The StaRUG provides companies in crisis with the opportunity to restructure without insolvency proceedings. Learn how the restructuring plan works, what requirements apply and what pitfalls to avoid.
Restructuring Outside Insolvency: The Restructuring Plan in Practice
Since 1 January 2021, German companies have had access to the Unternehmensstabilisierungs- und -restrukturierungsgesetz (StaRUG), an instrument that closes a fundamental gap in German restructuring law: the possibility of achieving a binding restructuring outside insolvency proceedings. The centrepiece of this framework is the restructuring plan. But how does this procedure work in practice, and which companies is it suitable for?
Background: The Gap in German Restructuring Law
Before the StaRUG, companies in crisis essentially faced two options: either a consensual restructuring with all creditors was achieved -- which in practice frequently failed due to the resistance of individual stakeholders (so-called hold-out creditors) -- or the company had to enter insolvency proceedings. The StaRUG transposes the European Restructuring Directive (EU) 2019/1023 and creates a third path: a court-supported restructuring that can be enforced even against the will of individual creditor groups.
Requirements: When Does the Restructuring Plan Come into Consideration?
Imminent Inability to Pay
The central access requirement is imminent inability to pay within the meaning of § 18 InsO. The company must foreseeably be unable to meet its existing payment obligations when they fall due. A forecast period of typically 24 months applies.
Important: The procedure is not available where inability to pay (§ 17 InsO) or over-indebtedness (§ 19 InsO) has already occurred. In such cases, the obligation to file for insolvency applies, and the managing director must file an insolvency application within the statutory time limits.
Restructuring Capability
In addition to imminent inability to pay, the company must be capable of restructuring. This means:
- The business model must be fundamentally viable
- The crisis must be surmountable through the measures envisaged in the plan
- No insolvency ground within the meaning of §§ 17, 19 InsO may exist
Structure and Content of the Restructuring Plan
The Descriptive Part
The restructuring plan consists of a descriptive part and a formative part (§ 5 StaRUG). The descriptive part contains:
- A description of the causes of the crisis and the company's economic situation
- The presentation of the restructuring concept with the envisaged measures
- A comparison of creditor satisfaction under the plan with satisfaction without the plan (so-called comparative calculation)
- A going-concern forecast demonstrating that the company will be sustainably viable again after plan implementation
The Formative Part
The formative part defines the specific interventions in rights:
- Debt reductions (haircuts)
- Moratoria and maturity extensions
- Conversion of debt into equity (debt-equity swap)
- Modification of security rights
- Interventions in equity and membership rights of shareholders
Group Formation
Creditors affected by the plan provisions are divided into groups (§ 9 StaRUG). Group formation must be appropriate and may not be arbitrary. Typical groups are:
- Secured creditors (creditors with security rights)
- Unsecured creditors
- Subordinated creditors
- Equity holders (where their rights are affected)
Within each group, all members must be treated equally (principle of equal treatment).
Voting and Plan Confirmation
Voting Procedure
Voting on the restructuring plan takes place within the formed groups. In each group, a majority of three-quarters of the voting rights must approve the plan (§ 25 StaRUG). Voting rights are generally based on the amount of the claims.
Cross-Class Cram-Down
A central instrument of the StaRUG is the so-called cross-class cram-down (§ 26 StaRUG). If a group does not approve the plan, the missing consent can be replaced by the court under certain conditions:
- The majority of groups has approved
- The dissenting group is not worse off than without the plan (no-worse-off principle)
- The members of the dissenting group are appropriately participat[ing] in the economic value distributed under the plan
Court Confirmation of the Plan
Confirmation of the plan by the restructuring court (§ 60 StaRUG) gives the plan its binding effect. The court reviews:
- Compliance with procedural requirements
- The accuracy of the comparative calculation
- The absence of grounds for refusal (in particular, worse treatment of creditors)
Flanking Instruments
Stabilisation Order (Moratorium)
The restructuring court can, upon application, issue a stabilisation order (§§ 49 ff. StaRUG). This effects:
- Stay of enforcement against the company
- Stay of realisation of security rights
- Duration: initially up to three months, extendable to up to eight months
The moratorium provides the company with the necessary breathing space to prepare the restructuring plan and negotiate with creditors.
Restructuring Mediation
For cases where a consensual solution still appears possible, the StaRUG offers restructuring mediation (§§ 94 ff. StaRUG). The court appoints a restructuring mediator who mediates between debtor and creditors. This instrument is particularly suitable for:
- Companies with a manageable number of creditors
- Situations where a basic willingness to reach agreement exists
- Early-stage crises where negotiating room still exists
Comparison with the Insolvency Plan
| Criterion | Restructuring Plan (StaRUG) | Insolvency Plan (InsO) |
|---|---|---|
| Access | Imminent inability to pay | Inability to pay/over-indebtedness |
| Publicity | Generally confidential | Public proceedings |
| Stigma | Low | Significant |
| Creditor scope | Selective (only affected creditors) | All creditors |
| Employee rights | Not subject to modification | Subject to limited modification |
| Duration | 3--6 months (typical) | 6--18 months (typical) |
Practical Timeline of a StaRUG Restructuring
A typical process is structured in the following phases:
- Phase 1 (Weeks 1--4): Crisis analysis, preparation of the restructuring concept, notification of the restructuring project to the court
- Phase 2 (Weeks 5--12): Drafting of the restructuring plan, informal creditor discussions, application for stabilisation order if appropriate
- Phase 3 (Weeks 13--18): Formal plan submission, voting in creditor groups, court plan confirmation
- Phase 4 (from Week 19): Implementation of plan measures, monitoring
Success Factors and Common Pitfalls
Success Factors
- Early notification: The earlier the restructuring project is initiated, the greater the room for manoeuvre
- Professional advice: Engaging experienced restructuring advisers and specialised lawyers is essential
- Transparent communication: Open communication with creditors promotes willingness to consent
- Robust concept: The restructuring plan must be based on realistic assumptions and a viable business model
Common Pitfalls
- Acting too late: If inability to pay has already occurred, access to the StaRUG procedure is barred
- Inadequate comparative calculation: A flawed or non-transparent comparative calculation leads to refusal of plan confirmation
- Incorrect group formation: If creditors are not appropriately grouped, this can jeopardise the entire plan
- Insufficient liquidity: Without adequate liquidity for the duration of the proceedings, the restructuring will fail
The Role of the Restructuring Officer
The court may appoint a restructuring officer (§§ 73 ff. StaRUG). Their task is to safeguard creditor interests and monitor the proceedings. Appointment is mandatory where:
- a stabilisation order is issued
- rights of consumers or SMEs are affected
- a cross-class cram-down is requested
Conclusion
The restructuring plan under the StaRUG is a powerful instrument for companies in crisis -- provided it is deployed in a timely and professional manner. It enables a confidential, stigma-free restructuring that can be enforced even against reluctant individual creditors. The key to success lies in early recognition of the crisis, a robust restructuring concept and professional support from experienced advisers.
At compleneo, we have extensive experience in supporting restructurings -- both under the StaRUG and in traditional insolvency proceedings. We support you from the initial crisis analysis through plan preparation to successful implementation. Contact us for a confidential initial assessment.
