The freight forwarding and logistics industry in Germany is facing unprecedented challenges, with many companies struggling to survive. According to Creditreform, a total of 11,000 corporate insolvencies were registered in the first half of 2024 — an increase of around 30 percent compared to the same period last year. The reasons for this are high taxes, levies and energy prices, which place a particular burden on small and medium-sized companies, while large corporations are favored.
The timely application of the statutory pledge of rights can be decisive for the continued existence of a company in the freight forwarding industry. Read more about pledges of rights and their realization in this article.
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High taxes and levies, rising energy prices and increasing regulatory requirements are placing an additional burden on the sector. The transportation and warehousing sector is particularly affected, accounting for 9% of all insolvencies.
Margins in the logistics sector have been reduced to a minimum due to intense price competition and exhausted rationalization potential. Rising costs and the declining creditworthiness of many customers are exacerbating the situation. Payment defaults can quickly lead to insolvency, and many companies are reluctant to insist on payment terms being met.
Insolvency law in Germany has been developed in favor of debtors, which further weakens the position of creditors. Freight forwarders and logistics companies must manage their receivables rigorously in order to secure their liquidity. It is particularly important to make use of statutory pledges of rights, which allow outstanding claims to be enforced at short notice without the need for court titles.
Effective receivables management and the proactive use of pledges of rights strengthen a company’s resilience and are the key to averting financial crises. The immediate assertion of pledges of rights prevents freight forwarders from being disadvantaged when their customers become insolvent.
Deutsche Pfandverwertung offers practical advice and legally compliant, prompt realization of pledges of rights.
Through public auctions, freight forwarders can at least partially cover outstanding receivables and quickly free up storage space. Quick and legally correct action is crucial in order to preserve the value of the seized goods and minimize economic losses.
The freight forwarding and logistics industry has never faced such challenges since the Federal Republic of Germany was founded. For many logistics companies, it is now a matter of survival.
Germany’s companies are being strangled by the highest tax and duty burden and the highest energy prices among industrialized nations. The misguided anti-small business policy of the last 25 years has put small and medium-sized companies at a disadvantage, while favoring large corporations. The competitiveness of many German companies is in free fall. The deindustrialization of Germany is progressing. The transport industry as a whole is under pressure.
What are the reasons for this?
The average payment delay in the logistics and transport sector is 9.8 days
The industry is operating in a highly competitive buyer’s market. Margins, which were once still adequate, have been reduced to an absolute minimum due to fierce price competition.
The potential for rationalization has largely been exhausted.
It is politically desirable that constantly rising energy and fuel prices and increased and extended tolls have to be accepted. New regulatory requirements, a shortage of skilled workers and a constant stream of new bureaucracy create further cost pressure.
Due to the general deterioration in creditworthiness, the number of companies whose payment default is still secured by factoring is constantly decreasing. The business model of an insurer is to limit the number of claims. In light of the continuous premium increases, factoring has become significantly more expensive.
The highly complex competitive situation in the logistics sector makes it impossible to pass on all of the rising costs to clients. Realistically, the situation is likely to deteriorate further in the foreseeable future. Any overdue receivable can lead to a crisis, and payment defaults quickly result in a business catastrophe: insolvency.
Nevertheless, many logistics companies, especially small and medium-sized enterprises, are still reluctant to insist on strict compliance with agreed payment terms. In suppression of the unpleasant topic, the threat to their existence is ignored despite better knowledge, although they secretly suspect that payment delays and even more so payment defaults can quickly lead to the financial ruin of their own company.
Many freight forwarders do not realize that they have no leeway to prolong their receivables with defaulting customers.
Forwarding and logistics companies are capital-intensive businesses. As a rule, they can currently achieve a return on sales of 3 % to 4 %. A return on sales of 4 % means that 4 % of each order remains as profit. However, the loss due to a payment default of 100% also means that the company’s equity is reduced by 96% of the amount of the receivable at the expense of scoring.
This simple calculation example also shows how many similar orders the logistics provider must acquire with a return on sales of 4% in order to fully and promptly compensate for a payment default of 100%. With a return on sales of 4%, 25 similar orders must be acquired. With a return on sales of 3 %, there are approx. 34 similar orders. In a nutshell, a bad order needs 25 or 34 good orders to fully compensate for it. This is impossible in the logistics sector. The low margin correlates with the available order volume, as a large number of providers compete for orders on price. Margins would be higher if it weren’t for this fierce competition.
Another driver of this situation is insolvency law. Put simply: Since the 2000s, interested parties, flanked by massive lobbying at EU and federal level, have pushed through their particular interests by establishing a so-called reform of insolvency law. This erosion of creditors’ property rights initiated by the legislator is being driven forward step by step. If creditors do not know how to protect their rights in good time, they are unintentionally called upon to reorganize and restructure their defaulting debtors with the help of StaRUG, ESUG and the Insolvency Code. Companies in payment difficulties use this extended scope of action to evade their payment obligations. Furthermore, these restructuring procedures are disproportionately expensive and lengthy in Germany compared to other countries. After administrators and advisors have helped themselves to the debtor’s remaining assets with their fees and adequate charges, creditors are usually left with a payout that can only be described as pitiful at the end of years of proceedings. In conclusion, it should be noted: The amendments to debt law create economic disincentives that are counterproductive to a free and therefore social market economy. The tried and tested legal principle of good faith, under which the debtor was held liable for his payment obligations, has now been replaced by the quasi-expropriation of receivables in order to finance the restructuring of his debtor with the remaining assets. A fair settlement by distributing the debtor’s assets to its creditors no longer takes place.
The interests of the individual company do not necessarily have to be in line with the politically desired interests; we do not have to criticize the legislator at this point. Our task is to deal with the possibilities offered by case law. In view of this ever-accelerating negative spiral, now is the time to restructure receivables management. Maintaining our own liquidity is vital now, but even more so in the years ahead.
Crises always arise because not everything was foreseen. Most companies do not have standardized response units when payments are due. Conflicts of interest can become apparent within internal company structures due to so-called silo thinking. For example, the sales department insists on understanding late payments in order to maintain the good relationship with the hard-won customer through further extensions. Or the internal legal department wants to protect itself by hiring an external lawyer due to possible ignorance of the auction process, which can lead to a significant loss of time with considerable disadvantages. In the event of late payment, a clerk in the accounts receivable department often fails to inform the management immediately in a misunderstood willingness to help and trust in the debtor and its ultimately unfulfilled promise to pay. Although this is humanly understandable, it is unfortunately counterproductive.
What can logisticians do to make their companies crisis-proof? And what kind of crisis do they need to be prepared for?
Current business administration distinguishes between two types of crisis:
The first is the sudden, unexpected crisis. It is uncontrollable and catches the logistics provider unprepared. The best examples of sudden crises are StaRUG proceedings and insolvencies that occur without warning. In such acute scenarios, the rule is: save what can be saved.
Secondly, the gradually building crisis (“creeping crisis”). Agreed payment targets are not being met and are being constantly extended by customers. Payment defaults accumulate. It is not unusual for a company to become accustomed to this situation. The threshold to an acute crisis is not recognized in time. The result is the erosion of equity. The emergency event arises seemingly unexpectedly. The bank asks for a meeting, insists on the involvement of a restructuring consultant, who in turn, after analysis, demands an extended financial commitment from the shareholders to keep the company going, otherwise there is a threat of insolvency due to termination of the credit lines. In this case, it can be decisive if the company can underpin a positive going concern forecast with functioning receivables management.
Because we are facing major problems in the real economy and the restriction of creditors’ rights is steadily progressing, new responses to corporate crises have been developed based on current practical experience and business management findings.
The most important principle is to get ahead of the situation quickly. It is important to anticipate the situation, reassess the available options and apply them in such a way that resilience is already in place before the incident occurs. In the event of a crisis, a prepared “toolbox” can be used to react immediately. The potential ticking time bomb (“loose cannon”) must be kept under control. The unintentionally passive role must be reversed immediately and an active role must be taken immediately to control the situation. In addition to the possibility of contractual protection, the logistics industry can benefit from the proactive use of statutory pledges of rights, if applied strategically. Section 410 HGB (German Commercial Code) pledge of rights of the freight forwarder, section 440 HGB pledge of rights of the carrier, section 475b BGB (German Civil Code) pledge of rights of the warehouse keeper, section 623 HGB pledge of rights of the carrier are relevant. The pledges of rights are statutory. They are usually set out in the freight and storage contracts and can be applied immediately when payment is due. No court judgment or enforceable title is required. The deadlines must be adhered to and the legal particularities must be observed. When applying the lien, it is important not to put the cart before the horse. This means first exercising the pledge of rights, then writing to a lawyer and taking legal action. The strategically correct sequence of the individual steps is the necessary prerequisite for achieving the goal of the greatest possible realization of the claim. In the case of international clients, logistics companies should check their contracts to see whether the application of German law is a condition. This enables the quick and smooth exercise of pledges of rights and the short-term implementation of the recovery procedure to realize the claim. When training to become a forwarding agent, the handling of non-performing contracts and, in particular, forwarding lien law is part of the course content relevant to the examination. The requirements for this are actually known. If you need to brush up on this knowledge, Deutsche Pfandverwertung Ostermayer & Dr. Gold GbR offers practical advice.
If the realization proceeds are not quite sufficient to cover the outstanding receivables, at least the amount in dispute is reduced when collecting the remaining amount. Another advantage is that storage space that has been blocked for a short time is freed up again.
It is also imperative to act quickly because the items taken into pledge by the logistics provider generally lose value on an ongoing basis, and not just in the case of perishable goods.
Information on the forwarding agent’s lien in the event of insolvency
If the forwarder, warehouse keeper or carrier has asserted its pledge of rights one month before a customer files for insolvency and the goods are already in its actual possession for realization, there is no obligation to return them to the insolvency administrator. According to the priority principle, the logistics company has the sole right of realization. If the administrator should nevertheless try to persuade the creditor to allow him, the insolvency administrator, to realize the goods, the logistics provider should be very wary. Firstly, the logistics provider is giving up control. Instead of a transparent and regulated procedure in which the best possible realization proceeds are achieved, the administrator can now sell by private treaty, for example to realization companies. Insolvency administrators sometimes run liquidation companies themselves or are involved in them. As with all commercial enterprises, the profit of liquidation companies also lies in purchasing. It is therefore in the interest of the private buyer to purchase the goods at the lowest possible price. Secondly, the primary task of the insolvency administrator is to restructure the insolvent company and then hand it over to an investor. The more attractive the offer, including the inventory to be taken over, the easier it is to find investors, provided this inventory remains in the company. However, the transport industry cannot adopt the problem of the insolvency administrator. A common narrative is that the logistics provider would at least retain the customer. However, practice shows that the new business owner restructures the acquired company and then enters the market with a new business purpose instead of the failed business model. However, if the forwarder has the liquidation carried out by Deutsche Pfandverwertung by way of a pledge of rights, the chances are that the proceeds will be considerably more advantageous for the forwarder, as the liquidation can be carried out by public auction.
After filing for insolvency, the logistics provider’s exploitation rights are initially lost in favor of the insolvency administrator. For this reason alone, the freight forwarder should assert the pledge of rights for outstanding claims at an early stage. Nevertheless, the freight forwarder retains its privileges as the party entitled to separate satisfaction. In addition, the administrator must inform the freight forwarder when, where and how he intends to liquidate in accordance with Section 168 of the Insolvency Code. He must give the creditor the opportunity to point out a more favorable realization option. The administrator must take advantage of the realization option indicated by the creditor or place the creditor in the same position as if he had taken advantage of it. In practice, the insolvency administrator then usually releases the items seized in insolvency. In cooperation with the publicly appointed, sworn auctioneers, it is usually possible to realize better proceeds. We at Deutsche Pfandverwertung have many contacts with buyers of goods of all kinds.
Finally, some information on the involvement of Deutsche Pfandverwertung Ostermayer & Dr. Gold GbR:
The realization of a forwarding agent’s lien is a sovereign act that must be carried out in accordance with a procedure regulated by property law and the German Commercial Code.
Deutsche Pfandverwertung Ostermayer & Dr. Gold GbR is a publicly appointed, sworn auctioneer authorized to carry out sales based on pledges of rights.
We are available to logistics companies as a partner with many years of experience in conducting public auctions of pledged goods in compliance with the law. But experience is not everything. We always aim to be at the cutting edge. We immediately recognized the potential offered by AI. As a pioneer in our industry, we are now integrating these advantages of AI more and more into our processes, to the benefit of our clients.
