Insolvency proceedings for the assets of Wirecard AG and six other German companies, linked to trouble in fintech, have been opened by the Munich District Court, which will see around 730 employees lose their jobs.
On Tuesday 25th August, the German court named Michael Jaffé from the law firm JAFFÉ Rechtsanwälte insolvency administrator as the insolvency administrator. Following this appointment, the current supervisory board will have to surrender control of the company, and they may resign. So far, Wirecard has not responded to media requests for comment.
As part of the proceedings, the administrator will need to make other big cuts to the company to try and preserve cash. This includes the termination of around 730 employees. Approximately 570 employees, which include 350 in the insolvent companies and about 220 in the non-insolvent Wirecard Bank AG, will remain employed at the Aschheim location. The contracts of senior management are also being terminated.
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According to Jaffé, the cash burn rate when filing for bankruptcy was ‘enormous’. Therefore, there is an urgent need for action. As Finance Magnates reported, Wirecard filed for insolvency back in June of this year, after €1.9 billion went missing from the firm’s balance sheet. The company later revealed that it is likely that this money might not have existed in the first place.
Administrator: Wirecard AG Situation Is Extremely Difficult
“The economic situation of Wirecard AG was and is extremely difficult in view of the lack of liquidity and the well-known scandalous accompanying circumstances. The usual restructuring and cost adjustment measures are therefore not enough, because such a massive loss cannot be represented in the opened insolvency proceedings at full cost,”Jaffé said in a statement on Tuesday.
“Accordingly, the number of employees and all other cost items in all insolvent companies must be adjusted to the business reality. In the sales process for the core business, in which the non-insolvent Wirecard Bank AG is also offered on the market, we are currently negotiating an acquisition with several well-known interested parties. The proceeds from the realization will benefit the creditors.”
The first creditors’ meeting, which will examine the claims for damages, will take place on the 18th of November 2020.