| Pages in topic: [1 2 3] > | My Client Entered a Provisional Insolvency Proceedings Thread poster: Yasutomo Kanazawa
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I was wondering whether I should post this topic under "Legal" or "Money Matters" so if "Money Matters" is not the correct category, please move this topic to the appropriate category.
A big client of mine (agency) entered a provisional insolvency proceedings two weeks ago. I believe I cannot give any names here so I won't, but they owe me a lot of money (more than 5000 Euros). My question is, if a company enters a provisional insolvency proceedings, would it be possible to retrieve... See more I was wondering whether I should post this topic under "Legal" or "Money Matters" so if "Money Matters" is not the correct category, please move this topic to the appropriate category.
A big client of mine (agency) entered a provisional insolvency proceedings two weeks ago. I believe I cannot give any names here so I won't, but they owe me a lot of money (more than 5000 Euros). My question is, if a company enters a provisional insolvency proceedings, would it be possible to retrieve the money they owe me? I contacted the company after they gave me the notice, but they told me that it's out of their control, and I should coordinate with the insolvency administrator directly.
The proceedings are likely to begin May 1, 2024. I've checked the BlueBoard and already two colleagues have entered a "1" due to not being paid because of the insolvency.
In order to restructure their company, they are asking us freelancers to keep accepting jobs from them. I'm willing to accept and help them as much as possible, since we have been in a good business relationship since working together (never missed a payment's deadline and always precise as clockwork).
I'm not familiar with European, especially German law, but is there someone who have been in a similar situation?
Also, they say that it's "provisional" but are there other types of insolvency proceedings?
In order to stand up on their feet again, what is the best way to recover from insolvency? M&A? Buyout?
Sorry for all the questions, but your suggestions and inputs are highly appreciated. ▲ Collapse
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Yasutomo Kanazawa wrote:
In order to restructure their company, they are asking us freelancers to keep accepting jobs from them. I'm willing to accept and help them as much as possible, since we have been in a good business relationship since working together (never missed a payment's deadline and always precise as clockwork).
In order to stand up on their feet again, what is the best way to recover from insolvency? M&A? Buyout?
Sorry for all the questions, but your suggestions and inputs are highly appreciated.
Regardless of the type of insolvency, they are insolvent, and the risk of never seeing your money or only a small part of it is extremely high.
The same goes for the risk of never getting paid for any continued work, which would be extremely naïve to deliver in my view. In an insolvency, some types of creditors have priority, such as tax authorities and social security bodies, so money the company would earn from your continued work would first go to debts to these types of creditors while others like you will be at the end of the queue. You would be working free for someone else. Don't do it. They are giving you false, or at least very unrealistic hopes.
If you find yourself in a hole, stop digging.
Do be sure to follow the instructions for reporting their debt to you to the insolvency administrator to the letter and within the deadline. The company itself is not allowed to pay you now.
Consider this a write-off. If you receive a bit of money in a couple of years, you'll be lucky.
[Edited at 2024-03-30 14:02 GMT]
| | | | Arne Krueger
Germany
Local time: 10:45
German to English
+ ...
| Too much information unknown to help | Mar 30 |
It seems as if there is still business activity for this entity? Then it is most likely just a debt restructuring. But we have no clue about the balance sheet of your client. Could be that your "debts" are not being touched, but could also be that it is partially lost/all lost. Just wait for the proceeding and what the administrator has to say. If there is complete silence (which doesn't seem the case as your client still corresponds with you in a friendly and positive manner), get a lawyer. Als... See more It seems as if there is still business activity for this entity? Then it is most likely just a debt restructuring. But we have no clue about the balance sheet of your client. Could be that your "debts" are not being touched, but could also be that it is partially lost/all lost. Just wait for the proceeding and what the administrator has to say. If there is complete silence (which doesn't seem the case as your client still corresponds with you in a friendly and positive manner), get a lawyer. Also, we have no clue about the legal form of your client. There are differences in German law as to what they chose to run their business (we call this the difference(s) between "natürliche" and "juristische Personen"). Each form has their own regulations regarding debts. Difficult to give you an exact answer based on the information you provided. But just wait for aforementioned proceeding. ▲ Collapse
| | | | Mlandman MBA 
Austria
Local time: 10:45
Member (2013)
English to Dutch
+ ...
| Which company is it? | Mar 30 |
If this is an insolvency, and not a rumour or so, there is nothing secret about it and it would help if you share the name of the company.
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Mlandman MBA wrote:
If this is an insolvency, and not a rumour or so, there is nothing secret about it and it would help if you share the name of the company.
Unfortunately, forum rule 8 does not allow it:
'Outsourcers may not be discussed specifically.
Posts or comments regarding a specific outsourcer (identified by name, reference, link or other means), whether positive or negative, are not permitted. (To indicate their likelihood of working again with a given outsourcer, site users should use the ProZ.com Blue Board.)'
Only when it's a scammer can we name names because a scammer is not an outsourcer.
It seems to be a German company. The German insolvency register can be searched at https://neu.insolvenzbekanntmachungen.de/ap/suche.jsf;jsessionid=oeVsPRmyLaJM_UMBrkDKdc04C6iZMo0AUHYAUrpM.node-086 , but since we don't know any of the search criteria, this isn't helpful.
| | | | Yasutomo Kanazawa
Japan
Local time: 17:45
Member (2005)
English to Japanese
+ ...
TOPIC STARTER | Thanks for your reply, Thomas | Mar 30 |
Below is the letter I received from the provisional insolvency administrator:
I have substituted the name and reference number of the company in question with XXX and YYY.
Insolvency petition proceedings XXX
Local Court (City name), Ref.: YYYYYYYYYYY '
Here: Effects of insolvency on service contracts/
Dear Sir or Madam,
please note that the aforementioned company filed for insolvency. I have been appointed by the local court as prov... See more Below is the letter I received from the provisional insolvency administrator:
I have substituted the name and reference number of the company in question with XXX and YYY.
Insolvency petition proceedings XXX
Local Court (City name), Ref.: YYYYYYYYYYY '
Here: Effects of insolvency on service contracts/
Dear Sir or Madam,
please note that the aforementioned company filed for insolvency. I have been appointed by the local court as provisional insolvency administrator, as stated in the enclosed court order. As provisional insolvency administrator I will keep up the business operations with the goal of reorganization. In this regard, I am dependent on your continued purchase of goods or services.
Therefore I am informing you of the following:
1. In case you provided any services or delivered any goods to the debtor before the provisional
insolvency administration has been ordered (February 26, 2024 at 9.45 a.m.), the resulting
claims are qualified as insolvency claims (§ 38 InsO), which you can register in the insolvency
table, as soon as the insolvency proceedings have been opened (expected on May 1, 2024).
After the opening of the insolvency proceedings, i.e. presumably after May 1, 2024, I will
contact all creditors separately and inform them about their possibilities of filing their claims
(§ 174 ff. InsO).
2. If you claim security for your outstanding remuneration claims, that were established prior
to the order of the provisional insolvency administration (e.g. from title retention), please
immediately designate to me the object to which you are claiming the security (§ 28 Abs. 2
InsO).
3. Supplies or services ordered by XXX with my confirmation from the order of
provisional administration (February 26, 2024) until May 1, 2024 will be paid in accordance
with the contract.
Seite 4
Seite 4 von 4
4. All invoices and other correspondence concerning orders triggered by XXX shall
be sent to the known address of XXX, (address of company). For questions
please continue to contact your usual contact person at XXX.
5. If you write invoices for a total period, please split your invoices to February 26, 2024.
Services which you have fullfilled up to this date, have to be filed as insolvency claims.
6. Please note, that your invoices can no longer be paid via direct debit. If necessary you have
to switch the method of payment in your system.
7. Finally, please invoice your services very promptly after they have been provided.
Please invoice XXX for services that you provide in April 2024 by May 3,
2024 at the latest.
I would like to thank you in advance for your support in continuing and restructuring the business operations of XXX.
Yours sincerely
(Insolvency administrator’s name) *
as temporary insolvency administrator
As you pointed out below, you told me not to be naive about accepting jobs from them and I can understand that.
But after re-reading the above letter, the letter clearly states that the insolvency administrator is trying to reorganize this company, and in order to achieve this, he is dependent on everyone's continued purchase and service.
If this administrator is truly serious about reorganizing this company, shouldn't I trust him? Or is this one of his typical strategies by an administrator to make us work for free to pay the tax authorities and social security bodies?
Also, he clearly states that jobs delivered after February 26, 2024 till May 1 will be paid in accordance to the contract. Could we say that he is lying?
It's not May 1 yet, but I have contacted the administrator in charge twice, but I haven't received any reply from him yet, only "Read" notifications in both cases inquiring about what kind of insolvency this company is in at the moment (i.e. cash-flow insolvency or balance sheet insolvency).
If the situation was like, say, 50 Euros, I wouldn't have bothered much, but 5000 Euros is a lot of money which I cannot just write-off and say "okay, too bad, it just wasn't my lucky day" and let it go.
Thomas T. Frost wrote:
Regardless of the type of insolvency, they are insolvent, and the risk of never seeing your money or only a small part of it is extremely high.
The same goes for the risk of never getting paid for any continued work, which would be extremely naïve to deliver in my view. In an insolvency, some types of creditors have priority, such as tax authorities and social security bodies, so money the company would earn from your continued work would first go to debts to these types of creditors while others like you will be at the end of the queue. You would be working free for someone else. Don't do it. They are giving you false, or at least very unrealistic hopes.
If you find yourself in a hole, stop digging.
Do be sure to follow the instructions for reporting their debt to you to the insolvency administrator to the letter and within the deadline. The company itself is not allowed to pay you now.
Consider this a write-off. If you receive a bit of money in a couple of years, you'll be lucky.
[Edited at 2024-03-30 14:02 GMT] ▲ Collapse
| | | | Yasutomo Kanazawa
Japan
Local time: 17:45
Member (2005)
English to Japanese
+ ...
TOPIC STARTER
Mlandman MBA wrote:
If this is an insolvency, and not a rumour or so, there is nothing secret about it and it would help if you share the name of the company.
If you would like to know which company I'm talking about, please send me a private message. Forum rule 8 does not apply in this case.
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Yasutomo Kanazawa wrote:
3. Supplies or services ordered by XXX with my confirmation from the order of
provisional administration (February 26, 2024) until May 1, 2024 will be paid in accordance
with the contract.
It always helps to get the complete information. If it is the insolvency administrator that tells you work will be paid for this period, I would tend to trust him or her, since it's the administrator who determines which expenses can be paid and which not. Originally, you said: 'In order to restructure their company, they [i.e. the company] are asking us freelancers to keep accepting jobs from them,' but that is clearly not the case, since it's the administrator who asks for it. That is entirely different.
As for work delivered until February, the only thing you can do is to report it according to the instructions. You can try to obtain more information to satisfy your curiosity, but it will not give you any influence on the proceedings. It is probably not the administrator's first priority to reply to that sort of requests. They are busy people and would be focused on the tasks delegated to them by the court and the law.
PS: Try to access the official documentation on the website I mentioned.
[Edited at 2024-03-30 16:46 GMT]
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Dan Lucas
United Kingdom
Local time: 09:45
Member (2014)
Japanese to English
| Will there be a link between the past and the future? | Mar 30 |
Yasutomo Kanazawa wrote:
If the situation was like, say, 50 Euros, I wouldn't have bothered much, but 5000 Euros is a lot of money which I cannot just write-off and say "okay, too bad, it just wasn't my lucky day" and let it go.
A very difficult situation, and you have my sympathies. That is a significant sum of money for anybody.
It seems to me that the key issue is whether cooperating with the insolvency administrator, in the form of continuing to work with the company, has any bearing on whether you will get paid for the jobs that you submitted before the company went bankrupt. My understanding is that suppliers are a long way down the pecking order when it comes to getting paid, because they are essentially unsecured creditors. Surely there will be a very clear demarcation between everything that happened before February 26, and everything that after that point?
To put it another way, it seems unlikely to me that the administrator will allocate to you, from the limited pot of funds remaining for the payment of creditors, more of the money you are owed just because you have been nice to the company since it went insolvent. But then I am not an insolvency practitioner.
I suppose in theory in the future they could pay you back some of the money they owe, but in reality is that likely?
Regards,
Dan
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Dan Lucas wrote:
It seems to me that the key issue is whether cooperating with the insolvency administrator, in the form of continuing to work with the company, has any bearing on whether you will get paid for the jobs that you submitted before the company went bankrupt. My understanding is that suppliers are a long way down the pecking order when it comes to getting paid, because they are essentially unsecured creditors. Surely there will be a very clear demarcation between everything that happened before February 26, and everything that after that point?
To put it another way, it seems unlikely to me that the administrator will allocate to you, from the limited pot of funds remaining for the payment of creditors, more of the money you are owed just because you have been nice to the company since it went insolvent. But then I am not an insolvency practitioner.
I doubt there is such an individual link for each supplier, but if the administrator considers the current activity viable and manages to keep the company afloat by keeping the activity running, the chance of the company being able to clear at least some of the bad debts piled up until February at a later time must be higher than if the company has to be liquidated.
| | | | Dan Lucas
United Kingdom
Local time: 09:45
Member (2014)
Japanese to English
| What will others do? | Mar 30 |
Thomas T. Frost wrote:
I doubt there is such an individual link for each supplier, but if the administrator considers the current activity viable and manages to keep the company afloat by keeping the activity running, the chance of the company being able to clear at least some of the bad debts piled up until February at a later time must be higher than if the company has to be liquidated.
Yes, that was my thought also. So we are getting into a kind of quasi-game theory situation where each supplier will be making a calculation as to whether there is more risk involved in continuing to work with the company, in the sense of throwing good money after bad, or more risk involved in not continuing to work with the company, in the sense of impairing its ability to remain a going concern.
If most suppliers believe that other suppliers will continue to work with the company and if they also take the same approach, things may work out for the company. If most suppliers believe that other suppliers will not continue to work with the company, and if they as a result decide not to work with the company going forward, things could get rather difficult.
All very vague. Horrible situation.
Dan
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Mlandman MBA wrote:
If this is an insolvency, and not a rumour or so, there is nothing secret about it and it would help if you share the name of the company.
Self-censored, link removed: Slator released the news on 19 March.
I don't know how insolvency works, but for what it's worth, I faced two bankruptcies: French agency in 2001, French middle-man personal bankruptcy in 2010.
In the first case, I got nothing from about €3600 of invoices (if I remember well), in the second, €1000 out of €1500 of invoices.
The first thing to do is to make yourself known as a creditor to the amdinistrator and file your unpaid invoices. If you keep working with the company, it means you trust that they will recover.
As Thomas mentioned, providers like us are at the end of the list. So if the company actually folds and you do get some money back in 3, 4 or 5 years, you'll be happy.
Good luck.
Philippe
[Edited at 2024-03-31 11:35 GMT]
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Dan Lucas wrote:
So we are getting into a kind of quasi-game theory situation where each supplier will be making a calculation as to whether there is more risk involved in continuing to work with the company, in the sense of throwing good money after bad, or more risk involved in not continuing to work with the company, in the sense of impairing its ability to remain a going concern.
The thing is that the only way the company can clear its pre-February debts is to earn more money. The only way to earn more money is to keep their activity running.
To keep the activity running, current suppliers need to know they will get paid for future supplies, which is what the administrator told them they would be. The administrator is in a situation where they can earmark revenue from clients to the suppliers who did the work. In the meantime, the company is protected from pre-February claims because these creditors cannot take legal action to get paid now, which would probably result in liquidation. Hence, I'd say the risk involved in continuing to work for the company under these conditions is very low. It looks like a no-brainer to me. In this scenario, a court may order the company to pay back the old debts over a period such as five or ten years. Throughout this period, it would be under administration.
If everybody decided to stop working for the company, it would probably be liquidated. The likely result would be that the pre-February claims would be lost or mostly lost. The translators would get no new revenues from the company, and they would also lose what they are owed – or almost. It's not a very attractive choice.
| | | | Dan Lucas
United Kingdom
Local time: 09:45
Member (2014)
Japanese to English
Thomas T. Frost wrote:
The thing is that the only way the company can clear its pre-February debts is to earn more money. The only way to earn more money is to keep their activity running.
But what has changed? It is the same company, presumably with most of the same employees, and certainly all the same systems. Even if they managed to maintain their client base and their full complement of suppliers, there is no magical way for them to easily make money where previously they failed to make money. Whatever they did before manifestly did not work, otherwise they would not be insolvent.
If they want to make more money, that has to come from cutting costs, or from growing volumes so that profits rise faster than costs, or from raising prices to clients. Cutting costs probably involves cutting rates to translators. Growing volumes probably involves cutting prices, which would seem infeasible given that they were already too low for the company to make money. Raising prices, particularly if the product itself is unchanged, probably reduces volumes.
There is no easy solution, no magic wand. I am not saying it is impossible, but it will be very difficult.
Dan
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Dan Lucas wrote:
But what has changed? It is the same company, presumably with most of the same employees, and certainly all the same systems. Even if they managed to maintain their client base and their full complement of suppliers, there is no magical way for them to easily make money where previously they failed to make money. Whatever they did before manifestly did not work, otherwise they would not be insolvent.
If they want to make more money, that has to come from cutting costs, or from growing volumes so that profits rise faster than costs, or from raising prices to clients. Cutting costs probably involves cutting rates to translators. Growing volumes probably involves cutting prices, which would seem infeasible given that they were already too low for the company to make money. Raising prices, particularly if the product itself is unchanged, probably reduces volumes.
There is no easy solution, no magic wand. I am not saying it is impossible, but it will be very difficult.
Dan
I agree, there are many unknowns and questions. We don't know what happened. Did an important client stop paying? Is it the business model that doesn't work? Were expenses out of control? Was the quality insufficient? Maybe there is some information in the insolvency register.
As long as the rates remain as they were, I would remain on board as long as the administrator guarantees payment, though.
PS: There are two court decisions so far, but they don't provide any concrete information about the situation, only standard legalese.
https://neu.insolvenzbekanntmachungen.de/ap/text.xhtml?x=0.04362610062977379
https://neu.insolvenzbekanntmachungen.de/ap/text.xhtml?x=0.6041093578227588
[Edited at 2024-03-30 19:00 GMT]
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