Vol 18 (2021) - Issue 1

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The New German Restructuring Regime

Synopsis
After the implementation of the European Restructuring Directive through the introduction of a new German Restructuring Code, Germany has a more attractive restructuring regime. Comparably to an English Scheme of Arrangement process, it will be possible to implement a restructuring plan which may foresee debt haircuts and other financial and corporate measures even against the vote of single obstructing 'holdout stakeholders', provided that a 75% majority of the stakeholders in each voting group approves the plan.
Under certain conditions, it is even possible to 'cramdown' a dissenting voting group entirely. This does not require the company to go through a formal insolvency process anymore. It is expected that these changes will fundamentally change the German restructuring landscape. For instance, insolvency forum shopping of German companies and classic debtor-in-possession/protective shield proceedings are expected to become much less frequent.