A German local court has opened a regular insolvency proceeding against communications technology company Gigaset AG, Europe’s market leader for wireless phones, raising questions as to how – or whether – the struggling company will be restructured.

The Münster Local Court (Amtsgericht Münster) in North Rhine-Westphalia opened ordinary insolvency proceedings against Gigaset AG, German news outlets reported on Wednesday. The company also confirmed it on its website on Tuesday evening.

With around 850 employees, the 175-year-old company’s products include analogue and IP-based Digital Enhanced Cordless Telecommunications (DECT) telephones, Android smartphones, cloud-based smart home solutions, as well as DECT telephones and signals for companies and SMEs.

In September, the executive board of Gigaset AG, the manufacturer’s holding company, and Gigaset Communications GmbH, the operating branch, filed applications for insolvency.

In the case of the AG, the ordinary insolvency proceedings have now been “opened”.

Also in September, Gigaset Communications GmbH applied for self-administration “with the clear objective of continuing the business,” Raphael Dörr, responsible for Gigaset’s Corporate communication, told Euractiv.

Gigaset Communications GmbH is still in the self-administration application phase. The process has not yet been opened. The process of the GmbH is designed for the continuation of the business.

“We are currently in negotiations with potential investors, which are progressing successfully and purposefully. We are confident that we will be able to present a strong new partner in January, with whom we will jointly shape a promising future for Gigaset Communications GmbH,” Dörr said.

Slump in business

For the financial year of 2022, the telephone manufacturer recorded a turnover of €241 million, compared to €217 million in 2021.

In April, Gigaset’s mission was to be a fast-growing “Made in Germany” technology leader by 2025.

Five months later, the phone manufacturer filed for insolvency due to an unexpected slump in business.

“Gigaset AG and its indirect operating subsidiary Gigaset Communications GmbH have been subject to preliminary insolvency proceedings since 20 September 2023,” stated the interim report for the second quarter.

“Inflation depresses consumer sentiment and significantly clouds business prospects in the second half of 2023. Further external and internal challenges lead to an unmanageable financial situation,” the report added.

Restructuring?

In Germany, a company can be restructured both in self-administration and in standard administration.

“If the company has competitive products, it will reorganise itself through insolvency,” Torsten Martini, specialist lawyer for insolvency and reorganisation law at the law firm Görg, told Euractiv.

The options are to carry out a transferring reorganisation or for the administrator to submit an insolvency plan.

“As a rule, creditors and administrators will always strive for this [restructuring], simply because it is naturally the better alternative than liquidation for all parties involved – suppliers, other creditors, customers and, above all, employees,” Martini added.

A solution can then be found in a few weeks or months.

“The insolvency proceedings themselves will then usually run for a few more years. But that has nothing to do with the company that is now being reorganised,” Martini explained.

Euractiv understands that details of Gigaset’s restructuring are currently speculative, as this depends on the decision of the future investors, who have yet to be identified.

[Edited by Nathalie Weatherald/Zoran Radosavljevic]

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