GERMANY Law and Practice Contributed by: Michael Josenhans, Anouschka Zagorski and Christina Banz, Freshfields
creditors amounted to 6.1%, noting that this statistic includes the full spectrum of insolvency proceedings. 7.4 Rescue or Reorganisation Procedures Other Than Insolvency StaRUG Since 1 January 2021, the Stabilisation and Restruc- turing Act (StaRUG) (implementing the EU Restruc- turing Directive of 20 June 2019 – Directive (EU) 2019/1023) provides for a comprehensive legal frame- work for voluntary out-of-court restructurings. In principle, a debtor with its centre of main interest (COMI) in Germany has access to StaRUG proceed- ings if it faces imminent illiquidity ( drohende Zahlung- sunfähigkeit ) but not yet illiquidity (cash flow insol- vency, Zahlungsunfähigkeit ) or over-indebtedness (balance sheet insolvency, Überschuldung ) (each as defined in the InsO). StaRUG enables the debtor to implement a financial restructuring and bind all creditors, including classes that do not approve the plan, through a cross-class cram-down. Operational restructuring measures, however, continue to require a consensual agree- ment of all affected parties (for example, long-term contracts such as lease agreements cannot be varied under StaRUG). If a new financing is required to implement the restruc- turing, StaRUG cannot afford super senior status. However, such financing will, in principle, be exclud- ed from claw-back and lender liability in subsequent insolvency proceedings. However, as these privileges only apply for a limited timeframe until the debtor is sustainably restructured, in practice lenders continue to rely on a restructuring opinion ( S6-Sanierungsgu- tachten ) to reduce risks (see 7.5 Risk Areas for Lend- ers ). If required, the debtor may choose to apply for a moratorium applying a stay on enforcement measures by creditors. SchVG The German Bond Act 2009 (SchVG) provides for an out-of-court restructuring procedure in relation to bonds governed by German law. Provided and to the extent that the terms and conditions of the bond pro- vide for the possibility to amend these by way of a
bondholders’ resolution, the SchVG allows for a wide range of restructuring measures. These include: • a waiver of principal and/or interest; • deferrals; • a debt-for-equity swap; and • modifications of the terms and conditions of Ger- man bonds. For major decisions (such as waivers or debt-for- equity swaps), the resolution of bondholders gener- ally requires a quorum of 50% by value of the bonds in the first bondholders’ meeting, and, if the quorum is not met, 25% by value in a second bondholders’ meeting. No quorum is required for other decisions in a second bondholders’ meeting. The majorities that must be obtained to approve the resolution for major decisions are 75% of bondhold- ers by value present and voting in the bondholders’ meeting and more than 50% for any other decisions (such as the appointment of a joint representative). The bondholders’ resolution is subject to appeal within one month. A successful appeal will nullify the resolution. 7.5 Risk Areas for Lenders Insolvency Claw-Back Certain pre-commencement transactions are subject to insolvency claw-back actions by the insolvency officeholder, provided certain conditions are met. Generally, to be subject to claw-back, the relevant transaction must have occurred prior to the com- mencement of insolvency proceedings and must have disadvantaged the debtor’s creditors (with indirect effects being sufficient). Finance documents therefore typically contain infor- mation obligations aimed at providing regular and – in the event of arising difficulties – early visibility of the borrower’s financial situation. Lender Liability Under German law, if a lender refuses to grant a (new) loan to the distressed company, accelerates its (existing) loans or refuses to (partially) waive its claims, thereby causing the company’s insolvency, the lender generally cannot be held liable, as it has
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