The fashion group Esprit has had to enter its German branch into protective shield proceedings under German insolvency law. This move has been made in order to allow the company to restructure itself and gain protection from its creditors while doing so. Under such proceedings, Esprit will seek to make changes to its business, make a successful plan to escape its current financial trouble and continue trading. Such a step was deemed necessary due to the negative impact of the COVID-19 coronavirus crisis. In this article we will provide an overview of what is involved in such proceedings and also place them in the context of Esprit’s case.

At Schlun & Elseven Lawyers we are a full-service law firm who provide guidance and expertise in the field of German insolvency law. We advise companies considering insolvency as well as creditors and other parties who want to know more about their options during insolvency proceedings. We are currently advising creditor clients as regards their options in the Esprit case. Contact us today to find out more as to how our insolvency lawyers can help you. We can be reached by phone, email or through our contact form.


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Esprit Insolvency Proceedings

Like many companies Esprit have experienced great difficulties during the COVID-19 coronavirus crisis and in March 2020 they made the decision to enter insolvency shield proceedings. The process of protective shield proceedings will be outlined later in this piece, but for an even greater outline of how this process works you can visit our page “Protective Shield Proceedings in German Insolvency Law“. According to the CEO of Esprit Group Anders Kristiansen this decision is “the right step” for Esprit due to the “dramatic impact” of the current coronavirus crisis on their business.

The company hopes that by entering protective shield proceedings they will be able to shield themselves from their creditors while they put a restructure plan in place. Although not insolvent at the time of entering the proceedings, the company was experiencing significant financial challenges when filing for said proceedings. These financial difficulties seem to have existed prior to the coronavirus outbreak but have been since been increased. Their hope is that at the end of the protective shield proceedings they will emerge in a stronger financial position.


Protective Shield Proceedings

Protective shield proceedings allow companies to be shielded from their creditors while they restructure their business. Such protective shield proceedings have allowed Esprit to protect themselves during this time. Protective shield proceedings can be implemented under § 270(b) INSO (German Insolvency Statute) in cases where:

  • The debtor requests it,
  • Insolvency is imminent but not yet in process,
  • An experienced professional must oversee it,
  • There must be an insolvency plan and some chance of success in the restructuring.

The advantage for the company is that the process is self-administrated, and the company can make decisions as to their plan during the proceedings. Decisions are not forced upon them. However, during the process of the insolvency shield proceedings creditors have a degree of power and they can remove the right of self-administration. This can occur in situations where such a move is decided upon during a creditors’ meeting as the plan does not meet their requirements. Therefore, risky decisions or decisions which may be deemed to negatively impact creditors can be rejected at such a meeting.

During the protective shield proceedings, the company has usually three months to put a restructuring plan in place. This restructuring plan may be of benefit to the creditors as well as the company in question. However, creditors need to keep a close eye on the restructuring plan to make sure that their wishes are respected.


Creditors’ Options during the Esprit Insolvency Proceedings

If you are a creditor of Esprit and need assistance in proceeding, it is advisable to contact a German insolvency lawyer. A German insolvency lawyer will examine your case, analyse related documents and determine the best course of action available to you. Proceeding without expert legal advice is an unnecessary risk to take during these proceedings.

At Schlun & Elseven we are currently advising a number of Esprit’s creditors as to how they should proceed in this matter. Our German insolvency lawyers have been through this process before and know what to expect. They have been on both sides of protective shield proceedings and can therefore provide the keen insight needed when assessing your options. This level of experience is hugely beneficial when you find yourself in such a situation, particularly if you are not familiar with German insolvency law! Having insolvency law experts in your corner means that your interests in this matter will remain at the forefront of the proceedings.


Unfair Dismissal & Other Employment Law Options

During the restructuring following the Esprit insolvency proceedings, many Esprit employees in Germany may face the possibility of dismissal. In 2019 it was estimated that Esprit employed over 2,000 people in Germany and their futures now hang in the balance. Should you be amongst this group and have received notice of termination of employment it may be in your interests to work with our team of certified legal specialists in German employment law. Even in cases where everything appears above board as regards the termination, the advice of an experienced legal professional is worth considering.

Should you seek to bring a case for unfair dismissal due to the Esprit insolvency proceedings it is worth communicating with our employment lawyers as soon as possible. § 4 Unfair Dismissal’s Act (Kündigungsschutzgesetz) allows for a three-week window in which to pursue such claims. Once our legal experts have analysed your situation, they will provide the guidance you need as to your best course of action.

The employment law services we provide are not simply limited to unfair dismissal / termination of employment but to a whole range of other issues. In the current situation dismissal cases are the most pressing but if you have any further employment law issues due to this issue, please consider the services of our experts in the field.


Representation in Insolvency Law

At Schlun & Elseven Lawyers we are a full-service law firm based in Cologne, Aachen and Düsseldorf with further conference room facilities in Berlin, Hamburg, Stuttgart, Munich and Frankfurt. From our offices we advise clients from all over the world in their dealings with German insolvency law. Our lawyers provide all their legal services in English as well as German.

Should you have a legal concern on the matter of the Esprit insolvency proceedings, our lawyers can be reached by phone, email and through our contact form. Once we start working together, we also provide video conferencing facilities for our clients in Germany and elsewhere. Contact us today to find out how our insolvency lawyers can help you today.

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