Crisis and insolvency of contractual partner

The crisis and subsequent insolvency of a company can also have a significant impact on its contractual partners. This is because an insolvency administrator can reclaim payments or services (known as insolvency contestation) that the insolvent company provided, in some cases long before the insolvency application was filed. The hurdles for a successful challenge are generally much lower than is often assumed. This is all the more cause for concern as a further increase in insolvencies in Germany is to be expected due to the continuing aftermath of the COVID-19 pandemic, the current price development for raw materials, procurement difficulties in the supply chain, and the overall economic development. However, entrepreneurs can reduce the financial risks of an insolvency challenge, and in some cases even eliminate them, if certain basic rules are observed. As a creditor, it is therefore essential to have a solid knowledge of this area in order to avoid mistakes and, as far as possible, rule out repayments in the context of an insolvency challenge. In addition, there is the risk of contractual partner receiving (or no longer receiving) services from the insolvent contractual partner and thus falling into default of delivery yourself. There are also risks associated with international exchanges of services, which can be reduced by drafting appropriate contracts.