German law · English information
The German StaRUG provides a framework for restructuring outside insolvency proceedings. It is neither a general payment moratorium nor a substitute for a required insolvency application.
When the framework can be used
Court-based instruments are intended to sustainably address imminent illiquidity. Actual illiquidity or over-indebtedness fundamentally changes the duties involved. Insolvency grounds therefore need continuous review throughout the restructuring.
Affected parties and voting
A plan can modify selected claims and rights. Selection must be appropriate, and class formation follows legal criteria. Approval generally requires 75% of voting rights in each class. Cross-class approval is subject to additional conditions and minority safeguards.
Limits and advice for participants
Employee claims, including occupational pension claims, are excluded from the operative part of the plan; other statutory exclusions also apply. Ongoing contracts cannot simply be terminated at will. We advise on plan design and negotiations or, for creditors, on valuation, class formation and their economic position. Opposing interests cannot be represented in the same engagement where a conflict exists.
Related information
Procedures overview · Creditor rights · Corporate insolvency
Official German Insolvency Code · Official StaRUG
Practical implementation
Selecting affected creditors and designing the plan
A StaRUG restructuring plan does not automatically cover all liabilities. The selection of affected creditors must have a proper basis, and different legal positions require appropriate classes. Employee claims and other statutorily excluded rights cannot simply be written down through the plan. The economic position, proposed changes and comparison with the relevant alternative need reliable evidence. Creditors must be able to understand how the plan affects their rights before voting and any court confirmation.
Stabilisation and ongoing funding
A court order can restrict specified enforcement or realisation measures. It is not a universal payment holiday. Its scope, duration and statutory conditions require separate assessment. A viable liquidity forecast remains essential: reducing debt does not remove operating losses. Actual illiquidity or over-indebtedness raises additional notification and procedural issues. Management must therefore continue monitoring insolvency grounds throughout the restructuring and ensure that the proposed financing remains available under the assumptions used in the plan.
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: A financing maturity approaches
An otherwise viable business cannot refinance a large maturity. A plan may modify affected financial creditors' claims and payment dates. The initial assessment concerns impending illiquidity, realistic refinancing and creditor selection. Trade suppliers need not automatically become affected parties.
Example 2: One bank objects
Several lenders support the proposal but one refuses. Majority support does not automatically bind every dissenting creditor. Class formation, voting thresholds, comparison calculations and minority protection need examination. Artificially designed classes may undermine the proposed solution.
Example 3: Payroll arrears are material
Management proposes to reduce unpaid wages through StaRUG. Employee claims are generally excluded from the operative restructuring provisions. Employment measures require their own lawful process, and the financial plan must not assume a debt reduction unavailable under the chosen framework.
Example 4: Enforcement is imminent
A lender intends to realise security while negotiations continue. Stabilisation may be available, subject to a coherent plan and an appropriate application. The company needs to identify the particular assets, the required period and the financing of continued operations.
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