.png)
Strategy, liquidity, earnings: a corporate crisis can have various causes. Well-structured crisis compliance identifies the right steps for your individual situation. The risk of a crisis has increased significantly in recent years, especially against the backdrop of the pandemic and the war in Ukraine—even for established companies. Furthermore, in an era of numerous high-profile corporate scandals, liability claims against executives for misconduct have come into focus. Against this background, crisis compliance management is currently gaining significant momentum.
Smarter through crises: What crisis compliance can do
A crisis always creates an exceptional situation. A crisis is fraught with criminal and liability risks for corporate management, and the potential for misconduct is vast. That is why such a situation requires a well-considered and careful approach, as well as a different perspective from the responsible managing directors and board members: different rules apply in a crisis than in day-to-day business!
If a crisis is looming or a company is already in the midst of one, it is crucial to take the right steps quickly and thoughtfully to avert insolvency or criminal and liability consequences—or to act in a legally correct manner in the event that insolvency is unavoidable. A company must have the appropriate knowledge and methodological base to understand its obligations and seize potential opportunities. This is exactly where crisis compliance comes in. It identifies compliant steps and room for maneuver during a crisis and provides preventive support to protect the company before a crisis occurs. The reasons for a crisis are manifold—as are the resulting liability risks.
Insolvency delay as the number one risk
A crisis is often triggered by a liquidity bottleneck that can lead to insolvency. If a company becomes insolvent or over-indebted, capital companies and partnerships without a personally liable partner are automatically required to file for insolvency under Section 17 of the German Insolvency Code (InsO). The responsible managing directors and board members are obliged to file for insolvency immediately, or within a 3-week period in permissible cases. The task of crisis compliance is to monitor, verify, and document the grounds for insolvency. In addition to the delay in filing for insolvency, other risks to which a company—and thus its directors or board members—is exposed during an acute crisis include bankruptcy, withholding and embezzlement of wages, fraud, and creditor or debtor favoritism. It should be noted that those responsible must observe many insolvency and corporate law obligations during a crisis. Crisis compliance identifies the right steps here. This helps avoid unintentional breaches of duty and significantly reduces the liability risk for management bodies or the supervisory board.
Turning the tide in time
To prevent a crisis from occurring in the first place, crisis compliance, in conjunction with risk management and an early warning system, ensures that sufficient strategic, personnel, and organizational room for maneuver remains. Since January 1, 2021, the early warning system has been legally anchored in Section 1 of the German Corporate Stabilization and Restructuring Act (StaRUG). It obliges managers and supervisory bodies to engage in early crisis detection and crisis management. The early warning system continuously monitors developments and sounds the alarm if a crisis is looming for a company. This might become apparent, for example, when a market is in transition and major changes are expected, or when a customer fails to make payments and your own liquidity becomes strained. Prevention focuses on the company's solvency. Since many insolvency cases arise due to a company's inability to pay, it is important to always keep an eye on liquidity. At the slightest sign of an impending crisis, the company's liquidity should be professionally assessed. Furthermore, well-thought-out strategies and emergency plans ensure that, in turbulent times, well-considered decisions that are vital for the company's survival can be made with a cool head.
THE MAK`ED TEAM has supported many medium-sized companies during times of crisis. We know the mechanisms of a crisis and the right strategies to help a company survive, and we develop customized processes based on individual requirements. For crisis compliance that fully exploits its preventive potential.
.png)
