GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Karl Kuhn, Freshfields
debtor and the financial and operational meas - ures projected, the debtor can be restructured. 7.6 Transactions Voidable Upon Insolvency For claw-back of certain transactions prior to the commencement of insolvency proceedings, please see 7.5 Risk Areas for Lenders . In addition, the following general aspects are rel - evant for creditors in insolvency proceedings: All rights in relation to the insolvent estate and the debtor’s business affairs become vested with the insolvency administrator who becomes the sole representative of the insolvent estate and who is exclusively entitled to dispose of assets of the estate; dispositions made without the officeholder’s consent are null and void. Further, pending litigations are stayed. Creditors may only enforce their rights and claim payment in accordance with the rules set out in the InsO. Moreover, any kind of foreclosure action by a creditor against the estate is stayed and such actions made within the last month before the opening of insolvency proceedings become null and void. In debtor-in-possession proceedings, management may only enter into material trans - actions with the consent of the court-appointed custodian. 7.7 Set-Off Rights The right to set-off claims in insolvency pro - ceedings is subject to certain conditions. A creditor’s set-off-right remains in force, if set-off was possible (contractually or by law) prior to the commencement of insolvency proceedings and effectively prior to the filing of insolvency proceedings. If the creditor’s claim becomes due and payable after the commencement of insolvency proceedings, set-off is only possible if (and when) the creditor’s claim is due and pay - able prior to the estate’s claim becoming due
and payable. Set-off by creditors is precluded, inter alia, if the creditor owes something to the estate or becomes a creditor only after the com - mencement of insolvency proceedings, or if the “possibility to set-off” is subject to claw back. 7.8 Out-of-Court v In-Court Enforcement A typical out-of-court restructuring involves the negotiation of a consensual restructuring solu - tion with all stakeholders. Such restructuring may include a range of measures – eg, exten - sions 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 consuming, 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 stake - holders, 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 pos - sibility 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 supervisory board ( Aufsichtsrat ) unless, in each case, insol - vency is the only alternative to a StaRUG pro - cess, in which case there are compelling argu - ments that no approval is required. 7.9 Dissenting Lenders and Non- Consensual Restructurings There are robust mechanisms to bind dissenting lenders to a StaRUG restructuring or insolven - cy plan. Both frameworks provide for majority consent. Stakeholders vote in classes. If certain classes do not consent to the plan, cross-class
134 CHAMBERS.COM
Powered by FlippingBook