German law · English information
Section 270d InsO allows preparation of an insolvency plan under a protective shield where the statutory conditions are met. An insolvency application is required; this is different from StaRUG restructuring.
Eligibility and certification
A reasoned certificate from a suitably qualified person experienced in insolvency matters must confirm imminent illiquidity or over-indebtedness, the absence of actual illiquidity and that restructuring is not manifestly without prospects. The debtor-in-possession planning requirements must also be met.
A funded period for preparing the plan
The court grants a period of no more than three months to submit the insolvency plan. That period needs funding and concrete negotiations. The order does not guarantee a successful outcome or unanimous stakeholder support.
Monitor changes in the financial position
Before filing, assess liquidity, key suppliers, employment issues and major creditor support. Appointment of the provisional supervisor follows statutory rules. If actual illiquidity arises, special notification and assessment duties apply. The protective shield must not be used to postpone necessary action.
Related information
Procedures overview · Creditor rights · Corporate insolvency
Official German Insolvency Code · Official StaRUG
Practical implementation
Distinguishing the protective shield from debtor-in-possession proceedings
The protective shield under section 270d InsO is a particular route for preparing an insolvency plan within preliminary debtor-in-possession proceedings. It requires impending illiquidity or over-indebtedness, but excludes a debtor that is already unable to pay its debts. An appropriate certificate must address the statutory conditions. The procedure is therefore not available simply because a business is experiencing payment problems. Documentation, funding and the intended plan should be prepared before filing.
Using the preparation period effectively
The court's deadline for submitting the plan cannot exceed three months. Creditor classification, financing, operational measures and a credible comparison calculation must come together within that period. Work should start before the order is made. A deterioration in liquidity requires immediate review of procedural duties. The protective shield neither validates commercial assumptions nor guarantees creditor support or court confirmation. A realistic timetable must identify decisions requiring consent and information still to be obtained.
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: Payroll cannot be met
A company wants a protective shield but already cannot pay due obligations. Actual illiquidity must be assessed first. If it exists, the shield is unavailable; other insolvency restructuring procedures may still be considered.
Example 2: A large maturity is approaching
Current payments are funded but a future loan maturity cannot realistically be met. A protective shield may merit examination, subject to certification, funding and a credible insolvency-plan strategy. The application needs preparation rather than a label alone.
Example 3: Lenders have not been approached
Management plans to begin discussing debt reductions only after filing. The short preparation period may not accommodate this. Claim data, classes, finance and key stakeholder positions should be organised in advance.
Example 4: Liquidity deteriorates during preparation
An unexpected customer default creates a new funding gap. Management must update the position and examine notification and procedural duties. The existing protective-shield order does not justify continuing on an outdated forecast.
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