Even four and a half months after the German “Corporate Stabilisation and Restructuring Act” (“Unternehmensstabilisierungs- und -restrukturierungsgesetz”, “StaRUG”) came into force on 1 January 2021, reports of corresponding proceedings are (still?) limited (but see, for example, a decision by the Cologne District Court here, in German). However, the growing pressure to restructure after the final expiry of the suspension of the obligation to file for insolvency is likely to lead to entrepreneurs increasingly examining their remaining options. One option could be the so-called “restructuring moderation” (“Sanierungsmoderation“), which may already be initiated before the actual instruments of the stabilisation and restructuring framework according to §§ 2 et seq. StaRUG can be invoked.
The provisions on restructuring moderation contained in Part 3, §§ 94 – 100 StaRUG, are not based on the corresponding EU directive on the “preventive restructuring framework” (see for more details here), but on the French “procédure de conciliation” (see already Beissenhirtz, ZInsO 2011, 57, 64, here, in German). Accordingly, according to the explanatory memorandum to the SanInsFOG, p. 216, the debtor should therefore be given the opportunity “irrespective of the restructuring and stabilisation framework and its instruments, to receive support in working out a solution to overcome the economic or financial difficulties, in particular to reach a restructuring settlement, by using a court-appointed restructuring moderator […]“. This type of procedure is aimed in particular at micro and small enterprises that cannot afford advice and support from professional restructuring advisors to bring about a free restructuring.
Restructuring moderation is initiated by an application by the (restructurable) debtor for the appointment of a restructuring moderator to the court responsible for restructuring matters, cf. §§ 94, 30, 34 StaRUG. Since the explanatory memorandum to the StaRUG states that the restructuring facilitation is also applicable “as a preliminary stage to the possible use of instruments of the stabilisation and restructuring framework” (explanatory memorandum to the SanInsFOG, p. 216, in German, below), it is argued that the debtor must generally be “capable of restructuring” within the meaning of § 30 StaRUG, but that there must not yet be an imminent insolvency. Practice will show whether, on the one hand, the courts will allow this conceivable further postponement of the time of entry into the preventive restructuring framework and, on the other hand, to what extent creditors are willing to take this step.
At the debtor’s request, the court appoints a restructuring moderator without public notice, if the debtor is not “obviously” insolvent or over-indebted pursuant to § 94 (1) StaRUG, initially for a period of three months, with the possibility of an extension of up to a further three months, cf. § 95 StaRUG.
According to § 94 (1) StaRUG, the court may appoint as “restructuring moderator” any “suitable natural person, in particular one who is knowledgeable in business and independent of the creditors and the debtor”. The analogy to the selection of the insolvency administrator, cf. § 74 StaRUG, which can also be found elsewhere in the StaRUG, also applies to the restructuring moderator, although s/he does not necessarily have to belong to a certain professional group or be listed with the appointing court. The restructuring moderator is under the supervision of the court and must report to it monthly, in particular on the (probable) progress of negotiations, cf. § 96 (3) StaRUG, and must report (without delay) the occurrence of insolvency or over-indebtedness, cf. § 96 (4) StaRUG.
The task of the restructuring moderator is to mediate between the debtor and its creditors in bringing about a solution to overcome the economic or financial difficulties, cf. § 96 (1) StaRUG. The “solution” within the meaning of the standard is likely to be mostly the preparation, negotiation and conclusion of a restructuring settlement under § 97 (1) StaRUG, but this is not mandatory. In principle, freedom of contract applies to the restructuring settlement, so that – on a consensual basis – all contractually permissible regulations, including those involving third parties, can be agreed. The restructuring settlement should already be based on a restructuring concept for reasons of liability reduction and not only if the settlement is to be confirmed by a court, cf. § 97 (1) StaRUG. Accordingly, the essential difference to the principles of a proper out-of-court restructuring (see also here) should be the involvement of the court.
The involvement of the court can offer tangible advantages for creditors and debtors, because after confirmation by the court the restructuring settlement can only be challenged under §97 (3) in conjunction with § 90 StaRUG. This is an advantage that should not be underestimated compared to purely out-of-court restructuring with its sometimes immense risks of attack from dissatisfied creditors.
After years of inactivity in the area of “pre-insolvency restructuring”, the legislator’s initiative to even go beyond the requirements of the EU Directive with the creation of restructuring moderation is quite a positive surprise. The success of this initiative now depends on the attitude of the restructuring courts to this new type of procedure. Depending on the interpretation by the courts, the restructuring moderation could establish itself as a more or less independent “pre-insolvency restructuring procedure” or fade away as a meaningless instrument in the “toolbox” of the restructuring practitioners. This already begins with the point in time considered permissible from which the proceedings can be initiated. If the courts actually allow the initiation of restructuring proceedings even before the threat of insolvency arises, a restructuring procedure could establish itself with which the transition from a purely consensual out-of-court restructuring to an already more confrontational restructuring procedure under §§ 2 et seq StaRUG could be achieved “gently”. This is because the mere initiation of these proceedings (and the possibility of transfer to the stabilisation and restructuring framework under § 100 StaRUG) creates a threat for creditors that should not be underestimated.
As is so often the case, however, “after the reform is before the reform”. This is because the legislator will not be able to avoid bringing the rules on restructuring facilitation closer to those for the restructuring practitioner, see § 74 (2) StaRUG, at least to the extent that the debtor is enabled to “bring along” the restructuring moderator. Conversely, the debtor’s ability to have the restructuring moderator removed by the court at any time by means of an application (which does not even need to be substantiated!) under § 95 (1) StaRUG is likely to call into question the actual independence of the moderator in case of doubt.
Consolidated text StaRUG: https://www.bundesrat.de/SharedDocs/drucksachen/2020/0701-0800/762-20.pdf?__blob=publicationFile&v=1
RegE eines Gesetzes zur Fortentwicklung des Sanierungs- und Insolvenzrechts (with extensive reasoning)
All texts are in German