How can you bankrupt a competing company
What publishers can do now
Bankruptcy is a shock for everyone involved and is a completely unfamiliar situation for many. In addition to the hope in the book industry that KNV with its system-relevant services, the question arises for the suppliers affected by the insolvency how they can get their money for goods that have already been delivered, what risks are associated with further deliveries and what other options there are.
For a legal assessment, the assessment of the individual case and the need for legal assessment and advice always apply. The commercial law firm Buchalik Brömmekamp represents publishers and service providers in enforcing their claims in the insolvency proceedings of the KNV Group, according to their own information. Jasper Stahlschmidt, Specialist lawyer for insolvency law at the Buchalik Brömmekamp law firm illuminates in the following article the insolvency of KNV under the following questions:
- The security of further delivery
- Practical tips for publishers and suppliers
- The possibilities of influencing the publishers in the process
- The chance of a takeover of the intermediate bookseller by the publishers.
Dr. Jasper Stahlschmidt is a lawyer, specialist lawyer for insolvency law, certified ESUG consultant and managing partner of Buchalik Brömmekamp Rechtsanwaltsgesellschaft
A specialist article by Dr. Jasper Stahlschmidt from the Düsseldorf commercial law firm Buchalik Brömmekamp.
The bankruptcy petition of the intermediary KNV has shaken the book industry. In addition to the bookstores, the publishers and suppliers who have made advance payments with the delivery of their goods, especially in the high-turnover Christmas business, are particularly affected. They are likely to stay on their open bills, for which only a small quota is likely to be paid in the insolvency proceedings.
How should publishers and suppliers react and can they continue to deliver books? Answers to the currently most urgent insolvency law questions:
1. I delivered outstanding debts to KNV and before filing for bankruptcy on 02/14/2019, I still delivered books. What should I do?
The still open invoice will no longer be paid. The amount can only be registered with the insolvency administrator after the proceedings have been opened. This will take place approx. Two to three months after the insolvency application, at the latest according to the insolvency administrator on May 1st, 2019. All creditors will receive a separate letter from the insolvency administrator for the purpose of filing claims. It makes no sense to register the claim now. In the then opened procedure, the claims are checked and determined. A payout of what is known as a satisfaction rate, which in standard insolvency proceedings is between 3 and 5% on average, is also only to be expected in a few years.
2. If I have agreed on retention of title, will I get my goods or my money back?
Most publishers are likely to have agreed a retention of title (simple, extended and / or extended) in their terms and conditions. If the goods are still physically in the possession of KNV or in the logistics warehouse, they are available as security for the outstanding claims. The publishers should already inform the provisional insolvency administrator of the possible security interests and object to the disposition by means of a sale. Since an inventory must be carried out after the application has been submitted, the publishers should request a list of their goods from the administrator at the time of the application to KNV. This overview shows the rights of retention of title that the publisher has. Only then should the provisional insolvency administrator be allowed to sell these items, whereby the sales proceeds are separated and can then be claimed from the obligee to settle the security interests. This settlement of the books sold after the application is made will then take place after the opening of the procedure. It is also possible that a so-called supplier pool will be set up to collectively assert these retention of title rights.
3. Is there anything to consider for the day of application?
In addition to the goods in stock, there may also be claims from the resale of publishing goods on the day the insolvency application is filed, which are also covered by the extended retention of title. Here, too, the collection of these claims should be contradicted and information should be requested about the balance of claims on the day the application was submitted.
4. The preliminary insolvency administrator continues to ask for delivery by the publishers. What do suppliers have to consider?
Attorney Tobias Wahl has meanwhile been appointed as a "strong" insolvency administrator in parts of the KNV Group. In this way, the deliveries that go to these group companies are valued and privileged as bulk liabilities. They can be paid as priority claims after the proceedings have been opened. So this is a good sign for the publishers and suppliers. However, there is still the risk of payment default if the insolvency administrator later reports the so-called mass inadequacy. A real payment guarantee is not created with it. The safest way is therefore to deliver against prepayment. However, this puts a considerable strain on KNV's liquidity and makes it difficult to continue operations. Another way would be to agree on a deposit - a kind of security account - in order to limit the possible damage.
5. Should the temporary administrator's term of payment be met?
The desired payment term of 60 days is likely to be too long and should be shortened significantly. In any case, a period of 30 days between delivery and payment should not be exceeded (so-called cash transaction privilege), which is particularly important in companies where no strong preliminary insolvency administration has been ordered. When delivering and paying, publishers must therefore make an opportunity-risk assessment.
6. Does the preliminary insolvency administrator request a so-called waiver of set-off in his letter? Should the publisher sign this waiver?
The purpose of the waiver of offsetting is to ensure that the publisher or supplier does not offset against so-called old claims in the event of a payment by the provisional insolvency administrator. The payment is intended exclusively to settle the publisher's claim for deliveries since the application was submitted. Such a declaration is common in (provisional) insolvency proceedings, but a case-by-case examination must be carried out.
7. How will the process proceed?
The KNV is a "systemically relevant" company for the entire book trade and publishing industry. The appointed provisional administrator, lawyer Tobias Wahl, is experienced and will certainly try everything to continue and maintain business operations. Against the background, he will promptly initiate an investor process and try to find investors who create a fresh start.
There is a danger here that a competing company will come into play and dominate the book trade.
8. What options does the publishing industry have to help decide the future of KNV?
In insolvency proceedings, the continuation and maintenance of the company as well as the restructuring can be carried out not only through the entry of an investor, but also with the help of an insolvency plan through a so-called debt-to-equity swap. The publishers have the unique opportunity to convert their outstanding claims into company shares in the KNV company. The publishers take over the company, so to speak, and run it. A look at the Netherlands shows that this would not be unusual either. Here that takes over "Centraal Boekhuis" the logistics tasks owned by the book industry. Such a continuation solution could prove to be more advantageous than the takeover of KNV by a competitor or, in the worst case, the closure of the company.
9. How can the creditors influence the process?
All important decisions can only be made with a majority of the creditors. In addition to the banks and the Federal Employment Agency, the publishers, who are heavily affected in terms of numbers, play an important role in the process. The publishers should therefore pool their votes and be represented with one vote in the provisional creditors' committee. As a representative of all creditors, the creditors' committee sets the course for the future of the company. However, since all groundbreaking decisions in a (preliminary) insolvency proceeding are made in the first two to three months, speed is of the essence. The publishers must act now and become a member of the preliminary committee of creditors. If required, the member should also make use of insolvency law expertise in order to talk to the (provisional) insolvency administrator about the further progress of the proceedings on an equal footing.
The author Dr. Jasper Stahlschmidt is a lawyer, specialist lawyer for insolvency law, certified ESUG advisor and managing partner of Buchalik Brömmekamp Rechtsanwaltsgesellschaft (Düsseldorf).
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