The new German “Stabilisation and Restructuring Framework for Businesses”

Abstract

On 1 January 2021, the Bill on the Further Development of Restructuring and Insolvency Law (Sanierungs- und Insolvenzrechtsfortentwicklungsgesetz, SanInsFoG) entered into force in Germany. The core piece of the SanInsFoG is the Act on the Stabilisation and Restructuring Framework for Businesses (Gesetz über den Stabilisierungs- und Restrukturierungsrahmen für Unternehmen, StaRUG). In implementation of the Directive on restructuring and insolvency, it provides for a preventive restructuring framework. The key element of the framework is the option of a restructuring plan by means of which the debtor may achieve a discharge of debt in order to maintain the viability of his or her business. For the first time in German law, distressed companies now have access to a comprehensive restructuring procedure outside formal insolvency proceedings. In particular, the restructuring plan may become binding upon dissenting creditors if certain criteria are met (socalled cram down). Since a discharge of debt required unanimous approval of all affected creditors so far, this is a groundbreaking novation to the restructuring landscape in Germany The aim of this article is to give a first introduction to the new StaRUG-scheme, identifying both strengths and weaknesses. It will be shown that the framework is particularly suited for the restructuring of financial obligations. On the other hand, the German legislator did not follow the Dutch example and refrained from implementing an option to terminate mutual contracts what might be an obstacle where the debtor seeks to effect a restructuring of his operational business.