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Why does your bank require an expert restructuring report from you?

A restructuring report should show your financing partners whether and how your company can survive on the market in the long term – in other words, it is about the competitiveness and profitability of your company. Thus, an expert restructuring report creates the basis for granting loans even in loss-making situations. For your financing partners, the plausible and transparent presentation of your company's future profitability and competitiveness is an indispensable necessity for granting loans in a tense earnings or liquidity situation. A company in crisis will therefore hardly receive any further financing without a restructuring expert opinion from an independent consultant.

What does IDW standard S6 mean?

The Institut der Wirtschaftsprüfer e.V. (Institute of Auditors – IDW) has summarized the minimum requirements for a remediation expert opinion in the IDW standard S6. These requirements can be used by both auditors and financiers as a basis for an expert reorganisation opinion in order to guarantee uniform minimum standards and at the same time to meet the requirements of case-law of the Federal Court of Justice regarding the quality of expert reorganisation opinions.
For this reason, external financing partners often require the submission of an expert opinion in accordance with IDW standard S6 if an expert reorganisation opinion is required. The first part of such an expert report contains statements on the essential company data, causes and effects, as well as legal and economic influencing factors. It then describes, on the basis of a systematic assessment of the situation, the measures to be taken with regard to the mission statement of the restructured company. At the same time, it quantifies their effects within the framework of integrated liquidity, earnings and asset planning.
The concept must be plausible and feasible in two respects: firstly, it must be possible to enforce the contributions envisaged by the interest groups concerned – in particular the shareholders, lenders, management and employees. Secondly, it must be possible to implement the defined operational and strategic restructuring measures.

Which essential contents for a remediation report does the IDW standard require?

• Analysis of the company situation
• Determination of the crisis stage
• Analysis of the causes of the crisis
• Statements on the company continuation
• A mission statement of the restructured company on which the realignment is based
• Measures to deal with the corporate crisis
• A well-founded statement on the company's ability to restructure

Important: the requirements of the IDW standard must be applied taking into account the individual case in question. This means that even for smaller companies, all core components of a reorganisation report must be processed. However, the scope, level of detail and reporting can be adapted to the lower complexity of the company.

When is your company considered remediable according to the IDW standard?

Important: According to the draft dated 8.9.2017 for updating the IDW S6, the return on equity also includes the requirement of a balance sheet capital backing at industry level. A company is considered sustainable if the following three criteria are met:

1. Ability to continue

• There are no legal or factual obstacles to the continuation of the company, in particular no reasons for insolvency (insolvency or overindebtedness) in the forecast period. As a rule, it is sufficient to cover the financing requirements in the current and coming financial year with a high degree of probability.

2. Return potential

• In the medium term, a return that is customary in the industry and an equity base that is customary in the industry will be achieved.
• The company is in a position to make its interest and redemption payments.
• The company becomes attractive again for investors.

3. Competitiveness

• The company will maintain or achieve its competitiveness in all relevant markets.
• It has a solid market position in the long term.

What are the minimum requirements of the BGH for an expert restructuring opinion?

Important: The requirements described by the BGH are specified in the IDW S6. However, BGH case law always applies, as the IDW covers only one right of associations.

1. Both for the question of the recognizability of the initial situation and for the prognosis of the feasibility, the assessment of an unbiased (not necessarily uninvolved), industry-knowing expert, to whom the prescribed or usual accounting documents have been made available, is required.(BGH, ruling dated 04.12.1997, Az.: IX ZR 47/97)
2. The restructuring report contains an analysis of the economic situation of the company within the scope of its economic sector and records the main causes of the crisis.(BGH, ruling dated 04.12.1997, Ref.: IX ZR 47/97)
3. The restructuring report assesses the asset, earnings and financial situation of the company accurately.(BGH, ruling dated 04.12.1997, Ref.: IX ZR 47/97)
4. In the opinion of an objective third party, the company can be objectively restructured. The measures taken for the reorganisation are suitable for a thorough reorganisation of the company within a reasonable time.(BGH, ruling dated21.11.2005, Ref.: II ZR 277/03)
5. The planned remediation measures have already been implemented at the beginning, i.e. the remediation activities have been initiated appropriately.(BGH, ruling dated 12.11.1992, Ref.: IX ZR 236/91)

What is important when choosing a restructuring consultant and implementer?

First of all, it is important that you can trust him! But how do you know if you can trust him? A good indication: Your consultant has been active in the market for a very long time and has been successful. Second criterion: He takes your task more seriously than himself. Thirdly, he ensures that all his recommendations can be implemented quickly and effectively!

Furthermore: Your management consultant should be able to assess your situation realistically and neither too pessimistically nor too optimistically and implement the necessary turnaround measures together with you.

Finally: "Transparency, effectiveness and sustainability" should be the triad that decisively determines the work on your project. And this is where Struktur Management Partner is the triad that fulfils all these criteria together! This is also confirmed by a recently published scientific study by the SRH University of Applied Sciences Heidelberg and the five consecutive awards by the business magazine brand eins. Take our word for it!