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StaRUG – The New German Restructuring Tool

The StaRUG is a pre-insolvency rescue procedure which allows a debtor to implement a restructuring plan outside formal insolvency proceedings.

General Features of StaRUG

• Rescue procedure in which a restructuring plan is put to a vote across separate classes of creditors.
• Available at an early stage outside of formal insolvency proceedings.
• Initiation requires the debtor’s notice to the court, combined with a restructuring concept and confirmation that the company is facing impending insolvency.
• Moratorium of maximum eight months possible.
• Dept-equity-swaps and other measures are possible in the plan.

High Degree of Flexibility

• Debtor may choose from a broad toolkit of individual instruments.
• Not all instruments require the court’s involvement.
• Debtor is free to choose who is included in the plan.

The restructuring process closes the gap between free restructuring and judicial insolvency proceedings. However, the method can only be used by companies that are threatened with insolvency, explain the Ecovis experts.

Changes to the Insolvency Law

• Liability regimes for wrongful trading, which were scattered throughout corporate law, are harmonised in one central insolvency law provision (Par. 15b InsO).
• Debtors who wish to use insolvency in self-administration (“Insolvenz in Eigenverwaltung”) need to show to the satisfaction of the court that they have provided detailed debtor in possession planning with a six-month planning horizon.
• The mandatory insolvency case of over-indebtedness was reduced to a twelve-month (instead of 24 month) forward-looking going-concern prognosis.

For further information please contact:

Michael Busching, Partner, Lawyer, ECOVIS Insolvenz und Sanierungs AG, Hamburg, Germany
Email: michael.busching@ecovis.com 

Nils Krause, Partner, Lawyer, ECOVIS Insolvenz und Sanierungs AG, Hamburg, Germany
Email: nils.krause@ecovis.com