A director’s choice or a shareholder’s voice? German court decides whether a shareholder resolution is necessary to initiate StaRUG measures

Author: Frederik Kaup

Background 

The German restructuring procedure 'StaRUG' is aimed at preventing insolvency by enabling creditors to work with the crisis-stricken company to implement restructuring measures and achieve the desired turnaround. 

The StaRUG enables the implementation of far-reaching measures, including interventions in shareholder rights which can involve the exclusion of shareholders from the restructured entity.

In view of these far-reaching powers, a managing director's ability to file the application to initiate the StaRUG proceedings without the consent of the shareholders has been disputed. Also, in dispute is whether the absence of a shareholder resolution renders an application invalid or whether it is relevant only to the conduct of the affairs of the company and the potential liability of the directors.

Decision 

On 21 August 2024, the OLG Stuttgart (20 U 30/24) ruled that the initiation of a StaRUG procedure does not require a shareholder resolution. Such a resolution is also not required for the directors of the company to initiate the procedure if the StaRUG represents the only promising alternative to insolvency. The court held that because the StaRUG is specifically intended to enable interventions in shareholder rights, shareholders will often not consent to such proceedings. The availability of the StaRUG would be considerably restricted if the initiation of proceedings were to require a shareholders' resolution.

Key takeaways

The decision brings much-needed clarity to one of the most controversial issues in the context of the StaRUG procedure and ensures greater certainty in this restructuring practice.

Find out more

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