German law · English information
An insolvency plan can depart from the ordinary statutory distribution rules and enable restructuring. It can be used in ordinary and debtor-in-possession proceedings, and is not reserved for large companies.
What the plan can regulate
The descriptive part explains the economic basis; the operative part sets out changes to stakeholders‘ rights. These may include dividends, deferrals and, where permitted, changes to shareholder rights.
Voting and minority protection
Participants are divided into classes according to their legal position and interests. Approval generally requires both a majority in number and a majority by value of the voting creditors in each class. Overriding a rejecting class and protecting disadvantaged participants are subject to separate statutory conditions.
Financing and creditor review
The alternative to the plan must be explained through a credible comparison. Funding commitments, operational measures and tax consequences should be addressed before voting. Creditors should examine claims, voting rights, class formation, security and expected recovery. Objections and appeals are subject to deadlines.
Related information
Procedures overview · Creditor rights · Corporate insolvency
Official German Insolvency Code · Official StaRUG
Practical implementation
Explaining the comparison and creditor classes
An insolvency plan describes the economic position and the proposed changes to legal rights. Its comparison should explain the likely recoveries without the plan. Business valuation, collateral and disputed claims can materially affect that assessment. Classes must properly reflect different legal positions and interests. Voting requirements, any replacement of missing consent and individual creditor protection each have their own statutory conditions. The supporting evidence should enable creditors to assess the proposal rather than rely on a headline recovery percentage.
Implementing the confirmed plan
A confirmed plan needs clear payment dates, funding commitments and responsibility for implementation. Disputed or initially unknown claims require appropriate treatment, as do safeguards for promised distributions. Tax effects, corporate measures and monitoring should be considered early. An attractive calculation is insufficient if cash will not be available. Creditors should examine timing, conditions and enforceability alongside the proposed recovery. The implementation timetable must also accommodate approvals and dependencies outside management's direct control.
Four practical examples
The following scenarios are illustrative examples, not reports of client matters. The outcome depends on the facts and applicable rules.
Example 1: An attractive but unfunded recovery
A plan offers more than liquidation but relies on a non-binding investor proposal. Creditors should examine evidence and conditions of funding. The practical issue is whether the promised amount can actually be paid on time.
Example 2: A secured lender is affected
A bank holds valuable collateral. Its position cannot simply be equated with unsecured trade creditors. Valuation, class allocation and the plan's operative provisions must account for the different rights.
Example 3: A claim is disputed
A supplier files a significant claim that the administrator disputes. Voting rights, reserves and later distribution need separate treatment. Including a figure in a schedule does not resolve the underlying disagreement.
Example 4: A plan instalment is missed
After confirmation, the debtor fails to pay an instalment. The creditor should review the plan, due date, notice requirements and applicable consequences. Neither immediate pursuit of the full original debt nor passive delay is automatically justified.
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