Going-concern forecast (Fortbestehensprognose)
The going-concern forecast answers whether a company can service its liabilities as they fall due over the next twelve months with financing in place. If it is positive – continuation is more likely than not – there is no over-indebtedness within the meaning of section 19 of the German Insolvency Code, even where the balance sheet shows a shortfall.
Where it comes from
Section 19(2) sentence 1 InsO defines over-indebtedness in two stages. First stage: assets no longer cover liabilities – arithmetical over-indebtedness. Second stage: even then there is no over-indebtedness in the legal sense if, in the circumstances, continuation of the business over the next twelve months is more likely than not. That second stage is the going-concern forecast, and it decides whether the duty to file for insolvency is triggered.
The twelve-month horizon was written into the statute by the SanInsFoG with effect from 1 January 2021, was temporarily shortened to four months from 9 November 2022 to 31 December 2023, and has applied unchanged again since 1 January 2024.
The standard
“More likely than not” means more than 50 percent. That is a lower hurdle than many assume – but it has to be established positively. It is not enough that nobody can prove the opposite. The forecast is purely a solvency forecast: can the company service every liability falling due within the period? Earnings power, market position and asset base matter only to the extent that they affect liquidity.
What belongs in it
- an integrated plan covering at least twelve months, linking profit and loss, balance sheet and cash flow,
- all existing and foreseeable payment obligations, including amortisation, taxes and social security contributions,
- the financing commitments the plan relies on – binding, not merely indicated,
- the assumptions, disclosed and substantiated, together with a view of what happens if they do not materialise.
The most common weak point is the third one. A forecast resting on a capital increase that has not yet been committed, or on a hoped-for extension of a facility, does not carry – and will not survive later scrutiny. In the short term the 13-week cash flow forecast is the instrument that shows whether the assumptions hold week by week.
Distinction from the commercial-law going-concern assumption
Both run over twelve months and are nonetheless frequently confused.
| Insolvency law (section 19 InsO) | Commercial law (section 252 HGB) | |
|---|---|---|
| Purpose | Triggers the duty to file, or does not | Measurement in the annual accounts |
| Subject | Ability to pay | Continuation of business activity |
| Standard | positively more likely than not | continuation is the default assumption until facts speak against it |
| Reference point | the respective assessment date, rolling | the balance sheet date |
| Consequence if negative | over-indebtedness, duty to file, liability | switch to liquidation values, disclosure in the notes |
A positive insolvency-law forecast does not automatically mean a positive commercial-law one, or the other way round. The two tests have to be run and documented separately.
Where lenders are to finance the restructuring, the forecast is not the end point but the entry stage of a full restructuring opinion under IDW S 6. Who builds and maintains the underlying plan is described under Finance as a Service.
This entry is an overview, not legal or tax advice.