GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Beatrice Zobel, Freshfields
• costs of insolvency proceedings and so-called administrative claims ( Masseverbindlichkeiten ) – ie, specifically including claims arising from transac - tions executed by the insolvency officeholder after the commencement of insolvency proceedings; • unsecured claims ( Insolvenzforderungen ) pari passu; and • subordinated claims ( nachrangige Insolvenzforder- ungen ) – eg, interest accruing after the commence - ment of insolvency proceedings or claims of share - holders holding more than 10% of the registered share capital. 7.3 Length of Insolvency Process and Recoveries The sale of a company on a going-concern basis out of insolvency (asset deal) is typically consummated within three to six months. The completion of the pro - ceedings for corporate insolvencies – including any litigation, admission of claims, distribution of the insol - vency estate, etc – can take several years depending on the size of the company and/or the complexity of the matter. If the insolvent company implements an insolvency plan, the timeframe also varies from a few months to several years. The amount of insolvency dividends distributed in German insolvency proceedings varies significantly. Further, the rights of segregation and rights to sepa - rate satisfaction are usually not included in insolvency statistics in Germany. These depend on the value of the collateral in each individual case. For insolvency proceedings commenced in 2011 and concluded by end of 2018, the average dividend of unsecured 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) has provided for a comprehensive legal framework for voluntary out-of-court restructur - ings. 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 by majority vote on the restructuring plan (generally 75% consent of the nominal amount of the relevant debt or equity in each class). The debtor has the exclusive right to submit a restructuring plan (see 7.9 Dissenting Lenders and Non-Consensual Restructurings for a discussion of the process). Oper - ational restructuring measures, however, continue to require a consensual agreement of all affected par - ties (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 contin - ue to rely on a restructuring opinion ( 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
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