GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Beatrice Zobel, Freshfields
7.8 Out-of-Court v In-Court Enforcement A typical out-of-court restructuring involves the nego - tiation of a consensual restructuring solution with all stakeholders. Such restructuring may include a range of measures – eg, extensions of maturities, reductions in principal or interest or a debt-for-equity swap. An out-of-court restructuring is often the preferred route as in-court proceedings are generally more time-con - suming, more costly and imply a loss of control by equity holders and, in insolvency proceedings, also by management. However, it requires the consent of all affected stakeholders, and, as the case may be, approvals required under corporate law, or the articles of association of the debtor. If agreement cannot be reached, StaRUG proceedings offer the possibility to restructure a debtor outside of a formal insolvency process permitting majority decisions of debt and/or equity holders and a cross-class-cram-down. Entry into StaRUG proceedings by a German limited liability company requires relevant shareholder consent and, in a German stock corporation, approval of the super - visory board ( Aufsichtsrat ) unless, in each case, insol - vency is the only alternative to a StaRUG process, in which case there are compelling arguments that no approval is required. 7.9 Dissenting Lenders and Non-Consensual Restructurings There are robust mechanisms to bind dissenting lend - ers to a StaRUG restructuring or insolvency plan. Both frameworks provide for majority consent. Stakehold - ers vote in classes. If certain classes do not consent to the plan, cross-class cram-down mechanisms are available. Dissenting lenders are protected by, inter alia, the principles of horizontal fairness (no prefer - ential treatment of equal ranking creditors), absolute priority rule (with a new money exception), and a no- worse-off test, as well as judicial oversight and the need for judicial plan confirmation, which ensure fair - ness and transparency in the restructuring process.
7.10 Expedited Restructurings Specific expedited restructuring procedures like pre- arranged restructurings are not available under Ger - man law. However, in practice, the debtor negotiates the terms of the restructuring with its main stakehold - ers and would normally only enter into a StaRUG pro - cess once at least an agreement in principle has been reached (and a lock-up has been entered into) with the majority of creditors/equity holders required to implement the restructuring plan. A StaRUG process can then be implemented within a few weeks (often between seven and ten weeks). If the debtor has to file for insolvency proceedings, it may consider pro - tective shield proceedings (generally, a three-months process) to prepare an insolvency plan. Insolvency plan proceedings may be completed, if well prepared, within approximately six months after the formal com - mencement of insolvency proceedings.
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