Applications for self-administration proceedings with respect to Sono Group N.V. and Sono Motors GmbH under the German Insolvency Act

MUNICH, Germany, May 15, 2023 (GLOBE NEWSWIRE) -- On May 15, 2023, Sono Group N.V. applied to the insolvency court of Munich, Germany, to permit the opening of a self-administration proceeding (Eigenverwaltung) with respect to Sono Group N.V. pursuant to Section 270 (b) of the German Insolvency Code (Insolvenzordnung). On the same day, Sono Motors GmbH, Sono Group N.V.’s sole wholly-owned subsidiary, applied to the same court to permit the opening of self-administration proceeding in the form of a protective shield proceeding (Schutzschirmverfahren) with respect to Sono Motors GmbH pursuant Section 270 (d) of the German Insolvency Code. Sono Group N.V. conducts its business through its subsidiary Sono Motors GmbH, and the terms “we” and “our” used herein refer to Sono Group N.V. together with its subsidiary Sono Motors GmbH.

At the end of February 2023, we announced our decision to restructure our business model to focus exclusively on retrofitting and integrating solar technology into third-party vehicles going forward. At the same time, we discontinued our Sion passenger car program with immediate effect and terminated approximately 250 employees. A repayment plan was developed to handle customer claims arising from the Sion reservations. We continued to face challenges to obtain external financing and to date have not been successful in selling our Sion passenger car project and related assets. After other financing options failed to materialize, our management ultimately concluded that Sono Motors GmbH is over-indebted and faces impending illiquidity (drohende Zahlungsunfähigkeit), with Sono Group N.V., in turn, becoming over-indebted and also facing impending illiquidity. As a consequence, management decided to apply for the opening of self-administration proceedings with respect to Sono Group N.V. and Sono Motors GmbH with the goal of sustainably restructuring our business.

Self-administration proceedings are debtor-in-possession type proceedings under German insolvency law, which are available to businesses in financial distress and typically aim to preserve the business and the entity that are the subject of the proceedings. In these proceedings, management retains control and operation of the subject company’s business under the supervision of a custodian, who is initially appointed on a preliminary basis (vorläufiger Sachwalter). We understand that in the German market a self-administration proceeding in the form of a protective shield proceeding, such as the one which Sono Motors GmbH has applied for, is perceived by suppliers, customers, and potential investors as a proceeding with improved chances for a successful in-court business restructuring. We believe that this perception may improve our chances of sustainably restructuring, recapitalizing, and realigning Sono Motor GmbH’s business in the interest of its creditors, suppliers, customers, and employees. In order to be able to apply for a self-administration proceeding in the form of a protective shield proceedings, Sono Motors GmbH was required to provide a third-party attestation that the company is not illiquid and that the intended restructuring does not manifestly lack the prospect of success.