Restructuring report – sound analysis for successful reorganisation

Companies in financial difficulty are often asked by their lenders to submit a restructuring report in accordance with standard IDW S6, a standard published by the German Institute of Public Auditors (Institut der Wirtschaftsprüfer). With a restructuring report, and on the basis of a thorough analysis of their business, companies can develop and implement a sustainable restructuring concept. An IDW S6-compliant restructuring report is usually prepared by advisors experienced in insolvency and reorganisation working in a team combining both business and legal knowledge. This is because reorganisation of a company demands expertise in multiple domains.

A professional restructuring concept is indispensable for a successful turnaround. When a company is facing a liquidity crisis, it is often the basis for continued support from financial backers. An IDW S6 restructuring report is a reliable, neutral decision-making tool for companies, banks and all other stakeholders. It is prepared by an independent third party and contains an in-depth analysis of the company and its market environment, entrepreneurial vision and business model and, based on these, an assessment of the company’s restructuring capability and its ability to continue as a going concern.

It is a fact that successful reorganisation starts with a high-quality, professionally prepared restructuring report.

Focus

Objectives and composition of an IDW S6 restructuring report

The aim of a restructuring report prepared in accordance with IDW S6 is to determine a company’s restructuring capability and thus its future creditworthiness. The restructuring report must give the company a positive going-concern forecast for the purposes of insolvency law. Grounds to file for insolvency must not already be present – that is, illiquidity must not be imminent or have already occurred and the company must not be overindebted. In addition to the positive going-concern forecast, the restructuring report must state that – with suitable reorganisation measures put in place – the company can return to competitiveness and profitability. Only if this is the case will the company’s providers of equity and debt capital support its reorganisation efforts.

The restructuring report must contain basic information concerning the company’s baseline situation and economic and legal environment, as well as about its liquidity, assets, earnings and financial position. The advisor tasked with producing an IDW S6 report will conduct a thorough analysis of the causes of the company’s financial distress and show what stage of crisis the company has reached (crisis regarding stakeholder, strategy, products and sales, business success or liquidity). Here he or she must also examine whether the company is at risk of insolvency. Building on this analysis, the restructuring report will present the company’s restructuring concept, giving details of how the company’s future business model will be different, the measures required to reorganise and recover from the crisis, and the company’s new corporate mission. The restructuring report closes with an assessment of the company’s restructuring capability.

The restructuring report contains a detailed liquidity, earnings and asset plan. This is particularly important for debt providers, as their decision to continue financing the company will be based in large part on this plan. The quality of the plan and the restructuring report is therefore a major determiner of the success of the reorganisation efforts.

IDW S6 restructuring report: what we can do for you

Thanks to almost 50 years of activities in the restructuring field, we at Schultze & Braun have extensive experience of preparing restructuring reports as required by standard IDW S6. Acting as neutral third parties in accordance with rulings of the German Federal Court of Justice (Bundesgerichtshof), our experts regularly prepare going-concern forecasts and restructuring reports in accordance with IDW S6 as well as other IDW standards, and analyse whether grounds for insolvency are present.

From the outset, our interdisciplinary team of consultants, auditors, tax advisors and lawyers will work hand in hand with you and your management team to achieve the best possible outcome for your company. With our decades of experience in reorganisation and insolvency law, we are familiar with all of the restructuring options that the law offers – from out-of-court settlement agreements, via the preventive restructuring framework provided by the Act on the Stabilisation and Restructuring Framework for Businesses (Gesetz über den Stabilisierungs- und Restrukturierungsrahmen für Unternehmen, StaRUG) right through to self-administration and protective shield proceedings.

We begin by carefully analysing the causes of the challenges your company is facing. We then develop reorganisation strategies suited to your company and its current situation and determine the company’s financial requirements using an integrated liquidity plan. We prepare restructuring plans and concepts and assist you in negotiations with your business partners and financing providers. As a neutral third party, we ensure legal certainty for all parties involved in the restructuring process and identify additional options for reorganisation and negotiation – always in line with this chosen route to recovery.

At Schultze & Braun, we also examine whether illiquidity or overindebtedness are present in accordance with recognised professional standards and prepare a going-concern forecast covering at least the current financial year and the next. Our integrated planning tool has been tried and tested over many years and links earnings, liquidity and balance sheet planning which enables us to precisely determine your company’s financing requirements as well as to make balance sheet forecasts – concerning changes in equity capital and liabilities, for example. We monitor the process and look after liquidity control at frequent intervals. This provides transparency on current developments to all parties quickly so they can respond appropriately.

Acting as a neutral third party, we provide support and monitoring of the restructuring process especially on behalf of lenders and investors. Using specially developed tools, we report regularly to our clients on how the target company is doing and on compliance with reorganisation measures.

How can we support you?

Contact

Guido Koch
Dipl.-Kaufmann (certified business accountant/MBA equivalent), Steuerberater (Tax consultant), Wirtschaftsprüfer (Chartered accountant)

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