The handling of insolvency proceedings is a demanding and complex field of activity that has a significant function. Within this field, insolvency administrators bear a responsible role, as they are obliged to protect the debtor's assets, represent the interests of creditors and guide the course of the proceedings into an orderly structure.
The tasks of an insolvency administrator are extremely varied. They include responsibility for so-called filings, records, and various reporting obligations. Sounds like bulging folders and high stacks of paper? Until not so long ago, this thesis was most likely true. But advancing digitization and the possibility of process automation through the use of Artificial Intelligence (AI) as well as Machine learning (ML) provides a remedy.
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Insolvency administrator as key role in insolvency resolution
Before we highlight the various aspects of digitization for insolvency administrators in this article and show how they benefit from the advantages of an automated approach to handling insolvency proceedings, we provide an overview of the background around the topic of insolvency and the context in which insolvency administration stands in relation to it.
State of insolvency and initiation of insolvency proceedings
If a debtor is unable to meet its existing payment obligations to creditors, this state of affairs is referred to as insolvency. In such cases, insolvency proceedings are initiated with the aim of either restoring solvency or at least ensuring an orderly resolution of the situation. Within these proceedings, an insolvency administrator is appointed by the court.
Tasks of an insolvency administrator
After the court has made the appointment of the insolvency administrator, his responsibility is to immediately take control of the insolvency estate and manage it. In this regard, his obligations consist of depositing, sealing, recording, preserving, as well as additional duties of accounting. A central task is to identify and distribute the insolvency estate among the creditors.
The insolvency estate
According to the legal definition in section 35 of the Insolvency Code (InsO), the insolvency estate (formerly the bankruptcy estate) comprises all assets belonging to the insolvency debtor at the time of commencement of insolvency proceedings and also those acquired during the proceedings (new acquisitions). Pursuant to Section 153 of the Insolvency Code, the components of the insolvency estate must be listed in an overview of the assets in order to compare them with the debtor's liabilities.
Rights of an insolvency administrator
- Taking possession of the insolvency estate: An insolvency administrator has the right to take control of the insolvency estate immediately after being appointed by the court. This enables him to secure and manage the assets of the debtor.
- ContractingWithin the scope of his administrative authority, the insolvency administrator may conclude contracts which are in the interest of the insolvency estate. As a rule, these contracts serve to maintain the business, to dispose of assets or to settle creditors' claims.
- Determination of the insolvency estateThe insolvency administrator must identify, value and manage the insolvency estate. This includes both the existing assets at the time of the opening of insolvency proceedings and any new acquisitions during the proceedings.
- Preparation of the insolvency plan: He is entitled to take a thorough look at the debtor's economic documents and formulate an insolvency plan based on them. This plan is submitted to the court either by him or the debtor. The insolvency plan contains a clearly defined goal and has the purpose of informing all involved parties. Monitoring the implementation of the insolvency plan is equally the responsibility of the insolvency administrator.
- Representation in court: The insolvency administrator represents the debtor in court in insolvency matters. He is qualified to conduct proceedings related to the insolvency proceedings. He also represents the interests of creditors.
Duties of an insolvency administrator
- Careful management: Within the framework of insolvency administration, the insolvency administrator is obligated to manage the insolvency estate carefully, taking into account the interests of the creditors. This includes appropriate accounting and transparent documentation.
- Equal treatment of creditors: A central principle of insolvency administration is the equal treatment of creditors. The insolvency administrator ensures that the distribution of the insolvency estate is fair and in accordance with the law.
- Reporting requirements: The insolvency administrator shall report regularly on the progress of the insolvency proceedings. This is done towards the court, creditors or other parties involved.
- Handling of the procedureThe insolvency administrator accompanies the insolvency proceedings until their termination or conclusion. In this context, he also takes over administrative tasks. This includes, among other things, the preparation of final reports and accounts.
Digitize insolvency proceedings and optimize workflows
For insolvency administrators, the integration of smart technologies opens up a wide range of opportunities to make their workflows more efficient while improving the quality of their services. Some examples are:
Digital file management and documentation
Traditional paperwork in insolvency administration is time-consuming and prone to potential errors. Through the introduction of a digital document management insolvency administrators can store and process all records, documents and correspondence in a centralized and organized manner. This not only enables faster access to required information, but also helps to reduce the space required for physical documents.
Automated documentation processes also facilitate the tracking of activities and compliance with legal requirements. In addition, digital file management supports collaboration between different parties, as they can access relevant information simultaneously, which in turn promotes transparency and efficiency.
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Efficient communication and collaboration
Communication with creditors, debtors, courts and other involved parties plays a central role in insolvency administration. Through the implementation of a Document management system (DMS) for the automation of e-mail workflows, it is possible to send standardized messages automatically. This saves time and ensures consistent communication.
Automated deadline monitoring
Meeting deadlines is crucial in insolvency proceedings. Smart technologies are able to monitor deadlines automatically and set reminders. This minimizes the risk of missed deadlines and helps insolvency administrators to act in time.
Data analysis and reporting
Digitizing documents collects and analyzes a wealth of data in automated workflows, providing important insights into trends, patterns and financial developments. Automated reporting allows to create meaningful reports for creditors, courts and others without having to manually compile data.
Introduction of artificial intelligence and machine learning
The integration of AI and ML creates the possibility for insolvency administrators to perform even more precise forecasts and analyses. AI-powered software identifies the risk of default at an early stage and takes appropriate action.
Benefits of digitization for insolvency administrators through Konfuzio
The digitization solution provided by Konfuzio is capable of reliably processing data even under difficult circumstances. With its officially certified security structure, Konfuzio establishes the highest standards in terms of data protection and compliance with the General Data Protection Regulation (GDPR). By means of API the software can be easily integrated into an existing IT infrastructure.
Digitization of bank statements
Through the use of Konfuzio, there is the potential to support the insolvency administration in the digitization of account statements. By means of optical character recognition (OCR), Konfuzio can automatically identify and extract relevant data.
Enforcement of duties of managing directors
It is often necessary to enforce certain duties of business managers. Konfuzio categorizes and archives documents automatically and GoBD compliant, which optimizes this process.
Identification of receivables
With the help of digitization, outstanding receivables can be identified and tracked faster and more efficiently. Konfuzio classifies and tags documents automatically. This means that users can find documents quickly and easily by searching for specific tags or categories.
Digital archiving through "replacement scanning
Automate your processes with the Scan the entire documents of an insolvent company are digitized and archived for at least 10 years, as required by German law. This service is particularly cost-effective for insolvency administrators.
In perspective, digital document management enables access to all digitized records and related information provided by vendors such as Konfuzio and the relevant scan providers.
Conclusion and outlook
Digitization offers insolvency administrators the opportunity to optimize their workflows, save time and increase the quality of their services. Implementing intelligent software opens up new ways to efficiently manage complex insolvency proceedings, from file management to automated data analysis. By taking advantage of the opportunities offered by digitization, insolvency administrators add value for their clients while increasing their own effectiveness.