The Liability of the Management Consultant in Restructuring. Corporate Restructuring

Research Paper (undergraduate), 2020

18 Pages, Grade: 1,0


Table of contents

I List of figures

1 Introduction

2 Advice in restructuring
2.1 Corporate restructuring
2.2 The role of the adviser

3 Risks and liability
3.1 Scope of duties and basis of claims
3.2 Claims of the client/debtor and third parties
3.3 Countervailability of the consultancy fee

4 Results

II Bibliography

I List of figures

Figure 1: Overview of the building blocks of IDW S11 and the reasons for opening insolvency proceedings under InsO

1 Introduction

In addition to the company management, liability risks can also arise for restructuring consultants in the crisis of the company being advised. The obligation to file for insolvency plays a major role here.

If the reorganization consultant concludes that there is a reason for filing for insolvency, the corporate representatives must be informed of the legal obligation to file for insolvency.

In the course of the following work, the liability risks to which a reorganization consultant is exposed during reorganization consulting are examined. The focus of the present study is on German medium-sized companies and disregards the legal regulations for corporate groups.

In order to answer the research question "what liability risks does a reorganization consultant expose himself to in the course of a reorganization consultation", the reorganization environment is first explained in detail and the resulting tasks of a consultant are derived. Subsequently, the legislation, primarily the German Civil Code (BGB), the German Commercial Code (HGB) and the German Insolvency Code (InsO), is analysed and relevant case laws are examined and interpreted in the context of the work.

During the examination of the possible liability of the consultant, any potential insolvency challenges against him because of already collected fee claims or because of funds passed on to outside third parties must also be considered. The principles and limits of the liability of restructuring consultants based on case law are presented and explained in the following paper.

2 Advice in restructuring

2.1 Corporate restructuring

In business, restructuring is the collective term for all measures within a company crisis to restore profits that will sustain the company's existence. The term reorganization combines all business, tax, and legal measures of problem-solving. Restructuring is understood to be the entirety of the measures for the recovery of a company. This should only be attempted if there is a reasonable prospect of success.1

To carry out a reorganization, a company crisis must exist. If losses are generated permanently and the equity capital is affected, over-indebtedness may be a threat. This is just as much a reason for insolvency as insolvency if due liabilities can essentially no longer be met.2

The prerequisite for successful restructuring is a research into the causes and the preparation of a restructuring plan. If there is no prospect of success, insolvency proceedings must be initiated. In the event of temporary insolvency, reorganisation is not necessary if it is possible to rectify the situation through loans or standstill agreements with creditors. The aim of a reorganisation is therefore regularly the permanent elimination of losses and the return to capital-preserving profits.3

A distinction is made between four types of reorganisation. The first type, the accounting reorganization, is characterized by a formal capital reduction or by releasing open reserves and hidden reserves. No new capital accrues to the company in the process. The second type of reorganization is through inflow of new financial resources. Thirdly, restructuring can be achieved by changes in borrowed capital. This is done by converting short-term loans into long-term loans and by converting loans into equity. The fourth type is by changing the legal form of the company.4

If internal reorganization measures are not sufficient, external measures must be taken. Frequently used reorganisation measures are carried out by the affected company in cooperation with its creditors, especially credit institutions and suppliers.5

These can make a concrete contribution to the reorganisation by deferring or rescheduling their claims or waiving them using debt relief. It is also advisable to appoint an external restructuring consultant. Restructuring and restructuring management is the core competence of consulting.6

2.2 The role of the adviser

Experience shows that management consultants, tax advisors, auditors, and lawyers/specialist lawyers for insolvency law as well as insolvency administrators share the field of corporate restructuring/crisis consulting.

Typical consulting tasks in a crisis environment include various instruments of corporate restructuring. The basis for this is provided by the standards of IDW S 11, the "Determination of reasons for opening insolvency proceedings".7 IDW S 11 is a standard for assessing insolvency8, over-indebtedness9, and imminent insolvency.10 According to IDW S 11, a company is insolvent if it is permanently unable to completely close a liquidity gap of even a small percentage of the obligations due on the balance sheet date.11

Figure 1 shows an overview of the building blocks of IDW S11 and the reasons for opening insolvency proceedings under InsO.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Overview of the building blocks of IDW S11 and the reasons for opening insolvency proceedings under InsO12

In addition to IDW S 11, IDW S 9 is an option to allow the company access to a protective screen procedure.13 Here, the debtor is allowed to carry out an independent restructuring procedure in the period between the application to open insolvency proceedings and the opening of proceedings.14

The contents of S 9 include:

- analysis of impending insolvency as opposed to insolvency according to IDW S 11,
- a brief analysis of the causes of the crisis,
- identification of obvious obstacles to remediation,
- outline of the mission statement of the restructured company,
- integrated reorganisation/business planning for the current financial year and at least one subsequent year.15

Significantly more extensive is the IDW S 6. Due to the high requirements, the reorganisation concept is mostly prepared by an auditor or experienced reorganisation consultant.

The IDW S 6 stipulates that immediately after acceptance of the order for the preparation of a restructuring concept, an analysis of the possible insolvency maturity by IDW S 11 is required in a further preliminary stage and that insolvency maturity during the preparation period must be excluded. Only then is the ability to continue as a going concern to be examined in the first stage.16,17

In the second stage, the competitiveness of the company must then be examined.

The core components of a rehabilitation concept according to IDW S 6 are:

- basic information on the economic and legal starting position of the company in its environment, including the asset, financial and earnings situation,
- analysis of the stage and causes of the crisis and analysis of whether there is a risk of insolvency,
- presentation of the mission statement with the business model of the restructured company,
- presentation of the measures taken to avert the risk of insolvency and overcome the corporate crisis and to create the mission statement of the restructured company,
- an integrated corporate plan and the summarised assessment of the ability to rehabilitate (based on the 2-step concept).18

3 Risks and liability

3.1 Scope of duties and basis of claims

To determine the scope of duties and the basis of claims within a consulting mandate in the restructuring environment, it is necessary to delimit these according to typical consulting roles and the restructuring instruments just presented. In addition to advising the affected company itself, it is also possible to advise the management, the shareholders, and the participating bank in the restructuring process.19

3.1.1 Determination of insolvency maturity

If the consultant is given an explicit audit assignment to determine whether the company is ready for insolvency (IDW S 11), obligations arise from this which represents the framework for possible liability.20

In the event of a delayed filing for insolvency caused by the consultancy, the consultant must compensate for the resulting damage (deepening damage). The same case arises if the consultant has been commissioned to provide restructuring advice, such as within the framework of an IDW S 6.21

3.1.2 General advice – Duty to instruct in the tax consultant mandate

In addition to the mandate of preparing the expert opinions by the IDW standard, there are also other mandates in the field of restructuring, such as the permanent tax consultancy mandate.22

According to case law, a permanent tax consulting mandate of a GmbH does not stablish an obligation to inform the client of the duty of its managing director to commission a review or to carry out the review itself in the event of a shortfall in the commercial balance sheet, whether the company is facing insolvency.23

This is also not part of the tax advisor's secondary contractual obligations. Such an obligation could only arise for a tax adviser if he had taken on the mandate to provide general commercial law advice, which also includes checking the existence of grounds for insolvency, and if he made further comments on the over-indebtedness of the company in addition to the audit of the financial statements. However, if the tax adviser contractually entrusted only with the preparation of the tax balance sheet should prove that there is no over-indebtedness under insolvency law, he shall be liable to the company for the consequences of the delayed filing for insolvency caused by this.24,25


1 Ct. Müller & Thierhoff, 2016, p. 1 ff.

2 Ct. Müller, 1986

3 Ct. ibid.

4 Ct. Prof. Dr. Hommel, et al., 2006, p. 34 f.

5 Ct. Hohberger, 2019, p. 25

6 Ct. ibid.

7 Extracted from: Institut der Wirtschaftsprüfer in Deutschland e.V, 2015

8 § 17 InsO

9 § 19 InsO

10 § 18 InsO

11 Ct. Müller & Thierhoff, 2016, p. 296 f.

12 Own representation according to IDW S11

13 § 270b InsO

14 Case law BGH, 12.05.2016 - IX ZR 65/14, 2016

15 § 270b InsO

16 Ct. Michailov, 2019

17 Ct. BDO AG Wirtschaftsprüfungsgesellschaft, 2019

18 BDO AG Wirtschaftsprüfungsgesellschaft, 2019

19 Prof. Dr. iur. Kayser, 2014

20 Ct. ibid.

21 Case law BGB, 06.06.2013 - IX ZR 204/12, 2013

22 Case law BGH, 07. 03. 2013 - IX ZR 64/12, 2013

23 Ct. ibid.

24 Case law BGH, 06.06.2013 - IX ZR 204/12, 2013

25 Case Law BGH, 07.03.2013 - IX ZR 64/12, 2013

Excerpt out of 18 pages


The Liability of the Management Consultant in Restructuring. Corporate Restructuring
The FOM University of Applied Sciences, Hamburg
International Business Law
Catalog Number
ISBN (eBook)
ISBN (Book)
Assignment, International Business Law, Consulting, restructuring, management consultant, liability consulting, liability, IDW, IDW S11, IDW S6, IBR, Countervailability consultancy fee, Corporate restructuring
Quote paper
Felix-Sebastian Ament (Author), 2020, The Liability of the Management Consultant in Restructuring. Corporate Restructuring, Munich, GRIN Verlag,


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