1489313 - Hogan Lovells FIS Horizons 2021 update - Flipbook - Page 19
Financial Institutions Horizons
Germany
Germany’s new restructuring regime came into
force on 1 January 2021. At the heart of the
new regulation is the introduction of a so-called
stabilization and restructuring framework
(“SRF”) for companies. In a sea change to the
traditional approach, the SRF enables a company
to be restructured before insolvency proceedings
have to be initiated. It is therefore expected that
this new regime will have a major impact on
German restructuring practice.
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It is possible to implement the plan without the
involvement of the court. The new restructuring
law thus gives the debtor a comparatively
discreet opportunity for restructuring both its
debts and its capital on a confidential basis.
A successful restructuring, though, requires a
structured and precisely planned preparation.
•
Involving the restructuring court may,
however, be advantageous. The plan will only
bind dissenting creditors if it is approved by
the court. Under certain conditions, the court
may also terminate mutual contracts and order
stabilization measures (such as a cessation
of enforcement measures), neither of which can
be done under a plan without court involvement.
The core element of SRF is the submission of a
restructuring plan (the “plan”) by the company
and its acceptance by affected creditors.
•
•
The plan allows far-reaching arrangements
to be made, affecting not only the debts of the
distressed company, but also its shareholder
structure. The decision as to which creditors
will be affected by the plan and whether the
plan should affect shareholders, remains with
the company.
The plan can be used to restructure the debts
owing to affected creditors (for example by
imposing a haircut or a deferral), intervene
in the rights of shareholders, alter creditors’
claims under security provided by other
entities within the group and/or implement
a new financing.
•
Claims of employees must not be changed
under the plan.
•
The creditors affected by the plan must be
divided into groups according to appropriate
characteristics and treated equally within their
groups. If the plan intervenes in the rights of
shareholders, the shareholders must form a
separate group.
•
In order to become effective, the plan must be
accepted by each creditor group by a majority
within that group of at least 75 % by value,
whereby the voting right depends on the
amount of the claim held by each creditor.
Dissenting creditor groups can be crammed
down under certain conditions.
If the court is involved, the following limitations
of liability will also apply:
•
Relaxation of the general prohibition on
payments pursuant to section 15b of the
Insolvency Code (previously section 64
of the Limited Liability Company Code)
if the company has notified the court of its
subsequently occurred illiquidity and/or
over-indebtedness.
•
Provisions of a legally binding plan and
legal actions taken in the implementation
of the plan are generally not contestable in
a subsequent insolvency.
In certain cases, a restructuring officer must
be appointed, to whom the court can transfer
various rights of control. Alternatively, it is also
possible to enter into a consensual settlement
with different creditors with the support of a
restructuring moderator.
