Insolvency occurs when a company is no longer able to meet its financial obligations or is over-indebted. In such cases, the available financial resources are insufficient to settle invoices, loans or other liabilities as they fall due.
Insolvency is a legally regulated procedure designed to protect the interests of creditors and – where possible – to ensure the continued existence of the company.
Typical reasons for insolvency include:
- Insolvency
- imminent insolvency
- Excessive debt
- ongoing losses
- Liquidity shortages
- unexpected market changes or crises
The objectives of insolvency proceedings may include:
- the restructuring and continuation of the business
- debt restructuring
- the protection of creditors’ interests
- the orderly realisation of assets
- the fair distribution of available funds amongst creditors
For businesses, insolvency does not necessarily mean the end of their operations. Modern insolvency proceedings often offer opportunities for restructuring and reorganisation, for example through:
- Restructuring measures
- Adjustment of cost structures
- Renegotiation of liabilities
- Investor take-ups or company sales
Particularly in the case of start-ups, insolvencies can be caused by factors such as:
- lack of funding rounds
- lack of product-market fit
- excessive burn rates
- Scaling issues
- unexpected market changes
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That is why professional financial management, realistic cash flow planning and the early identification of financial risks are crucial prerequisites for sustainable business success.
innoWerft supports start-up founders in developing viable business models, keeping track of financial indicators and identifying risks at an early stage, with a view to promoting the long-term stability and growth of their businesses.