Establish a GmbH or UG from insolvency

Is it possible to set up a GmbH or UG despite insolvency when self-employed?

Basically, the state does not want to stand in the way of any founder. Therefore, some framework conditions have been set to enable the start of a new company before, during or after insolvency.

For the time being, an attempt can be made to reach an agreement with creditors that leads to an out-of-court solution. This minimizes the risk of enforcement measures , which would result in new debts being incurred.

The possibility of (regular) insolvency.

An alternative to an out-of-court settlement is judicial insolvency proceedings .

After approval for standard insolvency proceedings , it is quite possible to establish a company. From the point of view of many lawyers, it is worthwhile and, in purely formal terms, is no different from the situation of the regular establishment of a UG or GmbH from a debt-free situation.

The start-up should not be burdened by debts or enforcement measures from previous self-employment.

Therefore, debt settlement is important , either without or ideally with insolvency proceedings.
Good preparation is essential for this. This applies both financially and mentally. In order to avoid legacy liabilities, the old company should already have been closed by means of standard insolvency.

The good conduct phase in insolvency is also crucial.

In the good conduct phase of regular insolvency, it is obligatory not to accumulate new debts and to accept reasonable work that is arranged,

This still applies despite the decision to set up a company (GmbH / UG) and continue to be self-employed. In the event of violations, the discharge of residual debt is prohibited and the old debts are revived. The interest is calculated and credited retroactively. Even the company's assets can be seized if the insolvency fails.

If the guidelines are complied with and the business model and behavior of the managing director provide a good prospect of success in reducing debt through promising activities, the chances of approval for the establishment of a company are good.

The crisis as an opportunity and possibility to avoid future mistakes:

A lot of business experience can be gained from a crisis. The person in charge has learned a lot about communication, finances and stress management after this difficult time. The mistakes that led to the company crisis thus strengthen business know-how and teach what was done wrong.

Studies also show that companies that were founded in the second attempt after the first failure and that are stable, have higher revenues and are more resilient to crises. From accounting to collateral and financing , many things run better in the second stage of founding a company.

Possible obstacles to the new start-up? The founding ban of the managing director

Under certain circumstances, a court can prohibit the managing director from managing a corporation again for a specified period of time . This applies in particular to insolvency-related crimes , such as breach of trust, credit fraud, or withholding of wages. This ban can be a measure to prevent further crimes from being committed.

Furthermore, the trade office can prohibit the issuing of a business license to self-employed persons if there are indications of their unreliability in financial matters.
This can be the case, for example, if social security contributions or taxes have not been paid in the past. In other professional fields such as auditors, tax consultants or lawyers, insolvency or inability to pay can also lead to the revocation of a license.

You now know about founding a company from bankruptcy:

A new company can therefore be founded during insolvency proceedings. However, this also requires the consent of the insolvency administrator and should be confirmed in writing.

Establishing a company in standard insolvency proceedings is therefore equivalent to establishing a company WITHOUT debts (equivalent to a person without debts). A person in standard insolvency proceedings may not be seized, which means that seizure protection applies.

It is therefore important not to incur any new debts in your self-employed activity , as these new additional debts would be counted as “private debts” and would not be covered by the standard insolvency proceedings that have already been initiated.
This would mean that one would “lose” all debts through standard insolvency (discharge of residual debt), but debts generated from the activity would accumulate again as a private individual.

A possible solution:

To continue the approved self-employed activity in a UG or GmbH from the foundation.

The insolvency proceedings are initiated and the expert should be contacted in the plan so that he can later approve the establishment. If the standard insolvency has already started and the decision has been made, the expert should also be contacted, because this is also possible during ongoing insolvency proceedings.

As with any start-up, financial challenges can of course arise. It is therefore advisable to look for financing options with little capital outlay and to avoid new debts. Professional insolvency advice is therefore essential.

long-term relationships and assets.

The discharge of residual debt applicable in a standard insolvency only applies to the debts for which this standard insolvency was applied for.
If you had rental agreements or similar for your self-employment, these should therefore be run through the GmBH or UG.

There are some success stories on the topic of “starting a business from bankruptcy” that you can read online.


Conclusion on self-employment, new business or startup from insolvency:

It is a complex topic, but there is always a chance that a business activity (self-employed, as a UG or GmbH) can be continued. To do this, however, you should contact a professional debt counseling center and coordinate well with creditors and insolvency administrators. Communication, transparency and entrepreneurial skills are essential to having a fresh and, above all, successful start despite insolvency.