An outline of the brand new German enterprise stabilisation and restructuring regime

On 1 January 2021, the German Legislation for the Additional Growth of the Restructuring and Insolvency Legal guidelines (SanInsFoG) got here into power.

Crucially, this incorporates a stabilisation and restructuring framework for companies (StaRUG). Set out inside this are new procedures for out-of-court pre-insolvency restructurings in Germany (the German Scheme), launched in reference to the Directive on restructuring and insolvency of 20 June 2019 ((EU) 2019/1023) (Restructuring Directive). Additionally worthy of point out is the truth that the German Insolvency Code has undergone vital adjustments.

The German Scheme

The German Scheme resembles the UK and Dutch schemes. It fills the hole in German restructuring legislation between consensual pre-insolvency restructuring and restructuring within the context of formal and complete insolvency proceedings. It’s accessible to corporations after the incidence of imminent illiquidity (drohende Zahlungsunfähigkeit) on the idea of a 24-month prognosis.

Overarching goals

The German Scheme gives for a debtor-in-possession course of, by which a restructuring plan is voted on by separate lessons of collectors. Solely the debtor is entitled to provoke the restructuring course of and to suggest the restructuring plan. The place a minority of dissenting collectors opposes the restructuring plan, the German Scheme gives for the involvement of a restructuring court docket, which wants to substantiate the restructuring plan and implement sure stabilisation measures.

Many processes that are a component and parcel of the German Scheme are related to those who are already accessible beneath in-court insolvency proceedings. Below StaRUG, nevertheless, these measures could be enforced with out the formality and stigma of in-court proceedings.

Early disaster detection and administration

The managing administrators of corporations are obliged to recognise company crises at an early stage and to handle such crises. They should repeatedly monitor developments that would jeopardise the continued existence of their firm. The place they determine such developments, they have to take acceptable countermeasures and report back to the supervising our bodies instantly.

Managing administrators and supervisory our bodies ought to subsequently overview their present company organisation for appropriate early disaster detection and administration techniques. They need to rigorously doc the fulfilment of their early disaster detection obligations.

As quickly because the restructuring challenge has been notified to the restructuring court docket, nevertheless, there’s a shift in duties. The managing director of the corporate now has to guard the pursuits of collectors, pursuing the restructuring matter with the due care of a prudent and conscientious supervisor. If these duties are breached, the managing director is liable to the corporate for the harm incurred. Such claims for damages can solely be asserted by the corporate itself and never by the corporate’s collectors.

Restructuring plan – collectors

The debtor might submit a restructuring plan to its collectors, who’re divided into sure lessons (eg secured collectors, unsecured collectors) and members. A majority of 75% of the voting rights in every class is required and enough for the adoption of the restructuring plan. Voting rights are decided by the quantity of the declare, the worth of the safety and, within the case of share or membership rights, the share of the subscribed capital of the debtor. If the required majority in a single class is just not achieved, its approval could also be changed by means of a cross-class cram-down.

The affirmation of the restructuring plan by the restructuring court docket is required, except all collectors affected by the restructuring plan comply with it.

Below the restructuring plan, liabilities and safety rights granted by the debtor in addition to the underlying contractual relationships could be modified. Third-party safety granted by associates of the debtor can be impaired. Capital discount/improve and debt-equity-swaps can also function.

Restructuring plan – new monies

New financings, whether or not secured or unsecured, can also type a part of the restructuring plan. Such new financings are usually excluded from claw-back in a subsequent insolvency. This privilege doesn’t apply to shareholder loans and economically comparable transactions, which, by operation of German insolvency legislation, are subordinated in any German insolvency proceedings.

Pursuant to StaRUG, lender legal responsibility can’t come up from data {that a} restructuring matter is pending with the restructuring court docket, or that the debtor has utilized for sure stabilisation measures.

The lender legal responsibility regime imposed by German case legislation on restructuring loans has not been suspended in its entirety by StaRUG. Nonetheless, no legal responsibility will happen if the lender has superior new monies in an effort to facilitate a restructuring. Pursuant to the necessities of the German Federal Supreme Court docket (Bundesgerichtshof) and the German Institute of Auditors’ IDW S6-standard, the debtor often gives a restructuring opinion in an effort to proof that the proposed restructuring is more likely to be predominantly profitable.

Court docket measures

The German Scheme gives for sure stabilisation measures.

To realize a profitable restructuring, the debtor might apply to the court docket for stabilisation orders towards all, single or a number of collectors, akin to a keep of execution or a keep of realisation. Stays could also be issued for a period of as much as three months with the choice of an extension of as much as eight months beneath sure circumstances.

Restructuring officer

On the request of the debtor or of collectors holding 25% of the voting rights or in sure necessary instances, the restructuring court docket will appoint a restructuring officer. That is typically the case when the rights of customers or SMEs are to be diversified beneath the restructuring plan, the debtor applies for stabilisation orders, or the court docket confirms the restructuring plan via a cross-class cram-down.

The restructuring officer should be a tax advisor, auditor or lawyer skilled in restructuring and insolvency issues or one other pure particular person with comparable {qualifications}. The restructuring officer displays the restructuring course of, determines factual points and examines particular person procedural steps.

Illiquidity or over-indebtedness

If, through the restructuring course of, the debtor turns into illiquid or over-indebted, the restructuring court docket is authorised to proceed the restructuring proceedings in sure circumstances. These embrace if the success of the restructuring plan is probably going and:

  • insolvency proceedings would clearly not be within the curiosity of the collectors, or
  • the illiquidity or over-indebtedness of the debtor outcomes from the acceleration of a declare that was modified and accounted for by the phrases of the restructuring plan.

COVID-19 associated provisions

For corporations affected by COVID-19 – ie companies that had been profitable in 2019 however with a turnover shortfall of greater than 30% in 2020 – the standard 12-month forecast interval to resolve over-indebtedness has been diminished to 4 months till 31 December 2021.

Furthermore, as a result of delayed disbursement of monetary help beneath German state help programmes, insolvency submitting obligations have been suspended till the tip of April 2021 in relation to corporations which filed an utility for the granting of monetary help beneath state help programmes.


The Restructuring Directive wanted to be carried out by Member States by 17 July 2021. SanInsFoG turned legislation a lot earlier, as a result of the federal government wished to have the German Scheme accessible by 1 January 2021.

It stays to be seen whether or not the German Scheme will present for a sensible, environment friendly and internationally aggressive new restructuring regime.

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