Today's economic reality is a stress test for thousands of companies. Debts pile up, banks send demand letters, and the case drifts towards insolvency. But insolvency is not the only way out: out-of-court restructuring lets you reach agreement with creditors and restructure debts without losing your business or management control.
A far more effective, safer and - importantly - more advantageous route for the business owner is out-of-court restructuring. It is a set of measures aimed at financially rehabilitating the company, giving it a chance to emerge from the crisis without handing the business over to an external administrator and without ending up on public insolvency registers.
How the mechanism works: what out-of-court restructuring is
In broad terms, restructuring (from the Latin sanatio - healing) is a system of measures for the financial recovery of a company, aimed at preventing insolvency or restoring competitiveness. In most legal systems, restructuring is recognised as a pre-insolvency measure that creditors or other parties undertake on the basis of an agreement with the debtor.
Legal basis. Insolvency and restructuring frameworks in most jurisdictions expressly treat restructuring as a measure to prevent insolvency - it is carried out on the basis of an agreement between the debtor and its creditors or other parties.
Key advantages over insolvency
The owner continues to run the business and is not replaced by an external administrator or insolvency practitioner.
Insolvency status on public registers can permanently cut off access to new contracts and financing. Restructuring happens without a public scandal.
Court insolvency proceedings drag on for years and require huge spending on lawyers and administrators.
During restructuring, enforcement proceedings are paused, and any insolvency petitions already filed are returned to creditors.
Once notified of the risk of insolvency, a creditor cannot simply ignore the negotiations.
The main tools of out-of-court restructuring
Debt restructuring
Debt restructuring means changing the terms of credit agreements or other obligations already in place in order to ease the financial burden on the company. In practice it may include:
- Term extension - extending the repayment period of a loan or credit facility;
- Payment holidays - a temporary suspension of payments on the principal;
- Interest rate reduction - moving to a concessionary period;
- Refinancing - obtaining a new loan on better terms to repay old debts.
Settlement agreement
A settlement agreement is an arrangement between the debtor and creditors on how the debt will be repaid, which brings the insolvency case to an end. Unlike restructuring, a settlement agreement can be reached within the court insolvency procedure itself.
The law allows a settlement agreement to be concluded at any stage of the insolvency case (though no earlier than the first creditors' meeting). Once the court approves it, the proceedings are terminated and the company carries on operating as usual, but now under a new debt repayment schedule.
A settlement agreement is a compromise. The judge and the majority of creditors will be willing to cooperate if they can see that the company is genuinely able to recover - it just needs a little time and gentler terms.
Business mediation
Mediation is a negotiation process involving an independent, neutral intermediary (the mediator) who helps the parties find a mutually beneficial solution without taking the conflict to court. In an insolvency context, mediation is used to:
- settle disputes between the creditors themselves (for example, payment priorities);
- resolve disagreements between creditors and the insolvency administrator;
- negotiate with government bodies (first and foremost the tax authority).
Mediation is especially effective in complex multi-party conflicts, when five to ten different creditors are at the negotiating table - banks, suppliers, the tax authority. Bringing in a professional mediator can significantly speed up the process and produce a solution that works for everyone involved.
Step-by-step plan: how to launch out-of-court restructuring
Step 1. Diagnosing the financial position
This stage is often underrated, yet it is crucial. You cannot approach creditors empty-handed. You need a clear picture of the current position: how much debt there is in total, to whom, on what terms, whether there are pledges and guarantees, what the real receivables look like, and which assets could be sold for the urgent repayment of part of the obligations.
The analysis feeds into a cash flow forecast covering at least 12-18 months - this is what shows how much the company can realistically pay creditors and on what timeline.
Step 2. Drawing up the restructuring plan
The plan must include:
- A repayment schedule - a month-by-month breakdown of the amounts the company will direct to each creditor, taking priorities into account (secured creditors, the tax authority, major suppliers).
- Proposed changes to terms - deferrals, instalment plans, rate reductions, loan extensions. The more detailed and realistic the plan, the better the chances of convincing creditors. The plan must be economically sound and backed by financial calculations.
- A fallback scenario - what happens to payments if circumstances change (for example, if revenue drops). Creditors trust a plan more when it accounts for not only the optimistic but also the pessimistic case.
Step 3. Negotiating with creditors
This is the most demanding stage. Negotiations with each major creditor are built individually. Before the meeting you need to prepare arguments for why cooperation is more beneficial for the creditor than insolvency. The difference is clear - it is economically better for a creditor to accommodate a company that offers a realistic repayment plan.
| What the creditor gets | Out-of-court restructuring | Insolvency |
|---|---|---|
| Control over the debtor's assets | Stays with the business, operations continue | Liquidation or external administration |
| Percentage of debt recovered | A significantly higher percentage | Lower recovery after proceedings |
| Timeline | A newly agreed schedule | Years of court proceedings |
| Reputation and publicity | No public scandal | An entry on public registers |
Step 4. Legal documentation
All arrangements are put in legal form - in restructuring agreements and, where necessary, in a settlement agreement approved by the court.
Step 5. Monitoring performance
Once the agreements are signed, the most critical period begins - the first 6-9 months of operating under the new payment schedule. Even a small missed payment can shatter creditor trust. During this period you need regular monitoring of compliance with the schedule and prompt notification to creditors of any deviation, together with a proposal to make up for it.
Legal risks: what to watch out for
Advocates of insolvency often scare business owners with the risks of out-of-court arrangements. These risks do need to be taken into account, but each of them has effective mechanisms of protection.
Risk 1. Challenging the transactions. Creditors and insolvency administrators may try to challenge a settlement or restructuring agreement if they suspect the debtor deliberately concealed assets or transferred property before the negotiations.
Protection: maximum transparency and documented evidence of every step - from the first financial analysis to the final signature. Any "grey" scheme in the past can become grounds for a challenge.
Risk 2. The court refusing to approve the agreement. The court may refuse if creditors who were not party to the deal (above all secured creditors) would be left worse off than in ordinary insolvency.
Protection: bring as many creditors as possible into the negotiations, especially the major and secured ones.
Risk 3. Insolvency during the restructuring. Even after signing a settlement agreement you cannot relax. If things go wrong again a year later, any creditor can initiate fresh insolvency proceedings.
Protection: build conservative forecasts into the restructuring plan and always keep a financial reserve.
How G-Invest helps with out-of-court restructuring
Out-of-court restructuring is comprehensive work at the intersection of law, finance and negotiation skill. The consulting firm G-Invest is a reliable partner in financial recovery and turnaround management. We provide:
- Financial diagnosis - a detailed report on the causes of the crisis and the company's real options.
- Restructuring plan design - economically sound, legally protected and financially achievable.
- Negotiation management - preparing the arguments, running the meetings, and bringing in professional mediators when needed.
- Legal support - drafting the restructuring and settlement agreements.
- Monitoring of the plan - tracking compliance with the payment schedule and making prompt adjustments when market conditions change.
Save your business without insolvency
G-Invest will run the financial diagnosis, assemble the restructuring plan and take on the negotiations with banks, suppliers and the tax authority - so that you remain the owner and keep control.
Frequently asked questions
What is out-of-court restructuring in simple terms?
It is a set of measures for the financial recovery of a company carried out before filing an insolvency petition with the court. In essence, it is the opportunity to agree debt restructuring with creditors and keep operating without going to court or losing control of the business.
How does debt restructuring differ from insolvency?
With restructuring the company keeps operating, owners retain control, and creditors are paid under an agreed new schedule. In insolvency the business is liquidated or placed under external administration.
What lawful ways are there to restructure a company's debt in 2026?
The options are: extending loans and credit facilities, payment holidays, lowering interest rates, refinancing, a settlement agreement with creditors, and business mediation involving a professional intermediary.
Which is more advantageous: insolvency or out-of-court restructuring?
Out-of-court restructuring is almost always more advantageous. The company retains control over its assets and operations, owners avoid reputational damage and personal liability, and creditors recover a significantly higher percentage of their debt. Insolvency only makes sense when restoring the business is genuinely impossible.
What are the risks in negotiating restructuring with creditors?
The main risks are: challenges to the transactions by insolvency administrators, the court refusing to approve the settlement agreement, and a fresh wave of insolvency if the financial position deteriorates again. All of them are minimised with professional legal and financial support.