The German Code for Restructuring and Insolvency Law Development (SanInsFoG) came into force in early 2021, resulting in significant changes to the Insolvency Code. The changes impact both self-administration proceedings (where the debtor retains possession and control of its assets in insolvency proceedings, usually to implement a restructuring) and protective shield proceedings (where the debtor develops an insolvency plan). The requirements for self-administration proceedings have become stricter.

Liquidity forecast

The company has to submit a liquidity forecast for the six months after the opening of proceedings. The forecast must include both the costs of continuing business operations in self-administration and the costs incurred in the proceedings. All positive and negative effects of the self-administration proceedings must be taken into account, including cost-saving effects (eg pre-financing of funds for the administration) and negative effects (eg changes to payment terms by contractual partners).

Changes to management 

The company has to be supported by a managing director, who is appointed for the self-administration proceedings, a general representative or an insolvency law advisor. These advisors ensure that insolvency law obligations are fulfilled during the self-administration proceedings. Furthermore, the administrator appointed by the court is to be granted insight into all business transactions.

Outlook 

While the requirements for self-administration proceedings have increased and additional preparation is required, the hurdle to enter protective shield proceedings is no longer as high. This could lead to protective shield proceedings becoming a more attractive option for debtors.

Find out more

To discuss the issues raised in this article in more detail, please reach out to a member of our Restructuring & Insolvency team.