GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Karl Kuhn, Freshfields
uted to the creditors pursuant to the following waterfall: • costs of insolvency proceedings and so- called administrative claims ( Masseverbindli- chkeiten ) – ie, specifically including claims arising from transactions executed by the insolvency officeholder after the commence - ment of insolvency proceedings; • unsecured claims ( Insolvenzforderungen ) pari passu; and • subordinated claims ( nachrangige Insolvenz- forderungen ) – eg, interest accruing after the commencement of insolvency proceedings or claims of shareholders 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 proceedings for corporate insolvencies – including any litigation, admission of claims, distribution of the insolvency 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 sig - nificantly. Further, the rights of segregation and rights to separate satisfaction are usually not included in insolvency statistics in Germany. These depend on the value of the collateral in each individual case. For insolvency proceed - ings 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 Restructuring Act (StaRUG) has provided for a comprehensive legal framework for voluntary out-of-court restructurings. In principle, a debtor with its centre of main interest (COMI) in Germany has access to StaRUG proceedings if it faces imminent illi - quidity ( drohende Zahlungsunfähigkeit ) but not yet illiquidity (cash-flow insolvency, Zahlungsun- fähigkeit ) 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). Operational restructuring measures, however, continue to require a consensual agreement 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 restructuring, StaRUG cannot afford super sen - ior status. However, such financing will, in prin - ciple, be excluded 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
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