10 December 2020
R&I update - December 2020 – 3 of 4 Insights
A draft bill published on 19 September 2020 intends to further develop the existing restructuring and insolvency law in Germany.
It includes fundamental amendments to German insolvency and restructuring law to stabilise the restructuring of businesses. It also ratifies the Directive (EU) 2019/1023 of the European Parliament and of the Counsel 20 June 2019 on restructuring and insolvency into German national law. The draft bill will come into force on 1 January 2021.
The legislator will establish completely new pre-insolvent restructuring proceedings to enable the debtor to negotiate a restructuring plan with the creditors. The debtor will be entitled to file for pre-insolvent restructuring proceedings if the company is imminently illiquid.
However, if the company is already illiquid, the debtor will be obliged to file for insolvency and won't be entitled to file for pre-restructuring proceedings. If pre-insolvent restructuring proceedings are opened, the debtor-in-possession can file for a stay of individual enforcement actions for a period of three to four months to support the negotiations of a restructuring plan.
The legislative proposal also introduces a restructuring practitioner into proceedings, who is appointed by the insolvency court to assist the debtor and the creditors in negotiating and drafting the restructuring plan.
If you're a debtor or a creditor in need of further legal advice regarding these fundamental amendments to German restructuring and insolvency law, please reach out to a member of our Restructuring & Insolvency team
by Nick Moser
by Nick Moser