Expensive Protective Shield Procedure - How Companies Secure Financing at an Early Stage

In times of the corona crisis, the protective shield procedure is the only way for many companies to permanently reorganise themselves. Due to the high costs of the protective shield procedure, early planning of financing is essential.
Building up reserves in credit accounts can be the solution.

Numerous companies in Germany are facing the question of whether they will survive the corona crisis. Due to the government-imposed lockdown, many stationary outlets, stores and restaurants are closed. Christmas business has been cancelled, carnival did not take place and what happens at Easter remains uncertain. The drop in sales is - without exaggeration - dramatic.

State aid does not suffice

To overcome this crisis, many of the affected companies have applied for state aid or intend to do so. However, the disbursement of these aids is proving more difficult than hoped. In fact, even the application process is very formalistic and complicated. Faced with the large number of applications, the authorities are simply overburden in processing. Companies often wait months for a decision on their application. Having become aware of this problem, the legislator has once again extended the suspension of the obligation to apply for insolvency. Until 30 April 2021, the following applies in principle: If a company affected by the corona crisis applies for state aid by the end of February 2021, which is suitable for eliminating the factual insolvency, the company does not have to file for insolvency despite the company's factual insolvency.

Nevertheless, it is already evident that many companies affected by the corona crisis will not receive any or sufficient state aid and will have to, and be able to, take care of their own rescue.

Protective shield procedure as a way out

One option is the so-called protective shield procedure. It allows companies that are threatened with insolvency and have a fundamentally functioning business model to reorganise themselves in self-management. The existing management remains fully authorised to act and has all the instruments of the German Insolvency Code at its disposal. This way, the protective shield protects against enforcement measures by creditors. Wages and salaries are paid by the Federal Employment Agency for three months and the hurdles for any necessary staff reductions are low.

Disadvantage: High costs

A serious hurdle to the implementation of such a protective shield procedure is the related costs. These costs result in particular from the high requirements for the preparation and implementation of the reorganisation concept on which the protective shield procedure is based. These costs must be paid out of the company's liquid assets. However, this is difficult if the company's cash has been exhausted due to the crisis and the company is only living off the current account. As soon as the banks learn of the protective shield procedure, they usually freeze the credit lines immediately.

Create reserves in credit accounts at an early stage

In this situation, companies are at an advantage if, in addition to their current accounts, they still have credit accounts with banks with which they have no credit relationship. A company threatened with insolvency can use these accounts to finance the protective shield procedure. In any case though, care must be taken to ensure that the use of these funds is in accordance with the company's financing agreements. Without a diligent examination of the relevant disposal restrictions in the loan agreements, the management otherwise puts itself at risk of personal liability towards the banks and possibly even criminal liability.


Corona means one thing above all: Uncertainty. Hence, it is all the more important for every company to act prudently in a future-oriented manner. In view of possible payment difficulties, the protective shield procedure should not be disregarded as a solution. Companies should ensure that they have this option and take the necessary measures.

Heinrich Meyer

Dr Moritz Handrup


Schutzschirmverfahren Corona Sanierung Finanzierung Guthabenkonten Staatshilfen

Contact us

Heinrich Meyer T   +49 69 756095-414 E
Dr Moritz Handrup T   +49 69 756095-424 E