Self-administered insolvency, in particular, offers companies the opportunity to restructure under court supervision – without relinquishing operational control.
Used correctly, it is not an emergency measure, but a strategic tool.
What exactly does self-administration mean?
Under self-administration, the management remains in office and continues to run the company. Unlike in standard insolvency proceedings, no insolvency administrator takes over operational control.
Instead:
- The management remains able to act
- a trustee supervises the proceedings
- the court oversees the process
The aim is to restructure the company – not to wind it up.
The key benefits of self-administration
Self-administration offers a number of advantages that are often overlooked in traditional crisis management:
1. Control remains within the company
Management remains in the driver’s seat.
This is particularly crucial for small and medium-sized enterprises – where business often depends on personal networks, expertise and trust.
2. Liquidity through insolvency payments
The Federal Employment Agency covers wages and salaries for up to three months.
This provides:
- immediate relief on liquidity
- time for operational stabilisation
3. Adaptable contract and cost structure
- Options to terminate ongoing contractual relationships
- Adjustment of lease and supply contracts
- Staff measures under simplified conditions
This creates genuine restructuring levers that are often unattainable outside of insolvency proceedings.
4. Attractiveness to investors
A company under self-administration is:
- structured
- legally ‘cleared up’
- often more attractive to investors
Key term: transfer-based restructuring / M&A during proceedings
BUSE Practical Guide: When self-administration works – and when it doesn’t
Works well if:
- the operational business is viable
- the crisis is primarily financial in nature
- the management is capable of acting and making decisive decisions
- preparations are made at an early stage
Becomes critical if:
- the response is too late
- there are no reliable figures available
- there is a lack of internal leadership
- stakeholders are not involved
Key point: Self-administration is not a lifeline for chaos, but a tool for structured restructuring.
The most common mistake: acting too late
In practice, we see time and again:
Self-administration is only considered once the scope for action is already severely restricted.
This leads to:
- reduced chances of restructuring
- less confidence among creditors
- greater pressure during the proceedings
Our clear recommendation:
Self-administration must be prepared for – not improvised.
How to do it right
Successful self-administration follows a clear pattern:
- Early analysis of the financial situation
- robust cash flow planning
- a clear communication strategy towards creditors
- Involvement of experienced advisers
- Coordination with the court and the administrator
The better the preparation, the greater the chance of success.
Conclusion
Insolvency under self-administration is not a stigma, but a highly effective restructuring tool.
Used correctly, it offers the chance to stabilise, restructure and secure the long-term future of a company.
Or to put it bluntly:
Those who wait too long lose options. Those who act early gain room for manoeuvre.
