a) General principles

Forms of in rem security (Sachsicherheiten)

Security over immovable property may be granted by way of a mortgage (Hypothek) or a land charge (Grundschuld); security over movable property by way of a pledge (Pfandrecht) or, far more commonly in practice, a security transfer of title (Sicherungsübereignung); and security over claims and other rights by way of a pledge or security assignment (Sicherungsabtretung).

Numerus clausus and the principle of specificity

German property law operates within a closed catalogue of recognised rights (numerus clausus / Typenzwang): the parties cannot create security interests of a type or content not provided for by statute. As a result, German law does not recognise a floating charge or a fixed charge in the common-law sense.

Security must instead be created over specific assets or asset pools that are at least sufficiently determinable (the principle of specificity, Spezialitätsprinzip / Bestimmtheitsgrundsatz). This requirement is particularly relevant for inventory, changing pools of equipment and future receivables, where the collateral must be identifiable on the basis of the parties’ agreement alone.

Accessory and non-accessory security

A fundamental distinction runs between accessory and non-accessory security. Accessory security rights — in particular the mortgage and the pledge — are tied by law to the secured claim: (i) the security only comes into existence if the underlying claim actually exists (e.g. a valid loan agreement); (ii) once the underlying claim is satisfied (e.g. through repayment), the security automatically expires; and (iii) if the underlying claim is assigned to a third party, the security passes to the new creditor by operation of law.

The land charge, the security transfer of title and the security assignment are non-accessory (abstract) security rights and are, in principle, independent of the existence of the underlying claim. The link to the secured claim is established contractually, in a security agreement (Sicherungsvertrag) between lender and security provider. That agreement governs the secured purpose, the circumstances in which the collateral may be realised, and the provider’s claim to re-transfer of the collateral once the secured purpose has ceased (e.g. on full repayment or non-utilisation of the facility). This contractual link is often described as a substitute for accessoriness (schuldrechtlicher Akzessorietätsersatz) and operates only between the parties.

b) Security over immovable property

Security over land is created by way of a real property charge — either a mortgage (Hypothek) or a land charge (Grundschuld). The two rights share the same basic object, the same mode of creation and the same registration requirement; they differ principally in their relationship to the secured claim and in whether a certificate is issued.

Object of the security

German law does not, for these purposes, distinguish between land and the buildings or works erected on it. Buildings and structures under construction are generally treated as essential parts of the land and cannot be separately encumbered; a mortgage or land charge over the plot therefore extends to the real estate as a single economic unit. The statutory liability also captures accessories (Zubehör), rents and certain insurance claims (in particular under building insurance).

Creation of the security (Bestellung)

A mortgage (section 1113 of the German Civil Code (Bürgerliches Gesetzbuch “BGB”)) and a land charge (section 1191 BGB) are each created by an agreement in rem between the owner and the creditor and by entry in the land register (section 873 BGB). The owner’s declaration of consent to registration must, as a rule, be publicly certified or notarised (section 29 Land Register Code, Grundbuchordnung). In practice the deed creating a land charge also records the owner’s submission to immediate enforcement (Unterwerfung unter die sofortige Zwangsvollstreckung); this must be fully notarised and gives the secured creditor an enforceable title without first having to obtain a court judgment.

Registration in the land register (Eintragung)

Entry in the land register (Grundbuch) is constitutive: neither a mortgage nor a land charge arises before it is registered. The land register is public, and the ranking of competing charges is in principle determined by the order of registration. Non-compliance with the notarial and registration formalities means that the intended in rem right is not validly created or perfected. This is critical in insolvency: a security that has not been perfected before proceedings are opened generally cannot be perfected afterwards, because the power to manage and dispose of the debtor’s assets passes to the insolvency administrator.

Mortgage and land charge compared

The decisive difference lies in the relationship to the secured claim. The mortgage is accessory and therefore moves with, and depends on, the secured claim. The land charge is non-accessory and exists independently of it, which makes it considerably more flexible: it can secure changing or revolving exposure and can be partly released or re-used without being extinguished. For these reasons the land charge is the predominant real estate security in financing practice, while the pure mortgage is comparatively rare. A middle position is occupied by the security mortgage (Sicherungshypothek), an accessory mortgage whose extent is determined solely by the secured claim and which must be designated as such in the land register.

Certificated and uncertificated rights

A further distinction applies to both mortgages and land charges, according to whether a certificate is issued. By default a certificate is created — a mortgage certificate (Hypothekenbrief) or land charge certificate (Grundschuldbrief), section 1116(1) BGB (for the land charge by reference in section 1192(1) BGB) — producing a certificated mortgage (Briefhypothek) or certificated land charge (Briefgrundschuld). The parties may instead exclude the certificate and have that exclusion entered in the register, producing an uncertificated (book) right (Buchhypothek / Buchgrundschuld, section 1116(2) BGB).

The distinction governs the mode of transfer. An uncertificated right is transferred by written assignment together with registration in the land register, whereas a certificated right is transferred by written assignment and delivery of the certificate, without any need to amend the register. The security mortgage referred to above is necessarily an uncertificated (book) mortgage, since issue of a certificate is excluded by law (section 1185(1) BGB).

c) Security over movable property

Pledge

A pledge is a statutory in rem security right over movable assets or rights. It gives the pledgee a limited right to realise the pledged asset on default and to satisfy the secured claim from the proceeds, without transferring ownership. In practice, however, the pledge is often unattractive for operating businesses because it is subject to the principle of physical possession (Faustpfandprinzip): the pledgee or a third-party pledgeholder must take and retain possession of the asset, which the debtor usually needs to keep using.

Security transfer of title

German financings therefore commonly use a security transfer of title, which allows the debtor to retain possession. A security transfer follows the general rules for the transfer of ownership in movables (sections 929 et seq. BGB). It is typically structured under sections 929, 930 BGB by an agreement transferring ownership combined with a possession arrangement (Besitzkonstitut / Besitzmittlungsverhältnis), so that the security provider remains in direct possession. No publicity — handover or registration — is required, which is the principal advantage over the pledge.

Certainty of collateral

The secured assets must be sufficiently determinate or determinable. For individual items this is usually straightforward; for inventory and changing pools, the security agreement must identify the collateral by listing, marking, location (Raumsicherungsübereignung) or another sufficiently precise method. Carving out, for example, “fixed assets” or items belonging to third parties can render the description insufficiently certain and the transfer void for lack of determinability.

If the transfer mechanics or the certainty requirement are not met, title does not pass to the secured party. Conversely, even where a valid transfer takes place, the secured creditor’s position in the debtor’s insolvency is governed by the security function rather than by formal ownership: the creditor does not obtain a right to segregate the asset as owner (Aussonderung) but only a right to preferential satisfaction (Absonderung) under section 51 no. 1 of the German Insolvency Code (Insolvenzordnung, “InsO”); the treatment of secured creditors in insolvency is addressed in the answers to Questions 11 and 14.

d) Security over receivables and other rights

Security assignment

Security over receivables is typically created by security assignment. German law does not, as a rule, require notification of the account or trade debtor for the assignment to be valid (a so-called silent assignment). However, if the debtor has neither been notified of nor otherwise knows of the assignment, payment to the assignor still discharges the debtor; lenders therefore frequently require an undated notice of assignment to be signed in advance and held for later delivery. Security over rights may alternatively be created by pledge (the rules on the pledge of claims applying correspondingly, e.g. section 1291 BGB to a pledge over a land charge).

Shares and intellectual property rights

Shares and intellectual property rights may also serve as collateral, although the applicable mechanics depend on the type of right. In particular, the pledge or security assignment of shares in a German limited liability company (GmbH) must be notarised to be effective, and pledges over shares or other rights may additionally require notification to the company or the third-party obligor.

e) Impact of non-compliance

Validity, perfection and determinability

The consequence of non-compliance depends on the security type and on the requirement breached:

• Where a requirement is a validity requirement — for example, registration of a mortgage or land charge in the land register, notarisation of a GmbH share pledge, or notification of an account pledge to the account bank — the intended security right is generally not validly created.
• Where a requirement goes to perfection or third-party effectiveness, non-compliance may leave the security exposed to competing rights, to subsequent dispositions, to discharging payments made by the debtor to the original creditor, or to insolvency risk.
• Where the collateral is not sufficiently identifiable, a security transfer or assignment may fail for lack of determinability.

Substantive grounds of invalidity

Beyond formal defects, security may be unenforceable on substantive grounds. Over-collateralisation (Übersicherung) can render the security agreement void under section 138 BGB (or, in standard business terms, under section 307 BGB) where there is a gross initial mismatch between the realisable value of the collateral and the secured exposure. For revolving global security, a coverage limit and an enforceable release claim follow from the fiduciary nature of the security agreement even absent an express clause — as a rule, a realisable value of around 110 %, or an estimated value of around 150 %, of the secured claims. A security agreement may likewise be void as an undue fetter on the debtor (Knebelung) or as detrimental to other creditors (Gläubigergefährdung) under section 138 BGB.

Insolvency avoidance

If security has not been perfected before insolvency proceedings are opened, later perfection is generally unavailable against the estate. Security perfected shortly before opening may, in addition, be challenged under the rules on insolvency avoidance (Insolvenzanfechtung, sections 129 et seq. InsO), in particular where perfection amounts to a legally relevant improvement of the creditor’s position within the applicable suspect periods.

German law gives secured creditors a strong proprietary position, but enforcement is not a single, uniform process. The practical point is that it is asset–by–asset: the available route, the timing, the need for court involvement and the degree of control all depend on the type of collateral and on whether enforcement takes place before or after an insolvency filing.

a) The common precondition: an enforceable claim and security

Before any collateral can be realised, the secured creditor must establish that the secured debt and the security have become enforceable under the finance and security documents. In practice this requires an event of default, the acceleration or termination of the secured debt, and compliance with any agreed notice, cure–period or enforcement–notice requirements. A recurring source of delay is the debtor disputing the validity of the acceleration, the occurrence of the enforcement event, the scope of the secured obligations or the creditor’s compliance with the contractual enforcement mechanics.

b) Enforcement outside insolvency

Real estate

A land charge or mortgage is enforced through formal court proceedings under the Act on Forced Sale and Receivership (Gesetz über die Zwangsversteigerung und die Zwangsverwaltung, ZVG): either a compulsory auction (Zwangsversteigerung), which realises the property itself, or compulsory administration (Zwangsverwaltung), which captures the income from the property — above all rents — through a court–appointed receiver. The creditor needs an enforceable title, usually the notarial land charge deed containing the owner’s submission to immediate enforcement (see the answer to Question 1). The court process — application, judicial review, valuation and auction mechanics — is comparatively formal and slow: an auction commonly takes many months to reach a first auction date, and appeals can extend it well beyond a year. A private sale (freihändiger Verkauf) is often commercially preferable because it preserves value and avoids the timing and price risk of an auction, but the creditor cannot simply appropriate the property or sell it unilaterally: a private sale requires the owner’s cooperation and the release of the land charge, and any consent to it must be given after the security has become enforceable — an advance consent given when the security was created is not sufficient. A private sale also does not automatically clear the property of junior encumbrances such as junior land charges or easements, which must be separately released or bought out. A common bridge is a “cold” receivership (kalte Zwangsverwaltung): a purely contractual arrangement under which an agreed manager, rather than a court receiver, collects the rents and meets property costs pending a sale — faster and more flexible than statutory compulsory administration, and particularly useful for income–producing properties.

Receivables

Enforcement of a security assignment is usually more operational than judicial. The creditor revokes any collection authority previously granted to the security provider, discloses the assignment if it was silent (see the answer to Question 1), notifies the third–party debtors and directs payment to itself or to a controlled account. The main practical issues are informational — the creditor needs accurate, current data on the debtors and payment flows — and relational, because disclosure can disrupt customer relationships and the debtor’s going concern.

Bank accounts

An account pledge can be enforced relatively quickly once the account bank has been notified and the documents contain appropriate blocking and instruction mechanics. The recurring complication is that the account bank usually has its own pledge and set–off rights under its general terms and conditions; lenders therefore typically obtain the bank’s acknowledgement, a waiver or a ranking agreement when the security is taken.

Movables

Where movables are held under a security transfer of title, the creditor’s position depends heavily on the security agreement and on practical access to the assets. Typically the creditor revokes the debtor’s right to use or dispose of the assets, demands their surrender and then realises them by sale or auction. Difficulties arise where the assets are essential to operations, dispersed across several sites, mixed with third–party goods, subject to competing retention–of–title claims, or hard to identify. As with real estate, the creditor may not simply keep the collateral: appropriation of its full economic value requires the security provider’s consent given after the enforcement event.

Shares

Enforcement over a share pledge is more sensitive. Pledged shares are usually realised by public auction, frequently organised through a notary where the documents so provide; a private sale is generally possible only with the pledgor’s consent after the enforcement event. Practical issues include valuation, attracting bidders, granting due–diligence access, navigating shareholder–agreement restrictions and any regulatory or change–of–control approvals, and guarding against challenges to the sale process.

c) Enforcement after an insolvency filing and in insolvency

The preliminary phase

Once an insolvency petition has been filed, the creditor’s position changes materially. The court may order preliminary protective measures, including a stay of individual enforcement, under section 21 InsO — common where enforcement could jeopardise the continuation of the business or a going–concern sale. Comparable restrictions can arise in court–assisted restructuring if a stabilisation or enforcement stay is ordered (see the answer to Question 9).

Who controls realisation

After proceedings open, unsecured individual enforcement is barred and secured creditors must enforce within the insolvency regime. Existing security is not extinguished; the decisive practical question is who realises the collateral — the creditor or the insolvency administrator.

Movables and receivables

For movables in the administrator’s possession and for security–assigned receivables, the administrator has the statutory realisation right (section 166 InsO). The secured creditor is entitled to separate satisfaction (Absonderung) from the proceeds, but the administrator deducts a lump–sum contribution for determination costs (4%) and realisation costs (5%) — 9% in total, plus any VAT — under sections 170 and 171 InsO before remitting the balance. Before realising, the administrator must give the creditor the opportunity to point to a better or cheaper means of realisation (section 168 InsO). This both reduces recoveries and affects timing, because the creditor depends on the administrator’s sale or collection process.

Real estate

Real estate occupies a special position. A land charge or mortgage confers a right to separate satisfaction that the creditor may, in principle, pursue largely as if no insolvency had been opened: unlike movables and assigned receivables, real property is not realised under section 166 InsO but through the ZVG regime (section 49 InsO). The creditor therefore generally retains the right to apply for a compulsory auction or compulsory administration, and the administrator may also apply for these itself (section 165 InsO). That control is not unqualified: on the administrator’s application the court may temporarily stay a compulsory auction under section 30d ZVG — in particular where the property is needed to continue the business or to prepare the sale of a business or asset pool, where the auction would jeopardise a submitted insolvency plan, or where it would otherwise materially impair the appropriate realisation of the estate — with a parallel stay of compulsory administration under sections 153b and 153c ZVG, and an equivalent stay available to a preliminary administrator before opening (section 30d(4) ZVG). A stay must be refused where it would be unreasonable for the creditor, who is in any event compensated for the delay, in particular by payment of the running interest on its claim from the estate (section 30e ZVG). Because an auction is slow and often value–destructive, administrator and creditor frequently prefer a private sale out of the estate, documented in a realisation agreement (Verwertungsvereinbarung) under which the creditor releases its land charge against an agreed share of the proceeds; the estate’s negotiated contribution is typically in the region of 1–5%, rather than the statutory 9% that applies to movables and receivables.

Shares, IP and other rights

The position here has become markedly more creditor–friendly. In a leading 2022 decision (BGH, 27 October 2022 — IX ZR 145/21), the Federal Court of Justice held that the administrator’s realisation right under section 166 InsO does not extend, even by analogy, to “other rights” (sonstige Rechte) such as pledged shares or assigned or pledged IP rights (in that case, trademarks): section 166 InsO is confined to movables and to assigned receivables. As a result, the secured creditor itself realises such collateral — its right being expressly preserved by section 173 InsO — which strengthens its hand in enforcing share and IP security in insolvency, subject to the security documents, the administrator’s right to be offered a better realisation (section 168 InsO) and any interim court measures.

Avoidance and timing risk

Two further practical issues cut across all collateral. First, security that was granted, perfected or enforced shortly before the filing may be attacked by the administrator under the avoidance rules (sections 129 et seq. InsO; see the answer to Question 12) — especially relevant for late security enhancements, refinancing security, shareholder–related security and enforcement steps taken with knowledge of distress. Secondly, where the collateral is needed for business continuation, the creditor may have limited control over timing: the administrator may seek to preserve the going concern to maximise value for the estate, which can delay cash recovery and require the creditor to negotiate interim use, compensation for loss of value, information rights and milestones for the sale process.

Germany offers a spectrum of restructuring routes, ranging from purely consensual out-of-court workouts, through the statutory preventive framework under the Act on the Stabilisation and Restructuring Framework for Businesses (Unternehmensstabilisierungs- und -restrukturierungsgesetz, “StaRUG”), to formal insolvency proceedings under InsO where the debtor is already insolvent. The StaRUG, in force since 1 January 2021, implements the EU Preventive Restructuring Directive (Directive (EU) 2019/1023) and is the centrepiece of pre-insolvency restructuring. This answer covers the consensual and preventive tools under StaRUG; formal insolvency proceedings — regular proceedings, self-administration and protective-shield proceedings — are addressed in the answer to Question 8, and the insolvency tests in the answer to Question 7.

a) Out-of-court (consensual) restructuring

Before invoking any statutory process, German debtors usually attempt a consensual restructuring with their key stakeholders — for example, standstill agreements, covenant resets, maturity extensions, amendments to finance documents, bridge or new-money financing, equity injections, debt buy-backs or a debt-to-equity transaction. Because such workouts rest on general contract, corporate and finance law, they bind only those who agree, or who are already bound by a contractual majority mechanism such as collective-action clauses in bond terms or a syndicate’s majority-voting provisions. They are flexible and confidential, but they founder on the hold-out problem: a single dissenting lender, bondholder or shareholder whose rights must be altered can block implementation. StaRUG was designed to solve precisely this problem, by allowing a plan to be imposed on dissenting parties where the statutory safeguards are met.

b) The StaRUG framework: a modular, debtor-in-possession toolbox

StaRUG provides a modular, debtor-in-possession framework that sits outside formal insolvency. It is not a single linear procedure but a toolbox from which the debtor selects the statutory instruments it needs (section 29 StaRUG): a judicial vote on the plan, a preliminary court review of contested plan issues (Vorprüfung), a stabilisation order staying enforcement and realisation, and court confirmation of the plan. A restructuring matter becomes formally pending when the debtor notifies the restructuring court of the project (Anzeige, section 31 StaRUG). Much of a financial restructuring can be carried out privately, with the court engaged only where binding effect against dissenters, a moratorium or confirmation is required; proceedings may be conducted confidentially (non-public) or, where cross-border recognition under the European Insolvency Regulation is sought, as public proceedings. For smaller or less contentious cases, StaRUG also offers a lighter, court-appointed restructuring moderation (Sanierungsmoderation, sections 94 to 100 StaRUG).

Entry requirement: imminent illiquidity

The gateway to StaRUG is imminent illiquidity (drohende Zahlungsunfähigkeit): the debtor must be likely to become unable to pay its debts as they fall due, assessed over a forecast horizon of, as a rule, 24 months (section 18 InsO). The framework ceases to be available once the debtor has crossed into a mandatory filing situation — actual illiquidity (Zahlungsunfähigkeit, section 17 InsO) or over-indebtedness (Überschuldung, section 19 InsO) (see the answer to Question 7). Policing this boundary is one of the central practical challenges: a StaRUG process depends on a robust integrated liquidity forecast and a credible restructuring concept, and management must continuously reassess eligibility, because a slide into actual insolvency triggers the filing duty. Conversely, a sufficiently concrete and predominantly viable StaRUG restructuring may itself support the positive going-concern prognosis that removes over-indebtedness. Once the matter is pending, the directors’ duties shift towards the interests of the general body of creditors (section 32 StaRUG).

The restructuring plan: scope and selectivity

The central instrument is the restructuring plan, which — like an insolvency plan — has a descriptive part and a structuring part. It can reshape the rights of affected creditors and, where needed, shareholders: typical measures are deferrals, maturity extensions, haircuts, amendments to loan and security terms, intercreditor changes, debt-to-equity swaps and corporate or capital measures (section 7 StaRUG). The rights of secured creditors (their separate-satisfaction entitlements) are themselves restructurable positions. A distinctive strength is selectivity: unlike a full insolvency, the plan need not include every creditor — it may capture only financial creditors, noteholders, certain secured lenders or shareholders, leaving trade creditors, customers and employees untouched, provided the selection is objectively justified by the restructuring concept and is not arbitrary. The principal limits are that employee claims and occupational-pension rights cannot be compromised (section 4 StaRUG), that banks and insurers fall outside the framework’s scope, and that the plan does not dispense with the corporate-law steps required to implement capital measures, although it can override dissent where the statute permits.

Groups, voting and majorities

Affected parties are divided into groups by legal status and economic interest (section 9 StaRUG) — typically secured creditors, unsecured creditors, subordinated creditors and shareholders — with separate groups where ranking, security or exposure differ, and a mandatory separate group for small creditors where they are affected (section 9(2) StaRUG). Within a group, affected parties must be treated equally unless unequal treatment is justified. A plan is accepted in a group if at least 75% of the voting rights in that group, measured by the amount of the affected claims or rights, vote in favour (section 25 StaRUG). The vote may be held privately on the basis of a plan offer, in a meeting of affected parties, or through a judicial voting procedure.

Cross-class cram-down and creditor protection

If a group withholds the required majority, its dissent can be overridden by a cross-class cram-down (gruppenübergreifende Mehrheitsentscheidung, section 26 StaRUG, modelled on section 245 InsO). Three conditions must be met: the dissenting group must not be worse off under the plan than in the relevant alternative scenario (the no-worse-off test); it must participate appropriately in the economic value distributed under the plan, judged against the absolute-priority rule (section 27 StaRUG) and its statutory exceptions (section 28 StaRUG, which, for example, allow the debtor or a participating owner to retain an interest where their cooperation is indispensable to realising the plan value); and a majority of the voting groups must have approved the plan. Where only two groups are formed, the approval of one group suffices — but a plan cannot be forced through on the vote of a group consisting solely of shareholders or subordinated creditors. Dissenting parties have only narrowly defined grounds to resist confirmation (section 63 StaRUG) and a minority-protection remedy directed at the no-worse-off test (section 64 StaRUG).

Valuation and the comparison scenario

Because both the no-worse-off test and the cram-down turn on a counterfactual — how affected parties would fare without the plan — the valuation underlying that comparison scenario is, in practice, the principal battleground in contested StaRUG cases. Disputes concern the business plan and liquidity forecast, going-concern assumptions, discount rates and multiples, assumed sale proceeds and refinancing availability, and the allocation of restructuring value among creditor and shareholder groups. A debtor seeking confirmation must therefore be ready to defend the plan economics with a robust valuation record and, where appropriate, independent expert evidence. Critics point to an asymmetry: minority shareholders and smaller creditors often lack the data access, expertise and resources to mount an effective valuation challenge within the tight procedural timetable.

Shareholder cram-down and ownership restructuring

The most contentious use of StaRUG is its reach into shareholder rights. Because equity can be formed into its own group and crammed down, a plan may carry capital measures up to a reduction of the share capital to zero followed by a fresh-money capital increase from which the former shareholders are excluded (section 7 StaRUG), effecting a change of control without a formal insolvency. The policy debate pits the restructuring rationale — that equity which is “out of the money” in the relevant counterfactual should not be able to block a viable rescue — against shareholders’ objection that ownership is being expropriated in a confidential pre-insolvency process on the basis of contested valuations. Recent practice has tested the limits. In the pioneering Leoni AG restructuring (2023), minority shareholders were eliminated without participating in the recapitalisation. In the VARTA AG case (2024), the plan reduced the share capital to zero and excluded the free-float shareholders from the subsequent capital increase, leaving only the principal shareholder and a new investor; the restructuring court (Amtsgericht Stuttgart) confirmed the plan on 11 December 2024, the Regional Court (Landgericht Stuttgart) dismissed the shareholders’ appeals on 21 January 2025 — finding that they had not shown they would be better off in the counterfactual and that StaRUG is not unconstitutional — and the Federal Constitutional Court (Bundesverfassungsgericht) declined to take up their constitutional complaint on 28 February 2025. The practical lesson is that shareholders can no longer assume they are safe merely because no insolvency has been opened.

Stabilisation, confirmation and implementation

Where individual enforcement or realisation threatens to derail negotiations or destroy value, the debtor can apply for a stabilisation order (Stabilisierungsanordnung, sections 49 et seq. StaRUG) — a moratorium on enforcement and on the realisation of collateral, granted for an initial period of up to three months and extendable, subject to limits, to a maximum of around eight months. Such orders are not automatic; the debtor must satisfy the statutory requirements and show that the restructuring is not manifestly without prospects. Court confirmation of the plan (section 60 StaRUG) is required wherever dissenting parties are to be bound, a cross-class cram-down is used, or the parties want the legal certainty of a confirmed plan; the court reviews procedural compliance, group formation, voting and the treatment of dissenters. Once accepted and, where required, confirmed, the plan binds the affected parties, and the debtor implements the agreed steps — finance-document amendments, releases, security changes, new money, capital measures or share transfers.

Management, supervision and the restructuring officer

StaRUG is fundamentally a debtor-in-possession regime: management stays in office, runs the business, prepares the concept, selects the affected parties and chooses which tools to deploy. That autonomy is constrained, however, by the duty to monitor eligibility and to act in creditors’ interests once the matter is pending (section 32 StaRUG), and by the procedural requirements attaching to the court tools. The court may, and in defined cases must, appoint a restructuring officer (Restrukturierungsbeauftragter, sections 73 et seq. StaRUG) — for instance where the rights of consumers or small and medium-sized enterprises are affected, where a stabilisation order is made, or where the plan is foreseeably enforceable only against resistance. The officer is not an insolvency administrator and does not displace management; the role is one of supervision, reporting and mediation, and of assisting the court on issues such as valuation and group formation. In practice the officer is influential: courts favour candidates with strong restructuring credentials, and the officer’s assessment can shape the court’s confidence in the plan and dissenters’ willingness to settle.

c) Roles of the court and other stakeholders

The restructuring court’s role is correspondingly focused: it does not manage the business but grants stabilisation, may conduct the vote or a preliminary review, and confirms (or refuses) the plan. Among stakeholders, creditors and shareholders included in the plan form the voting constituency and may object on eligibility, group formation, valuation and the no-worse-off test; creditors left outside the plan are unaffected, which is why trade creditors and other operational stakeholders are typically excluded; and employees occupy a protected position, because their claims cannot be touched by the plan.

d) Crisis early-warning duties and current outlook

Finally, StaRUG places crisis-detection duties on management (section 1 StaRUG): directors must maintain systems to identify developments threatening the company’s survival and to take countermeasures — a duty increasingly treated as part of directors’ potential liability in the vicinity of crisis. For practitioners, this means restructuring planning should begin well before liquidity collapses. More broadly, StaRUG has matured from a novel instrument into a strategic tool in lender negotiations, shareholder disputes and distressed M&A — used to stabilise a debtor, convert debt into equity, shed legacy liabilities and create a platform for new investors. The open questions, sharpened by the first wave of contested cases, are how far cross-class cram-down and shareholder dilution may legitimately reach, and how courts should adjudicate valuation and protect dissenting minorities — an ongoing reassessment that may shape future judicial interpretation and legislative refinement (see the answer to Question 22).

Yes — a debtor can raise new financing during a restructuring, but whether that financing enjoys any priority depends critically on the stage. In the pre-insolvency phase (a consensual workout or a StaRUG restructuring) German law offers financiers protection against claw-back and liability rather than a priority ranking; a genuine priority arises only once formal insolvency proceedings (including self-administration) have been opened, where new financing ranks as an estate liability ahead of ordinary creditors. Germany deliberately did not take up the option in the EU Preventive Restructuring Directive (Directive (EU) 2019/1023, Article 17(4)) to give new or interim financing a statutory priority in a later insolvency.

a) Out-of-court rescue and bridge financing

A rescue or bridge loan (Sanierungskredit) can be agreed at any time under general contract law, and the debtor may grant security for it. Such financing carries no statutory priority, and it exposes the lender to two classic risks if the rescue fails and insolvency follows: avoidance of the financing and its security by the insolvency administrator — in particular intentional-disadvantage avoidance under section 133 InsO (see the answer to Question 12) — and lender liability for propping up a hopeless debtor, notably under section 826 BGB (intentional damage contrary to public policy) or for aiding a delayed insolvency filing. Both risks are mitigated where the financing rests on a serious, plausible restructuring concept — in practice, an independent restructuring opinion prepared to the IDW S6 professional standard — showing that the debtor is capable of being restructured and that the new money serves that purpose. Careful documentation of the financing’s necessity and of the debtor’s viability is therefore essential.

b) New financing under a StaRUG plan

A StaRUG restructuring plan may expressly provide for new financing (neue Finanzierung) — loans or other credit required to finance the restructuring on the basis of the plan, together with its collateralisation — and the plan must explain why that financing is necessary (section 12 StaRUG). The key statutory incentive is a safe harbour against avoidance and liability, implementing Articles 17 and 18 of the EU Preventive Restructuring Directive: legal acts carried out while the restructuring matter is pending before the court are protected (section 89 StaRUG, which also shelters interim financing, Zwischenfinanzierung, provided during the process), and acts implementing a court-confirmed plan — including the disbursement of new money and the granting of related security — are protected from avoidance in a later insolvency (section 90 StaRUG). This protection has limits, several of them tightened by the 2022 amendments: it shelters the provision and securing of new money but not its later repayment, which remains subject to the ordinary ranking and avoidance rules; it does not extend to shareholder loans and economically equivalent claims, or to security granted for them; and it can fall away where plan confirmation rested on incorrect or incomplete information of which the financier was aware. Crucially, the plan confers no priority ranking: if the restructuring fails, the new money does not automatically rank ahead of existing creditors in the ensuing insolvency.

c) New financing in insolvency proceedings

The position changes once formal insolvency proceedings are opened. Credit raised by the insolvency administrator after opening constitutes an estate liability (Masseverbindlichkeit, section 55 InsO), which is satisfied from the estate ahead of ordinary and subordinated insolvency claims — behind only the costs of the proceedings, and subject to the rules on insufficiency of the estate. This is the closest German analogue to debtor-in-possession super-priority financing, and it is available in self-administration as well: on the debtor’s application the court authorises the debtor in possession to incur estate liabilities, by single or group authorisation (section 270c(4) InsO), and likewise during the protective-shield preparation phase (section 270d InsO), so that new financing in a self-administration restructuring carries estate-liability priority. Significant borrowing requires the consent of the creditors’ committee or assembly (section 160 InsO). In addition, an insolvency plan may establish a credit framework (Kreditrahmen) under which lenders advancing new credit during implementation of the plan rank ahead of other plan creditors (sections 264 to 266 InsO).

d) Practical implications

The practical upshot is a clear divide. In the pre-insolvency phase, new-money providers obtain protection from claw-back and liability but no priority, and therefore rely on contractual priority, fresh security, intercreditor arrangements, conditions linking disbursement to plan confirmation, and thorough documentation of necessity. Where reliable priority for new money is essential, lenders frequently prefer to deploy or convert it within a self-administration or insolvency-plan structure, in which estate-liability status (or a plan credit framework) provides the genuine statutory priority that the StaRUG framework does not.

Third-party releases are available only to a limited extent. A StaRUG restructuring plan, like an insolvency plan, binds the debtor and the parties whose claims or rights are included in it; as a rule it does not discharge claims that creditors hold against non-debtor parties such as guarantors, co-obligors, third-party security providers or directors. There is one significant statutory exception — intra-group third-party security — and otherwise any release of a non-debtor must be agreed separately.

a) The starting point: third-party claims survive

Personal security and third-party collateral exist precisely to protect the creditor against the debtor’s default, so a plan that compromises the debtor’s own obligations does not, of itself, reach them. For the insolvency plan this is spelt out in section 254(2) InsO: the plan does not affect creditors’ claims against co-debtors and guarantors, or their rights in assets that do not belong to the estate. The same principle applies to a StaRUG plan. A creditor whose claim is reduced against the debtor may therefore still pursue a guarantor or third-party security in full, subject only to the exception below.

b) The intra-group exception: third-party security from affiliated entities

Since the 2021 reform, both a StaRUG plan (section 2(4) StaRUG) and an insolvency plan (section 223a, read with section 217(2), InsO) can reshape or release security and guarantees granted by an enterprise affiliated with the debtor (a verbundenes Unternehmen within the meaning of section 15 AktG) — for example a parent, subsidiary or sister company acting as surety, co-debtor or asset provider. Critically, this does not require the consent of the affiliated provider; the statutory safeguard is instead that the affected creditor must receive appropriate compensation for the interference. The mechanism is valuable in group financings, where group guarantees and cross-collateral would otherwise survive the debtor’s restructuring and trigger recourse claims and value leakage within the group. It remains narrow, however: it reaches only security from affiliated entities, requires adequate compensation, and does not extend to security or guarantees granted by genuinely external third parties.

c) Directors, officers and other non-debtor parties

Claims against directors, officers, advisers or other non-debtor parties are not released by a restructuring of the debtor. Claims based on management liability, tort or breach of duty survive and, where they belong to the estate or the general body of creditors, are typically pursued by the insolvency administrator (for instance the collective-loss claim under section 92 InsO, or avoidance claims). Any release of such liability requires a separate, consensual settlement with the relevant claimant, frequently structured around available D&O insurance (see the answer to Question 16).

d) No US-style third-party releases

German law therefore permits targeted releases of intra-group third-party security, but it does not provide for the broad, non-consensual third-party releases seen in some US Chapter 11 plans. Outside the statutory intra-group framework, every release of a non-debtor must be documented in a separate waiver or settlement with the relevant beneficiary.

 

Creditors organise both formally and informally, and the pattern differs between preventive restructuring and formal insolvency. Payment of creditors’ advisory fees by the debtor is a matter of agreement rather than a statutory entitlement.

a) In preventive and consensual restructuring

In a consensual workout or a StaRUG process, the most important organisation is usually informal: key financial creditors form ad hoc groups, steering committees or coordination committees, supported by joint legal and financial advisers. The mechanics follow the instruments — in syndicated financings, coordination runs through the facility and security agent and the majority-lender provisions of the finance documents; in bond financings it is more fragmented and typically proceeds through an ad hoc committee of major holders or, under the German Bond Act (Schuldverschreibungsgesetz, SchVG), a common bondholders’ representative and majority resolutions. StaRUG also allows the court to appoint an optional creditors’ advisory committee (Gläubigerbeirat, section 93 StaRUG) in larger cases, though in practice the debtor usually negotiates with a smaller group of economically significant creditors while keeping the wider body sufficiently informed.

b) In formal insolvency

In insolvency, creditors act collectively through the creditors’ assembly (Gläubigerversammlung, sections 74 et seq. InsO) and, where established, a creditors’ committee (Gläubigerausschuss, section 67 InsO). In larger cases a preliminary creditors’ committee is mandatory, broadly where at least two of three thresholds are met — a balance-sheet total above EUR 6 million, turnover above EUR 12 million, or more than 50 employees on annual average (section 22a InsO). The committee is composed to reflect the main constituencies — secured creditors, large and small unsecured creditors and employees — and its members are entitled to remuneration from the estate (section 73 InsO), which is distinct from the costs of individual creditors’ own advisers.

c) Advisory fees

There is no general rule requiring the debtor to pay individual creditors’ advisory costs; each participant ordinarily bears its own. In practice, however, a debtor will often agree to cover the reasonable fees of the legal and financial advisers to a key ad hoc group where this is commercially necessary to enable an organised dialogue — most commonly where that group is expected to make a material contribution such as maturity extensions, haircuts, new money, security releases or a debt-to-equity swap. Such undertakings are typically subject to fee caps, defined workstreams, reporting and reasonableness tests. In insolvency, committee members’ remuneration and expenses are borne by the estate, but this does not amount to a general reimbursement of all advisory costs incurred by creditor groups.

German law recognises three insolvency grounds, but only two of them compel a filing.

a) The three insolvency grounds

The grounds are illiquidity (Zahlungsunfähigkeit, section 17 InsO), over-indebtedness (Überschuldung, section 19 InsO) and imminent illiquidity (drohende Zahlungsunfähigkeit, section 18 InsO). For a company with limited liability, only illiquidity and over-indebtedness trigger a mandatory duty to file; imminent illiquidity permits a voluntary filing and is the gateway to preventive restructuring under StaRUG, but creates no filing duty.

b) Illiquidity

A debtor is illiquid when it is unable to meet its due payment obligations. Following the Federal Court of Justice, this is assessed by comparing available liquidity with due liabilities over an approximately three-week window: a gap is treated as a mere temporary squeeze, and not as illiquidity, if it is below 10% and is expected to close within about three weeks, whereas a shortfall of 10% or more that cannot be closed within that period is, as a rule, illiquidity unless its closure is shortly and certainly to be expected. A general cessation of payments (Zahlungseinstellung) is strong evidence of illiquidity.

c) Over-indebtedness

Over-indebtedness applies to legal entities and to partnerships without a natural person as a personally liable partner (for example a GmbH & Co. KG). It is tested in two stages: first, whether the debtor’s assets, valued on a realisation basis, no longer cover its liabilities; and secondly, whether a continuation of the business over the next twelve months is nevertheless predominantly likely (section 19(2) InsO). A positive twelve-month going-concern prognosis, supported by reliable liquidity planning, removes over-indebtedness even where the balance sheet is arithmetically negative; if that prognosis cannot be made, the debtor is over-indebted and a liquidation-value over-indebtedness statement must be prepared. (The prognosis horizon was temporarily shortened to four months during the 2022–2023 energy-crisis measures and reverted to twelve months on 1 January 2024.)

d) Imminent illiquidity

Imminent illiquidity exists where the debtor is more likely than not to become unable to meet its obligations as they fall due within, as a rule, a 24-month forecast period (section 18 InsO). It opens access to StaRUG and permits a voluntary insolvency filing, but does not oblige management to file.

e) The duty to file

Once illiquidity or over-indebtedness has occurred, the members of the management or representative body of a limited-liability entity (and equivalent structures such as a GmbH & Co. KG), and in certain cases liquidators, must file without undue delay (section 15a InsO). The outer limits are three weeks after illiquidity and six weeks after over-indebtedness, but these are maxima available only while there is a realistic prospect of removing the ground within the period; once that prospect falls away, the filing must be made immediately. They are rescue windows, not grace periods for open-ended negotiations. If the company is left without management, the shareholders or supervisory-board members may become responsible. The duty is objective and presupposes continuous monitoring of solvency, reinforced by the early-warning duty to detect existential risks at an early stage (section 1 StaRUG).

f) Consequences of failure to file

The consequences are severe. From the moment of insolvency maturity, payments made by the company are in principle prohibited, and directors are personally liable to reimburse payments that are not consistent with the care of a prudent manager in that situation (section 15b InsO). Directors are also liable to creditors for the loss caused by a delayed filing (delay-of-filing liability under section 823(2) BGB in conjunction with section 15a InsO as a protective law), with creditors who contract with the company after maturity able to claim their full reliance loss and pre-existing creditors their quota loss. Late filing is in addition a criminal offence (section 15a(4) and (5) InsO), whether intentional or negligent, and a conviction can disqualify the individual from serving as a managing director (section 6 GmbHG). These liabilities are examined further in the answer to Question 15.

g) The practical timing issue

In practice the hardest question is the precise moment of insolvency maturity. Management must not wait until every restructuring option has demonstrably failed: once illiquidity or over-indebtedness has objectively arisen, the short statutory window runs, and a merely improved outlook does not stop the clock. Management may refrain from filing only if the ground has objectively ceased to exist on sufficiently reliable, documented grounds rather than renewed hope. Where, for example, a rescue depends on a single investor who then withdraws, a positive prognosis may already have fallen away; if talks resume days later, management may still have to explain whether maturity — and a filing duty — had arisen in the interim. Contemporaneous liquidity planning and documented assessments are therefore essential.

German insolvency law provides a single statutory procedure under InsO that can be conducted in different forms. For corporate debtors the main variants are regular (administrator-led) proceedings, self-administration (Eigenverwaltung) and, as a special preparatory form of self-administration, protective-shield proceedings (Schutzschirmverfahren). In each, the outcome may be a liquidation, a going-concern sale by asset deal, or a restructuring through an insolvency plan.

a) Regular proceedings

Proceedings begin with a filing by the debtor or a creditor (sections 13 and 14 InsO). The court does not open immediately: in a preliminary phase it examines whether an insolvency ground exists and whether the estate will cover the costs, and it may appoint a preliminary administrator and order protective measures (section 21 InsO). In most corporate cases the court appoints a “weak” preliminary administrator, leaving management in office but making material transactions subject to the administrator’s consent; less often it appoints a “strong” preliminary administrator with a general disposal bar, who takes control of the business. On opening (section 27 InsO) the court appoints the insolvency administrator, and the debtor’s management loses the power to administer and dispose of the estate, which passes to the administrator (section 80 InsO); management remains in office as a corporate organ but is largely confined to duties to cooperate and inform. The administrator manages the estate, decides whether to continue or close the business, realises assets, pursues estate claims (including avoidance and director-liability claims), examines lodged claims and distributes proceeds. The creditors’ assembly decides, on the administrator’s report, whether the business is continued, sold or closed (section 157 InsO), and the administrator needs the creditors’ committee’s consent for particularly significant transactions such as a sale of the business (section 160 InsO).

b) Self-administration (Eigenverwaltung)

In self-administration (sections 270 et seq. InsO) the debtor remains in possession: management continues to run the business and administer the estate under the supervision of a court-appointed monitor (Sachwalter), who is not a full administrator but reviews the debtor’s conduct and finances, reports to the court and creditors and exercises certain insolvency-specific rights. It is used for going-concern restructurings where management has the confidence of the court and key creditors, and it requires careful preparation — a coherent restructuring concept, reliable liquidity planning and a self-administration plan (section 270a InsO). The court may refuse or later revoke self-administration if creditors would be prejudiced, so the preliminary creditors’ committee is highly influential; adding a chief restructuring officer is often decisive for court and creditor confidence.

c) Protective-shield proceedings (Schutzschirmverfahren)

The protective shield (section 270d InsO) is a special preparatory form of self-administration, available where the debtor faces imminent illiquidity or over-indebtedness but is not yet illiquid and the intended restructuring is not manifestly hopeless, as certified by a qualified expert. The court gives the debtor up to three months to prepare an insolvency plan, under the supervision of a preliminary monitor and behind a protective stay. Unlike US Chapter 11, the period is capped at three months and is not a repeatedly extendable restructuring window, which can pressure complex cases to pre-align stakeholders before filing. The procedure is widely perceived in the market as a restructuring rather than a liquidation tool — part of the 2012 reform’s aim of strengthening restructuring culture, encouraging earlier filings and reducing the stigma historically attached to insolvency in Germany. It is not risk-free: if liquidity deteriorates or creditor confidence is lost, the shield can be lifted and the case continues as regular proceedings, though often building on the work already done.

d) The insolvency plan and going-concern sale

The insolvency plan (sections 217 et seq. InsO) is the central tool for restructuring within insolvency, usable in regular or self-administration proceedings. It can provide for haircuts, deferrals, changes to secured and unsecured claims, operational and corporate measures and debt-to-equity structures, and it can be combined with a sale and govern the distribution of proceeds. Creditors and, where affected, shareholders vote in groups; dissenting groups can be crammed down where the statutory conditions are met (section 245 InsO; see the answer to Question 10), and the court confirms the plan if the requirements are satisfied, often enabling a swift exit from insolvency. In parallel, German practice frequently restructures by transferring the business to an investor by asset deal (übertragende Sanierung), which remains an important route to preserving going-concern value.

e) Role of the court

The court supervises the proceedings from filing to closure: it orders preliminary measures, appoints and supervises the administrator or monitor, decides on opening and on self-administration, convenes creditors’ meetings and confirms plans. Its role is framing rather than managerial — German insolvency law is strongly shaped by creditor autonomy, with economic decisions taken by the administrator or debtor in possession under creditor oversight. Notably, the court does not adjudicate the merits of disputed claims: a contested lodged claim is determined by the courts otherwise competent for the underlying dispute, which can leave claims (and estate actions such as avoidance) unresolved for years. Germany’s insolvency courts are also comparatively decentralised; while the main commercial centres have deep restructuring expertise, smaller courts encounter complex cases only rarely, which can enhance the practical influence of administrators and has occasionally encouraged forum shopping by relocating the debtor’s seat before filing.

f) Role of creditors and other stakeholders

Creditors exercise collective rights through the creditors’ assembly (sections 74 et seq. InsO) — which decides on continuation or closure, the appointment or replacement of the administrator and the committee — and, where established, the creditors’ committee (section 67 InsO), which monitors and supports the administrator, may inspect books and cash flows and must approve certain important transactions. Employees are significant stakeholders, both operationally and through committee representation; insolvency money (Insolvenzgeld, state payroll cover for up to the three months preceding opening, paid through the Federal Employment Agency), collective-labour issues and social-plan costs frequently shape strategy where the case involves site closures, workforce reductions or a sale of the business.

g) Duration

Duration varies widely. A well-prepared plan restructuring — especially a pre-packaged or heavily pre-negotiated plan in self-administration or under a protective shield — can complete within a year of filing, including the preliminary phase; a going-concern sale usually takes some months; a straightforward liquidation runs for several years; and proceedings with significant litigation, avoidance claims or disputed claims can remain open far longer — the Herstatt Bank insolvency, open for more than three decades under an earlier regime, is the classic example. The principal timing drivers are pre-filing preparation, liquidity during the preliminary phase, creditor support, the complexity of the debt structure, any M&A or labour measures, and whether the case is plan-led or liquidation-led.

German law concentrates enforcement and realisation in the collective proceedings. There is no single automatic moratorium running from the petition; protection instead builds in two stages — discretionary court measures in the preliminary phase, and a broad statutory stay from the opening order — with defined carve-outs for secured creditors and set-off, and an EU-wide reach under the EU Insolvency Regulation.

a) The preliminary phase

The filing of a petition does not itself open proceedings or divest management; it triggers an examination phase in which the court must protect the prospective estate. There is no automatic stay at this stage, but the court may order protective measures under section 21 InsO — typically appointing a preliminary administrator (sections 21(2) and 22 InsO) and, in particular, prohibiting or temporarily suspending individual enforcement (section 21(2) no. 3 InsO). A general enforcement ban is commonly imposed to prevent a race to enforce and to preserve a possible restructuring or going-concern sale.

b) The statutory stay on opening

From the opening order, individual enforcement by insolvency creditors into the estate is prohibited for the duration of the proceedings (section 89 InsO), and enforcement begun shortly before the filing is unwound: security obtained through enforcement in the month before the petition (or thereafter) becomes ineffective on opening (the backdating bar, Rückschlagsperre, section 88 InsO). To protect the newly opened estate’s liquidity, enforcement for estate liabilities that do not rest on an act of the administrator is additionally barred for the first six months after opening (section 90 InsO).

c) Pending legal proceedings

Litigation is also affected. Court proceedings concerning the estate are automatically interrupted on opening (section 240 of the Code of Civil Procedure, Zivilprozessordnung, ZPO) until the administrator takes them up or they are otherwise resumed. A creditor cannot pursue its pre-insolvency claim by individual action; instead it lodges the claim in the proceedings, and if the claim is disputed and not admitted to the table, it must bring a declaratory action to establish it (sections 179 and 180 InsO) — litigation that forms part of the collective verification process rather than individual enforcement.

d) Secured creditors and set-off

The stay does not treat secured creditors as ordinary unsecured creditors. A creditor with a segregation right (Aussonderung, section 47 InsO) may reclaim an asset that does not belong to the estate; a creditor with a right to separate satisfaction (Absonderung, sections 49 to 51 InsO) is satisfied from its collateral, with realisation channelled through the insolvency regime (the administrator realises movables and assigned receivables under section 166 InsO, while real estate is realised through the ZVG, subject to the administrator’s stay tools — see the answers to Questions 1 and 2). Rights of set-off existing at opening are in principle preserved (sections 94 to 96 InsO), subject to the restriction that set-off is excluded where the set-off position was acquired by an avoidable act or only after opening.

e) Extraterritorial effect

Within the EU, the stay has cross-border reach. Under the EU Insolvency Regulation (Regulation (EU) 2015/848, the “EIR”), German main proceedings are governed by German law as the law of the opening state (Article 7 EIR) and are automatically recognised in the other Member States (Articles 19 and 20 EIR), so the German stay extends, in principle, EU-wide. Important carve-outs apply: rights in rem over assets located in another Member State are protected (Article 8 EIR), as are set-off (Article 9) and reservation of title (Article 10), and secondary proceedings may be opened where the debtor has an establishment (Article 3(2) EIR). Outside the EU, the reach of the German stay depends on recognition under the autonomous German cross-border regime (sections 335 et seq. InsO) and on the law of the state where the assets are located; Germany has not adopted the UNCITRAL Model Law (see the answer to Question 17).

f) Exceptions: where creditors may still act

In summary, despite the general stay creditors may still act in defined situations: secured creditors obtain satisfaction from their collateral within the insolvency framework; creditors with set-off positions may set off; estate creditors (Massegläubiger) may enforce against the estate once the six-month bar under section 90 InsO has elapsed and payment is not made voluntarily; creditors of disputed claims pursue the prescribed declaratory action; and, in non-EU situations where the German proceedings are not recognised, a creditor may in practice enforce against locally situated foreign assets, subject to later challenge under German law.

Participation operates on several levels: verification of claims, the collective creditor bodies, and — where a restructuring is pursued — voting on an insolvency plan. Preventive StaRUG plans are dealt with in the answer to Question 3; this answer focuses on the insolvency plan.

a) Filing and verification of claims

Once proceedings open, pre-insolvency creditors lodge their claims with the administrator for entry in the insolvency table within the period set by the court (sections 174 and 175 InsO). The administrator examines them and the court holds a verification meeting (Prüfungstermin, section 176 InsO); admitted claims are recorded with binding effect, while a disputed claim must be pursued by the creditor through a declaratory action (sections 179 and 180 InsO). Late filing remains possible but may come too late for key steps such as a plan vote.

b) The creditors’ assembly and committee

Collective rights are exercised through the creditors’ assembly (Gläubigerversammlung, sections 74 et seq. InsO), which decides on continuation or closure of the business, the choice or replacement of the administrator and the establishment of a committee, and, where appointed, the creditors’ committee (Gläubigerausschuss, section 67 InsO), which supervises and supports the administrator between assemblies and consents to particularly significant transactions (section 160 InsO).

c) The insolvency plan: structure and content

The insolvency plan (sections 217 et seq. InsO) is the principal tool for a restructuring within insolvency. It has a descriptive part explaining the situation and the measures (section 220 InsO) and a structuring part setting out the binding changes to rights (section 221 InsO). It can provide for haircuts, deferrals and changes to secured and unsecured claims (section 223 InsO), operational and corporate measures and — since 2012 — the inclusion of shareholders, debt-to-equity swaps and other capital measures (section 225a InsO); intra-group third-party security can also be reshaped (section 223a InsO; see the answer to Question 5).

d) Groups and equal treatment

For voting, affected parties are divided into groups by legal position — at least secured creditors, ordinary unsecured creditors, subordinated creditors (where included) and shareholders (where affected) — with optional sub-groups for parties sharing similar economic interests (section 222 InsO). German plans are typically far simpler than US Chapter 11 plans, often with only three to five groups, and parties within a group must be treated equally.

e) Voting and majorities

Each group votes separately, and a group accepts the plan only if both a majority by head count and a majority by amount of claims within that group vote in favour (section 244 InsO). If every group accepts, the plan is adopted.

f) Cram-down of dissenting groups

A dissenting group can be overridden under the prohibition of obstruction (Obstruktionsverbot, the cram-down in section 245 InsO) where three conditions are met: the group is not worse off under the plan than without it; its members share appropriately in the economic value created by the plan; and a majority of the voting groups has approved it. Special rules govern shareholders (section 245(3) InsO). The debtor’s consent is in principle required but is deemed given unless the debtor would be worse off under the plan (section 247 InsO).

g) Confirmation, minority protection and effect

After acceptance, the court confirms the plan if the procedural and substantive requirements are met (section 248 InsO). An individual dissenting party may seek minority protection on the ground that it is worse off than in the no-plan scenario (section 251 InsO), and an appeal against confirmation lies only on narrow grounds and may be dismissed where any disadvantage can be made good from a reserve (section 253 InsO). Once confirmation becomes final, the plan binds all affected parties, including non-participants and dissenters (section 254 InsO); the proceedings are then lifted and the debtor regains control, often subject to plan supervision (section 260 InsO).

Once the rights of creditors to specific assets are accounted for, German insolvency law applies a strict statutory distribution hierarchy. It is useful to distinguish four layers: creditors who stand outside the estate distribution because they have rights to specific assets; estate claims paid with priority; ordinary insolvency creditors; and subordinated claims.

a) Creditors with rights to specific assets

Above the waterfall stand creditors who do not share in the general pool. A creditor with a segregation right (Aussonderung, section 47 InsO) can reclaim an asset that does not belong to the estate, for example under retention of title or a trust arrangement. A creditor with a right to separate satisfaction (Absonderung, sections 49 to 51 InsO) — typically the holder of real-estate security, a security transfer of title or a security assignment — is satisfied preferentially from the proceeds of its collateral (see the answers to Questions 1 and 2).

b) Estate claims

Within the estate, the first call is on the costs of the proceedings — court costs and the administrator’s (or monitor’s) remuneration (section 54 InsO) — followed by other estate liabilities (Masseverbindlichkeiten, section 55 InsO), such as obligations the administrator incurs in managing the estate, post-opening rent and the wages of employees retained after opening. Only once estate liabilities are met can ordinary creditors receive anything; if the estate cannot meet all of them, a further statutory ranking applies among them (insufficiency of the estate, sections 208 to 210 InsO).

c) Ordinary insolvency creditors

Ordinary insolvency creditors (Insolvenzgläubiger, section 38 InsO) are those whose claims arose before opening and are not subordinated. This broad class — trade creditors, banks, bondholders, tax authorities and employees’ pre-opening claims — shares pro rata in the remaining estate according to admitted amounts. Notably, German law gives no general statutory preference to employees or to the tax authorities within this layer.

d) Employees

Employees are nonetheless protected by other means. Wages for work after opening rank as estate liabilities and are paid ahead of ordinary creditors. For the period before opening, employees are covered by insolvency money (Insolvenzgeld) from the Federal Employment Agency for up to the three months preceding the opening decision (sections 165 et seq. of Book III of the Social Code, SGB III); the Agency is then assigned those wage claims and participates as an ordinary creditor. On a going-concern sale, employment relationships pass to the acquirer with accrued rights (the transfer-of-undertakings rule, section 613a BGB), but a purchaser from insolvency is generally not liable for pre-opening arrears or many legacy pension liabilities, which remain in the estate.

e) Pensions

Occupational pension entitlements are protected outside the estate by the statutory pension-insolvency insurer, the Pensions-Sicherungs-Verein (PSV), under sections 7 et seq. of the Company Pensions Act (Betriebsrentengesetz, BetrAVG): the PSV assumes vested entitlements and current pensions up to statutory caps, so these claims are dealt with through pension law rather than elevated in the estate’s waterfall.

f) Subordinated claims

Below the ordinary creditors sit the subordinated insolvency claims, ranked in the order of section 39 InsO: post-opening interest, the costs of creditors’ participation, fines and penalties, claims for gratuitous benefits and — last — shareholder-loan repayment claims and economically equivalent claims (section 39(1) no. 5 InsO). Shareholder loans are thus subordinated by statute, irrespective of any agreement, subject to the restructuring privilege for shares acquired to rescue the company and the small-shareholder privilege for non-managing holders of 10% or less (section 39(4) and (5) InsO). Such claims are paid only if all senior creditors are satisfied in full, which is rare in corporate insolvencies.

g) Subordination by contract

Subordination may also be agreed. A contractual subordination with the debtor (a Rangrücktritt) is respected in the waterfall, ranking the claim, in case of doubt, behind the section 39(1) claims (section 39(2) InsO); a qualified subordination (with a pre-insolvency payment standstill) additionally keeps the claim out of the over-indebtedness test. By contrast, a mere intercreditor or ranking agreement among creditors governs only their internal relationship and does not, by itself, change the ranking of their claims in the debtor’s insolvency — a distinction often misunderstood in complex financings.

h) DIP financing and cross-border protection of the ranking

New financing raised after opening (including in self-administration) ranks as an estate liability and is therefore paid ahead of ordinary claims, but German law has no separate statutory super-priority tier for it (see the answer to Question 4). Finally, the subordination of shareholder loans is robust against forum and choice-of-law engineering: the Court of Justice of the European Union has confirmed (2026) that the avoidance defence in Article 16 EIR cannot be invoked to escape the German subordination and claw-back rules merely by choosing a foreign law to govern the shareholder loan, because the ranking is governed by the law of the opening state (Article 7 EIR).

Transactions carried out before opening that disadvantage the general body of creditors can be unwound through insolvency avoidance (Insolvenzanfechtung, sections 129 et seq. InsO) — a central part of the administrator’s work.

a) Who may challenge, and within what periods

Avoidance claims are brought by the insolvency administrator (in self-administration, by the monitor, section 280 InsO); individual creditors have no standing within the proceedings but benefit indirectly through the enlarged estate. The look-back period runs from the petition and depends on the ground engaged.

b) Grounds for challenge

The principal grounds are: congruent coverage — a creditor receiving security or satisfaction to which it was entitled — avoidable if granted in the three months before the petition while the debtor was illiquid and the creditor knew (section 130 InsO); incongruent coverage — security or satisfaction not due, or not then due — avoidable on easier terms within the same window, and almost automatically in the final month (section 131 InsO); directly disadvantaging legal acts (section 132 InsO); intentional disadvantage (Vorsatzanfechtung, section 133 InsO), where an act done with intent to disadvantage creditors, known to the counterparty, is avoidable for up to ten years — reduced to four years where the act granted a creditor congruent security or satisfaction (section 133(2) InsO); gratuitous benefits, avoidable for four years (section 134 InsO); and shareholder loans, where repayment is avoidable within one year and the grant of security for them within ten years before the petition (section 135 InsO). Specific presumptions apply to dealings with related parties (section 138 InsO).

c) The cash-transaction privilege and burden of proof

An important defence is the cash-transaction privilege (Bargeschäft, section 142 InsO): an immediate, arm’s-length exchange of equivalent value (for wages, where pay follows the work by no more than three months) is avoidable only under the intentional-disadvantage ground, and then only where the debtor acted dishonestly and the counterparty recognised this. The administrator bears the burden of proving the elements of avoidance, in practice through chains of circumstantial indicators. Following the Federal Court of Justice’s recalibration of the intentional-disadvantage ground since 2021, a mere snapshot liquidity gap is no longer sufficient; a more robust demonstration of the debtor’s expected future inability to pay, and of the counterparty’s knowledge of it, is required — a modest shift in favour of commercial counterparties within an otherwise creditor-protective regime.

d) Effect of a successful challenge and third parties

A successful challenge does not void the transaction generally; it obliges the recipient to return the asset or its value to the estate (section 143 InsO). The counterparty’s own claim revives to the extent that it returns what it received (section 144 InsO). Avoidance may also be pursued against the recipient’s legal successor in defined circumstances (section 145 InsO), and the claim is subject to the ordinary limitation rules (section 146 InsO). Bona fide third parties are protected only within these statutory limits, so acquirers of assets from a distressed counterparty, and lenders taking security or repayment during the suspect periods, carry real claw-back risk — a key diligence point in any distressed transaction.

 

German law does not adopt a single rule for contracts on the opening of insolvency. The opening does not terminate all existing contracts; instead, InsO specifies which relationships end by operation of law, which continue, and for which the insolvency administrator has an option whether to perform. Outside formal insolvency, in a StaRUG restructuring, contracts continue under ordinary law and are affected only through the plan mechanics described in the answer to Question 3.

a) Relationships that end automatically

Some relationships tied to the debtor’s management of assets end automatically on opening. Mandates and agency or asset-management relationships concerning the estate lapse (sections 115 and 116 InsO), and powers of attorney relating to the estate expire (section 117 InsO). This clears the way for the administrator to take control and prevents the debtor from continuing to act for others while deprived of disposal powers.

b) Leases and tenancies

Leases and tenancies over immovable property follow a more protective regime, and the rules differ according to whether the debtor is the tenant or the landlord. Where the debtor is the tenant, the lease does not terminate on the opening of insolvency but continues with effect for the estate (section 108 InsO). The landlord is barred from terminating after the insolvency petition on the ground of pre-petition rent arrears or a deterioration in the tenant’s financial circumstances (the termination block, Kündigungssperre, section 112 InsO). To balance this, the administrator is given a special right to terminate the lease on the statutory notice period — for commercial premises, generally to the end of the next quarter (section 580a BGB) — irrespective of any longer agreed fixed term (section 109 InsO). This lets the administrator shed long, burdensome leases, while the landlord’s resulting claim for early-termination damages ranks only as an ordinary insolvency claim.

Where the debtor is the landlord, the lease likewise continues with effect for the estate (section 108 InsO): the tenant must keep paying, but rent for the post-opening period is owed to the estate and ranks as an estate liability (Masseverbindlichkeit), and payment to the insolvent landlord no longer discharges the tenant. Here the administrator has no special right to terminate. The exposure for tenants arises instead on a sale: if the administrator sells the let property out of the estate, the buyer steps into the lease under the principle that “sale does not break the lease” (Kauf bricht nicht Miete, section 566 BGB), but acquires a one-off special right to terminate on the statutory notice period regardless of any agreed fixed term (section 111 InsO; the same applies to a successful bidder in a compulsory auction, section 57a ZVG). Two practical points follow. This special termination right attaches only to an asset deal that transfers ownership of the property — a share deal in the property-owning company leaves the lease untouched, because section 566 BGB is not triggered — and the marketability of let real estate in insolvency is therefore materially affected by who may terminate, and on what notice, after a sale (see further the answer to Question 14).

c) Employment contracts

Employment contracts do not end automatically on opening. Both the administrator (for the employer) and the employee have a special right to terminate on a notice period capped at three months to month-end, unless a shorter contractual or statutory period applies (section 113 InsO). Wages for work after opening rank as estate liabilities; pre-opening wage and severance claims rank as ordinary insolvency claims, subject to the protections (insolvency money, transfer of undertakings) explained in the answer to Question 11.

d) Executory contracts and the administrator’s option

For mutual contracts not yet fully performed by either side at opening — the classic executory contracts — the administrator has a choice (section 103 InsO): to perform the debtor’s outstanding obligations and demand counter-performance for the estate, or to refuse performance. If the administrator performs, the counterparty’s post-opening claims become estate liabilities (section 55 InsO), which makes continuation attractive where a supply, IT service or key lease is essential to a going-concern sale or plan. If the administrator refuses, the counterparty cannot compel performance and is left with a damages claim for non-performance that ranks as an ordinary insolvency claim. The counterparty can force the issue by calling on the administrator to elect; if no affirmative election is made promptly, the administrator loses the right to insist on performance (section 103(2) InsO).

e) Licences

IP licences occupy a special and somewhat unsettled position. They generally qualify as executory contracts subject to the administrator’s option under section 103 InsO, which exposes a licensee to the loss of essential technology if the administrator of an insolvent licensor refuses performance, leaving only an unsecured damages claim. A proposed statutory licence privilege was not enacted, so no dedicated safeguard exists. In practice, licensees protect themselves structurally — through insolvency-resistant or unconditional rights, escrow arrangements, security interests in the licensed IP, or group structures that insulate critical licences from the licensor’s insolvency.

f) Ipso facto clauses and termination rights

German law restricts insolvency-triggered termination. Clauses allowing termination, modification or acceleration solely because of an insolvency petition, an opening order or similar events are in principle unenforceable (section 119 InsO), because they would undermine the administrator’s statutory power to choose continuation or termination. Termination for non-insolvency reasons — material breach, persistent payment default or other contractual grounds — remains possible, subject to protective rules such as those for leases; much litigation turns on whether a termination is genuinely based on an underlying default or is in truth insolvency-triggered. For financial-market and derivative transactions, special provisions preserve close-out and netting (section 104 InsO).

g) Set-off

Set-off remains generally available and is an important creditor protection: a creditor may set off where the mutual claims existed in principle before opening and the general civil-law requirements are met (sections 94 and 95 InsO), so it takes satisfaction by netting rather than by pro rata dividend. Set-off is excluded, however, where the set-off position was acquired only after opening or through an avoidable act (section 96 InsO) — for instance by acquiring a claim against the estate post-opening, or by procuring the counter-claim in avoidable circumstances. These limits, significant in banking and capital-markets relationships, preserve creditor equality while respecting legitimate pre-existing netting (see also the answer to Question 9).

h) Retention of title

Retention of title remains effective in insolvency, subject to claw-back risk. Under a simple retention of title the seller keeps ownership until full payment and, in the buyer’s insolvency, may reclaim identifiable goods still in the debtor’s possession as a segregation right (Aussonderung, section 47 InsO) — unless the administrator elects to perform under section 103 InsO and pay the price from the estate, in which case title passes on payment. Extended and expanded retention-of-title clauses (reaching processed goods or on-sale receivables) are common and generally recognised, but typically confer only a right to separate satisfaction (Absonderung, section 51 InsO) rather than outright reclamation. In practice, administrators negotiate with retention-of-title suppliers for continued use or sale of stock against agreed settlement percentages, since strict enforcement of all such rights would often make continued trading or a going-concern sale unworkable.

i) Disclaiming contracts in insolvency and StaRUG

German law has no common-law “disclaimer,” but the administrator’s refusal to perform an executory contract, converting the counterparty’s claim into an unsecured damages claim, functions economically as one. For contracts that continue automatically (real-estate leases, employment) the law instead provides special termination rights rather than an immediate unilateral disclaimer. In a StaRUG restructuring there is no power to tear up ordinary executory contracts against the counterparty’s will; the plan rebalances financial and certain operational claims and security through group voting and, if needed, cross-class cram-down (see the answer to Question 3), while the underlying contracts generally continue.

j) Link to asset and business sales

The treatment of contracts is closely linked to business and asset sales (see the answer to Question 14). In an asset deal out of insolvency the buyer typically acquires assets free of most legacy liabilities, while key contracts are either assumed and transferred by the administrator or terminated; real-estate leases, supply contracts and IP licences often require counterparty consent to assignment, failing which the administrator relies on termination and the buyer concludes fresh contracts. Employment relationships transfer by operation of law (see the answer to Question 11).

 

The sale of assets or of the entire business is a central tool in both insolvency and restructuring. German law distinguishes pure asset sales, share deals and sales embedded in an insolvency or restructuring plan; the basic policy is that viable businesses should be preserved and transferred to new ownership while legacy liabilities largely remain with the insolvent entity.

a) Conditions for asset and business sales in insolvency

In opened proceedings the administrator realises the estate (section 159 InsO). A viable business is usually transferred by asset deal — a transfer restructuring (übertragende Sanierung) — bundling the operating assets, the contracts selected for continuation and other value-generating positions, while the original entity remains in the process with its historical liabilities. The administrator must act in the collective interest of creditors, which calls for a competitive or market-tested process and proper documentation; particularly significant disposals require the consent of the creditors’ committee or assembly (section 160 InsO), and a sale to particularly interested parties or below value requires the assembly’s consent (sections 162 and 163 InsO). Timing is critical: a going-concern sale often has to be signed and closed soon after filing, so much of the preparation takes place during the preliminary phase. In self-administration and protective-shield proceedings, management runs the sale under the monitor’s supervision and the same duty to maximise value, usually aligned with an insolvency plan.

b) “Free and clear” acquisition and residual liabilities

From the purchaser’s perspective, the key question is whether the business can be acquired free and clear. In an asset deal out of insolvency the purchaser does not, as a rule, assume the debtor’s pre-existing liabilities — historic trade payables, financial debt, taxes and most contingent claims stay with the insolvent entity and are dealt with in the distribution. Importantly, the successor-liability rules that apply outside insolvency are themselves disapplied or curtailed in an insolvency sale: continuation-of-the-firm liability (section 25 of the Commercial Code, Handelsgesetzbuch, HGB) does not apply to an acquisition from the estate, and statutory tax successor liability does not arise on a purchase from insolvency (section 75(2) of the Fiscal Code, Abgabenordnung, AO). The principal exceptions are that employment relationships pass to the purchaser by operation of law (section 613a BGB; see the answer to Question 11, noting that the acquirer is generally not liable for pre-opening arrears), and that certain public-law and environmental obligations may attach to the asset under regulatory law. Where the sale is implemented through an insolvency plan, the allocation of liabilities can be structured in more detail within the plan.

c) Treatment and release of security

Security over assets does not disappear merely because the asset is sold. In a plain asset sale, the purchaser obtains the assets free of existing security only if the secured creditors release their rights; the administrator and purchaser therefore negotiate with the relevant lenders to release security against payment out of the proceeds, with the proceeds of encumbered movables and receivables typically split between estate and creditor by reference to the statutory determination and realisation costs (sections 170 and 171 InsO), and land charges released against an agreed share of the proceeds (see the answer to Question 2). By contrast, an insolvency plan or a StaRUG plan can release, modify or reallocate security without individual consent where the statutory majorities are met and a cram-down is confirmed (sections 245, 223 and 223a InsO; sections 2(4) and 26 StaRUG; see the answers to Questions 3 and 10) — a powerful but more formal route to clearing security from assets destined for a going-concern sale. Outside insolvency, a purely contractual restructuring needs creditor consent for releases; only a confirmed StaRUG plan can bind dissenting secured creditors.

d) Credit bidding

German law has no codified credit-bidding regime, but the concept is achievable. A secured (or other) creditor may agree with the administrator to use its claim as part of the consideration for acquiring the assets or business, usually combined with a cash component for costs, taxes and distributions to other creditors. In formal terms this is structured as a sale at an agreed price with set-off against the creditor’s admitted claim so far as permissible (section 94 InsO), or through an insolvency plan in which the claim is converted into equity or into rights in the acquiring structure. The commercial effect mirrors credit bidding even though the statute does not use the term.

e) Pre-packaged and pre-negotiated sales

There is no dedicated statutory pre-pack procedure, but pre-negotiated sales are common, especially in larger or time-critical cases and in self-administration or protective-shield proceedings: the key terms are negotiated and documented before filing, for confirmation and execution by the administrator (or the debtor under court supervision) afterwards, with the preliminary administrator running a focused market test against the pre-negotiated deal as a benchmark. This will change in the medium term. The EU has now adopted Directive (EU) 2026/799 of 30 March 2026 harmonising certain aspects of insolvency law, which (among five pillars, including avoidance actions, directors’ duties, creditors’ committees and asset tracing) requires Member States to introduce pre-pack proceedings — a preparation phase supervised by an independent monitor leading to a competitive, transparent sale, followed by swift execution after opening. Germany must transpose the Directive by 22 January 2029; the result will likely formalise and standardise aspects of German pre-pack practice without displacing the existing toolkit, with the detail depending on the implementation choices made within the Directive’s margins of discretion.

f) Interaction with StaRUG and out-of-court restructurings

Outside formal insolvency, asset or business disposals are governed by general corporate, contract and regulatory law together with the restructuring tools described in the answer to Question 3. A StaRUG plan can de-lever and stabilise the balance sheet around a planned sale — for example by compromising financial debt or adjusting security — but the actual transfer of assets or shares remains a matter of corporate and transactional implementation. In that sense StaRUG has become an important tool to prepare the ground for distressed M&A, whether by asset deal, share deal or more complex combinations.

g) Acquisition of distressed debt and NPL trading

Distressed real estate and corporate exposures are frequently addressed not at the level of the borrower but at the level of the debt itself. Banks routinely sell non-performing loans (NPLs) — broadly, exposures where the borrower is in serious payment default or is unlikely to pay without realisation of the collateral — to specialised distressed-debt investors, whether as single names or in portfolios. Two regulatory drivers reinforce this market. First, the EU prudential “backstop” (Regulation (EU) 2019/630, amending the Capital Requirements Regulation) requires banks to build minimum loss coverage for non-performing exposures on a fixed calendar and to deduct any shortfall from their own funds; this “calendar provisioning” makes it progressively more expensive for banks to warehouse NPLs and pushes them towards timely disposal. Secondly, the EU Directive on credit servicers and credit purchasers (Directive (EU) 2021/2167), transposed in Germany by the Secondary Credit Market Act (Kreditzweitmarktgesetz, KrZwMG, in force since 30 December 2023), has created a regulated secondary market, with BaFin-supervised licensing of credit servicers and conduct and information obligations for purchasers and sellers.

For investors, acquiring secured debt at a discount is also a route to control. Under a loan-to-own strategy, an investor buys the secured debt — often the senior, real-estate-secured tranche — with the aim of converting its position into ownership of the collateral or of the business, whether by enforcing the security, by a debt-to-equity swap, or by steering a restructuring. These techniques dovetail with the German tools described elsewhere in this guide: a debt-to-equity swap can be implemented through an insolvency plan or a StaRUG plan (see the answers to Questions 3 and 10), and a secured creditor’s claim can be deployed as consideration in a sale in the manner of a credit bid (see (d) above). Because the holder of a real-estate land charge is a creditor with a right to separate satisfaction, an NPL investor can also exert considerable influence simply by controlling the enforcement timetable (see the answer to Question 2).

This has a contested side. Financial investors who acquire NPLs are frequently interested in a swift realisation of the collateral rather than in continuing the borrower’s business, and may press for a compulsory auction (Zwangsversteigerung) of the secured real estate even where a going-concern solution might preserve more value for other stakeholders. The administrator’s countervailing tools — in particular the temporary stays under section 30d and sections 153b and 153c ZVG, and the negotiation of a private sale under a realisation agreement (see the answer to Question 2) — are therefore often central to mediating between an NPL investor’s interest in rapid enforcement and the estate’s interest in an orderly, value-maximising realisation.

 

Directors and officers of German companies face a dense web of duties and potential liabilities once a business moves into financial distress. The risk profile changes over time: from a primarily shareholder‑focused governance duty in normal times, via an early‑warning and stabilisation phase, into a situation where creditor protection and insolvency law dominate. Other stakeholders such as shareholders, de facto managers and, in rare cases, lenders can also become exposed.

a) Core management duties in distress

The starting point is the general duty of care under German corporate law: directors must manage the company with the diligence of a prudent and conscientious businessperson and in the best interests of the company. In financially healthy circumstances this usually aligns with value creation for shareholders. As the company approaches distress, however, the focus progressively shifts towards preservation of the enterprise and protection of the creditor body, and the margin of entrepreneurial discretion narrows.

A key development in recent years is the codified early‑warning duty in the StaRUG regime. Management of companies with limited liability is expected to implement and maintain forward‑looking risk and liquidity monitoring systems that can identify threats to the company’s going‑concern status at an early stage. Once material risks are identified, directors are required to react promptly, for example by adjusting the business plan, seeking fresh capital or debt relief, and, where appropriate, exploring preventive restructuring options. As explained in the answer to Question 3, this early‑warning function is no longer merely a best‑practice aspiration but a statutory benchmark against which directors’ conduct will be measured.

In parallel, directors must ensure that the company’s statutory capital maintenance rules, accounting obligations and corporate governance structures are observed. Where losses erode the registered capital to a significant degree, a shareholders’ or general meeting must be convened without undue delay so that the owners are informed and can decide on remedial measures. Failure to involve the supervisory board or shareholders properly in crisis management may itself be framed as a breach of duty.

b) Insolvency triggers and filing duties

The test for insolvency and the filing duty have already been set out in detail in the answer to Question 7. In practice they are central to the liability landscape. In summary, German law distinguishes between illiquidity, over‑indebtedness and imminent illiquidity.

Once a mandatory insolvency ground exists, management must file without undue delay, within the statutory maximum periods (generally three weeks for illiquidity and six weeks for over‑indebtedness), and only if there is a realistic prospect of remedy within that window may they use the full period. In distress, boards must therefore organise their decision‑making so that insolvency tests and liquidity plans are updated frequently, with the analyses properly documented. In larger groups, this includes monitoring intra‑group dependencies and cash‑pool structures, where missteps can lead to both insolvency law and corporate‑law liability.

c) Liability for late filing and for payments after insolvency maturity

If management fails to file in time, they face a combination of civil and criminal consequences. Civilly, directors can be held personally liable for the damage caused by the delay to the collective body of creditors. In addition, they may be required to reimburse payments made after the company became materially insolvent that are not compatible with the standard of care of a prudent manager in that situation.

The rules on such payments after insolvency maturity are consolidated in a unified provision of the InsO (section 15b) for different legal forms. They remain, however, a major source of personal exposure for directors. In practice, almost every sizeable corporate insolvency is followed by a detailed review of bank statements, payment runs and cash‑pool movements during the “twilight period”, with the insolvency administrator asserting reimbursement claims where payments are seen as unjustified. The burden then shifts to the director to show that individual payments were either still permitted (for example, because they preserved or enhanced estate value or were indispensable to keep a realistic restructuring attempt alive within the filing window) or fell outside the scope of the prohibition.

The sanctions for late filing also extend into criminal law. Wrongful trading or delaying an insolvency filing may be prosecuted and can lead to fines or imprisonment. Convicted individuals typically face bans on acting as managing directors for a period and may also suffer reputational and regulatory consequences beyond the immediate penalties.

d) Business judgment and crisis‑specific standards

German law recognises a version of the business judgment rule: where directors make entrepreneurial decisions on the basis of adequate information and in the honest belief that they are in the best interests of the company, courts will not second‑guess the merits with hindsight. In crisis, however, the envelope of protected business judgment is narrower. Decisions that materially affect liquidity, creditor position or capital structure must be grounded in robust financial data and realistic plans; speculative “gambling for resurrection” with creditor funds will not be protected.

This is particularly true for decisions about continuing or terminating business lines, entering into new obligations, or making selective payments in the run‑up to insolvency. In a near‑insolvent situation directors walk a fine line between their duty to exploit viable restructuring opportunities and their obligation to avoid deepening creditor losses. Directors cannot escape responsibility simply by filing “too early”: a precipitate filing that sacrifices a realistic rescue path may itself give rise to liability. The practical message is that crisis‑time decisions must be both documentable and defensible against both lines of attack.

e) Liability of shareholders, de facto directors and other insiders

Although shareholders of German corporations and limited liability companies are in principle not personally liable for the company’s debts, there are several important exceptions and extensions that become relevant in distress.

First, persons who in practice manage the company’s affairs without formal appointment – so‑called de facto or shadow directors – can be treated in many respects like formal directors. If a dominant shareholder, investor or group parent effectively directs the company’s management, gives binding instructions or represents the company externally beyond ordinary shareholder rights, they may become exposed to the same filing, payment and care duties as the official managing directors.

Second, there remains an extra‑contractual “existence‑destroying interference” doctrine under which shareholders can be liable if they withdraw assets or impose structures that effectively strip the company of its basis of existence to the detriment of creditors. While this doctrine has been narrowed and reframed over time, it continues to operate as a residual protection against abusive extraction of value in the vicinity of insolvency.

Third, shareholder loans and similar funding instruments are treated unfavorably in insolvency for both ranking and avoidance purposes, as explained in the answer to Question 11.

Partners in partnerships with at least one fully liable partner may also remain exposed with their personal assets, even if an operating company in the group is organised as a limited liability entity. The precise risk profile depends on the legal form and any liability‑limiting structures chosen.

f) Lender and adviser liability

As a rule, lenders are not liable for the debts of a distressed borrower simply because they continue or restructure a credit facility. The law does not impose a general “wrongful support” or “deepening insolvency” liability on banks. However, exceptional cases of lender liability are recognised where a financier deliberately or recklessly facilitates the continuation of a hopelessly insolvent business primarily to improve its own position at the expense of other creditors. Typical constellations might include extending new credit or waiving covenants solely to buy time to enforce collateral, despite knowing that other creditors will suffer greater losses as a result of the delay.

Moreover, specific duties may arise in structured financing or acquisition financings where the lender assumes advisory or quasi‑management functions. If a bank moves from arm’s‑length creditor to de facto co‑manager, it may attract some of the responsibilities and risks associated with that role.

Professional advisers – including lawyers, auditors and restructuring consultants – can also incur liability if they provide grossly deficient advice, knowingly facilitate unlawful transactions, or participate in misleading financial reporting. In practice, negligence‑based claims against advisers are most often pursued by insolvency administrators seeking additional estate recoveries. The emerging case law around StaRUG restructurings and restructuring opinions is likely to sharpen expectations for adviser conduct in preventive restructurings as well.

g) D&O insurance and other protections

Directors and officers typically rely on D&O insurance to mitigate the financial consequences of civil liability claims. In the insolvency and restructuring context, however, coverage questions can be complex. Recent German case law has clarified several key points.

First, the courts have emphasised that statutory claims for payments after insolvency maturity, now standardised in the InsO, are in principle capable of being covered by D&O policies because they are treated as a particular form of liability for financial loss. This was an important clarification after earlier decisions by some appellate courts had suggested that these claims might fall outside standard coverage grants due to the dogmatic characterisation as claims “sui generis” rather than damage claims.

Second, in 2024 the German Federal Court of Justice scrutinised policy clauses that provided for the automatic termination of D&O coverage upon an insolvency filing (BGH, judgment of 18 December 2024 – IV ZR 151/23). The court held that certain formulations of such automatic termination clauses are incompatible with the mandatory principles of insurance contract law and therefore invalid. This development strengthens the prospect that D&O cover remains in place during the very period in which claims for wrongful trading and crisis‑time breaches are most likely to be asserted.

At the same time, D&O cover is not a panacea. Policies usually exclude intentional misconduct and often contain stringent conditions around timely notification of circumstances, cooperation and settlement. Recent appellate decisions have underlined that where a director knowingly breaches core duties – for example by deliberately ignoring the insolvency filing obligation – insurers may invoke “wilful breach” exclusions and decline cover. Moreover, criminal sanctions, fines and certain types of administrative penalties are not insurable under German law.

Other stakeholders such as shareholders, supervisory board members or de facto directors may be either co‑insured under the same D&O programme or covered under separate policies. It has become common for financing documents or investment agreements to require the debtor to procure and maintain appropriate D&O coverage as part of the governance package, with supervisory boards taking a more active interest in scope and robustness of cover.

h) Consequences of breach and persistence of liability

Where directors, shareholders or other insiders breach their duties in distress, they face a layered set of consequences. Civilly, they may be liable to the company, to the insolvency administrator (stepping into the company’s shoes) and, in certain configurations, directly to creditors or other third parties. Internally, they may be removed from office, subject to claw‑back of remuneration or bonuses, or exposed to recourse from co‑directors or shareholders.

Criminally, delayed filings, fraudulent preference of creditors, fraudulent conveyances, false statements and certain forms of bookkeeping and tax misconduct can all trigger investigations. The opening of restructuring or insolvency proceedings does not wipe the slate clean: as explained in the answer to Question 16, administrators are under a duty to review past conduct and to pursue viable claims, and public prosecutors are increasingly attuned to alleged mismanagement in larger insolvencies.

Insurance can soften, but not eliminate, the financial impact of civil claims. Effective coverage depends on careful policy structuring, active supervision of coverage by boards and shareholders, and behaviour by directors that stays firmly on the right side of the line between negligent misjudgment (typically insurable) and intentional wrongdoing (generally uninsurable).

i) Outlook: Harmonisation under the EU Directive

The recently adopted EU Directive harmonising certain aspects of insolvency law will also shape the duties‑and‑liabilities landscape over the coming years. Among its harmonised areas is a directors’ duty to request the opening of insolvency proceedings. The Directive establishes a minimum standard, in particular a duty on directors to file within a defined period after the company becomes insolvent, and it leaves Member States room to maintain or adopt stricter rules. For Germany, the existing filing regime under section 15a InsO, including the three‑week and six‑week maximum periods and the consolidated liability rules for payments after insolvency maturity in section 15b InsO, already meets or exceeds much of the directive’s baseline. Significant disruption to the German framework is therefore not expected, although the transposition process may prompt refinements at the margins, for example in the calibration of filing periods, the formulation of directors’ early‑detection obligations and the alignment of avoidance and director‑liability concepts. Directors and their advisers should monitor the German implementing legislation, since the precise contours of the transposed rules will depend on the choices made within the directive’s margins of discretion.

 

Opening restructuring or insolvency proceedings in Germany does not wipe the slate clean for directors, officers or other stakeholders. Neither a StaRUG preventive restructuring nor formal proceedings under the InsO is designed to release past mismanagement, delayed filings or other breaches of duty. Instead, the question whether and to what extent personal liability exists for pre‑filing conduct is assessed largely independently of the chosen procedure.

a) Persistence of pre‑filing liability

As a starting point, entry into a StaRUG process or the opening of insolvency proceedings does not, by itself, discharge directors or controlling shareholders from liability for past actions and omissions. The same applies to other stakeholders such as de facto managers, shadow directors or lenders who may in exceptional cases face exposure. Claims for breach of corporate duties, violation of filing obligations or unlawful distributions survive and can still be pursued after restructuring or insolvency, subject only to the usual rules on standing, limitation and the interaction with any confirmed plan.

Insolvency plans and StaRUG plans are primarily instruments to restructure the debtor’s balance sheet. They can compromise or re‑schedule creditor claims against the company, and in some constellations also adjust affiliated‑party guarantees and security. They do not, however, automatically extend to personal liability of directors or officers. Any release of such persons would require an explicit arrangement and the agreement of the parties entitled to the claim; in practice that is difficult to achieve and, in a contentious large case, often politically unrealistic.

b) Claims pursued by the insolvency administrator

Once insolvency proceedings are opened, the insolvency administrator steps into the shoes of the company and is under a statutory duty to investigate whether there are viable claims against former or current directors, supervisory board members, controlling shareholders and other insiders. If such claims exist, the administrator is expected to pursue them for the benefit of the estate, which may include asserting them in court.

Typical claims in this context include actions for late filing of insolvency, reimbursement of impermissible payments made after insolvency maturity, damages for gross mismanagement, and repayment of unlawful distributions or hidden profit extractions. The administrator will usually start by reconstructing the financial situation during the so‑called “twilight period” before filing, reviewing management minutes, cash flow forecasts and correspondence with lenders and shareholders. Where necessary, external experts are instructed to assess whether the tests for illiquidity or over‑indebtedness were met earlier than acknowledged and whether a filing should have been made sooner.

Because these claims belong to the company, any proceeds flow into the insolvency estate and are distributed to creditors according to the general ranking rules outlined in the answer to Question 11. Individual creditors cannot normally pursue such corporate claims in parallel once proceedings are open.

c) Direct creditor claims and special liability scenarios

In addition to estate claims, individual creditors may in specific constellations have their own direct causes of action against directors and other stakeholders. These are exceptional and usually require more serious misconduct, but they are not extinguished merely because restructuring or insolvency proceedings are underway.

Direct liability can arise where directors have entered into contracts while knowing that the company is unable to perform, or have actively misled counterparties about the company’s financial condition. Creditors may also have claims based on unlawful preferences, fraudulent transfers or misleading financial statements. In extreme cases, these can lead to parallel criminal investigations and civil actions, for instance for deliberate delay of filing combined with selective payments that harm other creditors.

Shareholders and de facto managers can be drawn into such disputes where they have effectively dictated the company’s decision‑making in the crisis, for example by instructing management to continue trading for their own benefit, to strip out assets or to favour particular creditors. In multi‑layered structures, parent companies may face claims for destructive interference or, where they have stepped into a management role, for breach of the same duties that apply to formal directors.

d) Effect of StaRUG and insolvency plans on director liability

StaRUG and insolvency plans are capable of reshaping many legal relationships, but they do not generally operate as a blanket amnesty for past conduct of directors or other insiders. An insolvency plan can, in principle, address claims of the debtor against its own directors or shareholders, for example by waiving or limiting such claims with the consent of the estate. In practice this is sensitive, because it affects the estate’s recovery prospects and is subject to close scrutiny by creditors and the court. Creditors are understandably reluctant to approve a plan that gifts directors a wide release without appropriate compensation to the estate. And to get the approval the plan needs to show that the creditors would not fare worse with the plan than without it. Liability releases thus generally need to be compensated to get creditor approval.

StaRUG plans are even more narrowly focused. They primarily regulate the rights of financial creditors and, to a limited extent, affiliated security providers. They do not confer general release powers either. Any release would thus require explicit agreement by the party holding the claim, and where criminal or regulatory aspects are involved, cannot be achieved at all through a private plan.

Against this backdrop, many directors hope that a successful restructuring or a confirmed plan will at least mitigate their liability exposure. In practice, an orderly, transparent restructuring that demonstrably preserved value can be helpful when courts assess whether a director acted diligently in the crisis. It does not, however, eliminate technical breaches such as missed filing deadlines or unlawful payments in the period of insolvency maturity; those must be analysed separately, as outlined in the answer to Question 15.

e) Contexts in which director liability is typically sought

Director liability in restructuring and insolvency scenarios tends to be pursued in several recurrent contexts:

First, delayed filing of insolvency remains the central risk. As summarised in the answer to Question 7, once illiquidity or over‑indebtedness has arisen, management is obliged to file without culpable delay, with only a short window to rectify the situation. If courts find that the filing came too late, directors can be held liable for the additional losses caused by trading on, and for payments made in that period that reduced the estate.

Second, payments and transactions after insolvency maturity are a major focus. Directors may be sued to reimburse payments made once the company was materially insolvent that are not compatible with their duty to preserve the estate, even if those payments were lawful in ordinary times. The same scrutiny applies to the granting of new security interests, atypical settlements and intragroup transfers in the run‑up to proceedings.

Third, mismanagement before the onset of formal insolvency can trigger claims for breach of general duties. Examples include entering into obviously loss‑making long‑term contracts without a realistic prospect of benefit, failing to implement basic risk management and early‑warning systems as required by modern corporate and StaRUG standards, or ignoring clear warning signs from auditors or supervisory bodies. Here the yardstick is often what a prudent, diligent director would have done to stabilise the company.

Fourth, misuse of restructuring instruments can itself create liability. Directors who use StaRUG or insolvency proceedings in a way that primarily benefits a dominant shareholder or selected creditors, at the expense of the general body of creditors, risk allegations that they have violated their duty to manage the process in a creditor‑oriented way. Likewise, starting a formal process in a situation where a realistic, less destructive restructuring path was available but not explored at all may, in extreme cases, be characterised as a breach of duty to the company.

Fifth, criminal law remains in the background as a powerful enforcement tool. Deliberate delay of filing, fraudulent transfers, falsification of accounts, tax offenses and bankruptcy crimes can all lead to personal prosecution of directors and, in some cases, other stakeholders. Criminal proceedings do not depend on whether a StaRUG plan or insolvency plan has succeeded; indeed, a high‑profile restructuring can increase scrutiny.

Finally, insurers, supervisory boards and new investors play an increasingly active role. As explained in the answer to Question 15, directors often rely on D&O insurance, but coverage is limited and may be contested where allegations of intentional misconduct are made. Supervisory boards are under pressure to review crisis management critically and to consider recourse against former directors where there is a plausible case. In turn, new investors in a restructured company frequently require that potential claims against former management are at least analysed and, if valuable, preserved rather than silently abandoned as part of a “fresh start.”

 

German law uses a layered approach to the recognition of foreign restructuring and insolvency proceedings. The starting point is whether the proceeding falls within the scope of the EU Insolvency Regulation or, outside that regime, within the international insolvency rules of the InsO. For purely contractual restructurings that are not classified as insolvency proceedings, general private international law and the rules on recognition of foreign judgments are relevant.

This layered approach is well illustrated by two contrasting decisions at the two ends of the spectrum. As early as 2009, the Federal Court of Justice held that a U.S. Chapter 11 proceeding qualifies as a foreign insolvency proceeding eligible for recognition under section 343 InsO, reasoning that it pursues essentially the same objectives as German insolvency proceedings and that the German insolvency plan procedure was itself modelled on Chapter 11 (BGH, interim judgment of 13 October 2009 – X ZR 79/06, ZIP 2009, 2217). At the other end, in the summer of 2025 the Frankfurt Regional Court refused to recognise a UK Part 26A restructuring plan, holding in a preliminary judgment that such a plan does not qualify as an insolvency proceeding within the meaning of section 343 InsO because it lacks the collective character of a true insolvency proceeding — it does not involve all creditors but only selected groups — and that recognition was likewise unavailable under the other potentially applicable regimes (LG Frankfurt am Main, interim judgment of 22 August 2025 – 2-12 O 239/24).

a) Recognition of EU insolvency and restructuring proceedings

If proceedings are opened in another EU Member State (except Denmark) and are listed in Annex A of the EU Insolvency Regulation, they are automatically recognised in Germany once a court in that Member State has opened main proceedings on the basis that the debtor’s centre of main interests (“COMI“) is located there. In practice, COMI is presumed to coincide with the registered office of a corporate debtor, unless the contrary is clearly shown, for example because the real head office, management, and principal operations are elsewhere. Recognition under this regime does not require a separate exequatur; the opening decision and the typical effects of the proceeding (including stays, administrator powers, and the treatment of claims) are accepted in Germany by operation of European law.

This automatic recognition applies not only to classic liquidation and reorganisation proceedings under the InsO equivalents of EU Member States, but also to those preventive restructuring procedures that Member States have notified for inclusion in Annex A, provided they are collective and subject to some degree of court or administrative supervision. Germany followed this route for the public StaRUG restructuring cases: where a debtor opts for the “public” StaRUG variant, that procedure is now treated as an insolvency-type proceeding for recognition and jurisdiction purposes within the EU framework.

b) Recognition of non‑EU insolvency proceedings

For insolvency proceedings opened outside the EU or in Denmark, recognition in Germany is governed by the international insolvency provisions of the InsO. As a rule, such foreign insolvency proceedings are recognised without the need for a separate court declaration once they have been validly opened in the foreign state, but there are important safeguards.

First, the foreign court must have had jurisdiction in a sense that is acceptable under German conflict rules. In practical terms, this requires a sufficiently strong connection between the debtor and the foreign state, typically because the debtor’s general place of jurisdiction, its COMI, or at least the centre of its self‑employed business activity is located there. Pure “forum shopping” based only on thin connections is unlikely to be accepted.

Second, recognition must not lead to results that are manifestly incompatible with the fundamental principles of German law, in particular constitutional rights and basic creditor‑protection standards. This public policy control is reserved for exceptional cases, but it provides an ultimate backstop where a foreign proceeding is used in an abusive or grossly unfair way.

If these conditions are met, German courts treat the foreign main insolvency proceeding as having universal effect, including with respect to the debtor’s assets located in Germany, subject to domestic rules on secured creditors and local priority rights. At the same time, the German courts retain the possibility to open secondary or territorial proceedings limited to German assets in clearly defined constellations, for example where there is an establishment in Germany and a local creditor requests this.

c) Restructuring proceedings outside the EU Insolvency Regulation

The position is more complex for foreign restructuring tools that are not classified as insolvency proceedings and are therefore not covered by the EU Insolvency Regulation or the international insolvency provisions of the InsO. Typical examples are certain schemes of arrangement and some new restructuring plans under foreign company law. There is no dedicated statutory regime in Germany for the recognition of such proceedings. Instead, several routes are used in practice, depending on how the foreign measure operates.

If the foreign restructuring primarily amends contractual obligations, and those obligations are governed by the law of the restructuring state, the starting point is the Rome I Regulation on contractual obligations. Under that Regulation, the law chosen by the parties governs the modification and discharge of contractual debts, including by way of collective procedure. A properly sanctioned foreign scheme or plan can therefore have substantive effect on those claims as a matter of the chosen governing law, and German courts will generally respect those effects when applying that law, at least vis‑à‑vis creditors within its scope.

Where the foreign restructuring produces a court judgment with civil‑law effects, parties may also seek recognition under the general provision on the recognition of foreign judgments (section 328 ZPO). Recognition in this constellation depends on several conditions, including that the foreign court had jurisdiction according to German conflict‑of‑jurisdiction standards, that the procedure met basic fairness requirements, that no conflicting German judgment exists, and that recognition does not lead to results that are manifestly incompatible with German public policy. In addition, some authors and courts consider whether reciprocity is sufficiently guaranteed between Germany and the foreign state for comparable judgments.

Because these tests are applied case by case, there is less certainty for foreign company‑law restructurings than for classic insolvency proceedings. This is one reason why, after 2020, the German legislator opted to place public StaRUG cases into the Annex A framework, to secure a more predictable recognition regime within the EU.

d) COMI, governing law and the recognition test

COMI plays a central role when recognition is based on insolvency law. Within the EU regulatory framework, the existence of COMI in the opening state is the key jurisdictional anchor for main proceedings and a precondition for automatic recognition. Outside the EU, German law uses closely related connecting factors when it tests whether a foreign insolvency court had sufficient jurisdiction to warrant recognition.

By contrast, where the recognition of a foreign restructuring is sought primarily through contract law and general judgment‑recognition rules, the governing law of the affected debt instruments gains importance. If the compromise of claims has been carried out under the governing law chosen in the contract and that law allows the relevant scheme or plan to bind dissenters, German courts will often give effect to the compromise when applying that law, even if the debtor’s COMI is in Germany. In these scenarios, it is the interplay between governing law, jurisdiction clauses, and the fairness and collective nature of the foreign procedure that determines recognition, rather than COMI in the insolvency‑law sense.

e) Status of the UNCITRAL Model Laws in Germany

Germany has not adopted the UNCITRAL Model Law on Cross‑Border Insolvency, nor the UNCITRAL Model Law on Recognition and Enforcement of Insolvency‑Related Judgments. There is currently no concrete legislative proposal to introduce either instrument into German law. Instead, cross‑border insolvency and restructuring cases are handled through the combination of the EU Insolvency Regulation, the international insolvency provisions of the InsO, the Rome I and Rome II Regulations on the applicable law, and the general rules on recognition of foreign judgments.

This framework gives German courts considerable flexibility but also leaves some uncertainty around the treatment of newer foreign restructuring tools, especially from non‑EU jurisdictions, and around the coordination of parallel proceedings. These issues are being discussed in current literature, particularly in the wake of Brexit and the increased competition between preventive restructuring regimes across Europe, but as of 2026 they have not yet led to a German decision in favour of adopting the UNCITRAL Model Laws.

 

a) The post-Brexit recognition framework

Since the end of the Brexit transition period, the recognition of English restructuring and insolvency proceedings in Germany has become more complex and significantly more contentious. Before Brexit, English insolvency proceedings falling within the scope of the EU Insolvency Regulation and many judgments connected with English schemes of arrangement benefited from harmonised European rules on jurisdiction and recognition. That automatic framework has fallen away. Recognition of English proceedings in Germany is now tested against German international insolvency law, the general rules on recognition of foreign judgments, and the conflict‑of‑laws regime for contracts.

For classic English insolvency proceedings that are functionally comparable to German insolvency proceedings, German law still proceeds on the basis that such proceedings can in principle be recognised under the international insolvency provisions of the InsO. The key questions are whether the English court had an acceptable jurisdictional basis from a German perspective (typically linked to the debtor’s COMI or at least a strong factual nexus) and whether recognition would lead to outcomes that are manifestly incompatible with fundamental principles of German law. In practice, however, the more difficult cases since Brexit have arisen not around traditional liquidations or administrations, but around English restructuring tools that are only partially collective and that seek to compromise German law‑governed debt.

b) Schemes of arrangement and Part 26A restructuring plans

The first wave of post‑Brexit friction has focused on English schemes of arrangement and, even more prominently, on the new restructuring plans under Part 26A of the UK Companies Act. These instruments are deliberately flexible and allow the debtor to include only selected creditor groups, to engineer cross‑class cram‑down and to use English jurisdiction based on a “sufficient connection” rather than COMI. German courts now examine much more critically whether such proceedings qualify as “insolvency proceedings” in the sense required for automatic recognition under the InsO. Where they are not viewed as insolvency proceedings, they fall back into the more uncertain terrain of general judgment‑recognition rules and private international law.

c) The Frankfurt decision: refusal to recognise an English restructuring plan

So far, there has been at least one high‑profile German decision expressly declining to give effect to an English restructuring plan in relation to German law‑governed debt (LG Frankfurt am Main, interim judgment of 22 August 2025 – 2-12 O 239/24, NZI 2025, 846). In 2025, the Regional Court in Frankfurt issued a provisional judgment in a case concerning an English restructuring plan for a largely German‑focused real estate group. The English court had sanctioned a plan that extended senior debt maturities and compromised subordinated positions after the debtor had shifted its COMI to England. When a dissenting senior lender sued in Germany for payment under a German law‑governed facility agreement, the Frankfurt court refused to accept the English plan as a defence.

In that decision, the court examined three possible routes to recognition and, on an interim basis, rejected all three. First, it held that the English Part 26A plan at issue did not constitute a collective insolvency proceeding within the meaning of German international insolvency law, because the debtor had been free to include only selected creditor constituencies and the proceeding did not encompass all or a substantial majority of creditors in the way core insolvency proceedings do. Second, it found that recognition as a foreign civil judgment under the general rules on recognition of foreign judgments (section 328 ZPO) could not be granted at that stage because reciprocity was not established; in particular, there was not yet sufficient proof that English courts would, in comparable circumstances, recognise and give effect to German decisions compromising English law‑governed claims. Third, the court saw no applicable international treaty basis for recognition, noting that the post‑Brexit relationship is no longer governed by the Brussels regime and that the older bilateral conventions are either superseded or too narrow in scope for modern restructuring plans.

This Frankfurt decision is procedurally limited. It was rendered in a documentary summary procedure and expressly characterised as provisional. In that procedural setting, the court was not able to receive full expert evidence on English law or on the practice of English courts in recognising foreign restructuring measures. The losing party can request a full evidentiary hearing in the same instance or pursue an appeal to the Higher Regional Court and, potentially, further review. The case is therefore not the last word, but it illustrates the new fault lines: the “collective” character of the English plan, the jurisdictional basis relied on in England, and the question of reciprocity in light of the continuing English rule that foreign insolvency and restructuring measures do not generally discharge English law‑governed debt without creditor consent.

d) The broader post-Brexit picture

Beyond this individual case, the broader post‑Brexit picture is mixed. On the one hand, many German practitioners still see room for English schemes and plans to be recognised in Germany in suitable structures, particularly where English law governs the compromised instruments and where the jurisdictional and procedural fairness criteria of German law are carefully respected. The universal application of the Rome I Regulation to contractual obligations also means that, for English law‑governed debt, the substantive modifications effected by a validly sanctioned scheme or plan will often be given effect when German courts apply the chosen governing law.

On the other hand, the Aggregate‑type challenges show that German courts are willing to scrutinise English restructurings closely and are not prepared simply to assume that English judgments will be recognised across the board. The absence of an overarching EU framework, the continued application of the English rule that English law‑governed claims are not discharged by foreign insolvency procedures without consent, and the partially selective design of modern English restructuring plans all contribute to legal uncertainty. For plan proponents, this also feeds back into the English sanction hearing: if there is a real risk that German courts will not recognise the plan in relation to German law‑governed claims or German obligors, it becomes harder to persuade the English court that the plan will have the intended cross‑border effectiveness.

e) Developments up to 2026

In terms of developments up to 2026, two trends stand out.

First, German writing and case law increasingly emphasise the functional competition between domestic tools, especially StaRUG, and foreign restructuring regimes. Since StaRUG offers a court‑supervised, EU‑integrated preventive restructuring framework that is expressly recognised under the European Insolvency Regulation when used in its public form, German courts are less inclined to stretch recognition doctrines in favour of non‑EU instruments that sit outside any harmonised regime.

Second, there is growing debate over the impact of the 2019 Hague Judgments Convention and other international instruments on the recognition of restructuring judgments from third countries. Although insolvency proceedings as such are carved out, some argue that at least certain aspects of restructuring plans with a strong contractual and judgment‑based character could, in the future, find a route through these newer conventions. As of 2026, however, this remains largely a matter for academic discussion and forward planning rather than settled practice.

 

Foreign‑incorporated debtors can in principle make use of both restructuring and insolvency proceedings in Germany. The decisive question is not where the company is incorporated, but whether German courts have international jurisdiction under the applicable framework. In practice, the test differs depending on whether the EU Insolvency Regulation applies.

a) Foreign debtors under the EU Insolvency Regulation

Where the EU Insolvency Regulation governs jurisdiction (in particular for insolvency proceedings and the public StaRUG variant listed in Annex A), the central connecting factor for opening main proceedings in Germany is the debtor’s COMI. If a foreign‑incorporated debtor has shifted its COMI to Germany, German courts may open main insolvency or public preventive restructuring proceedings over that debtor, even if it remains incorporated abroad. In that situation, the same substantive German insolvency rules, including directors’ filing obligations and the tests for illiquidity and over‑indebtedness, apply as they do to German companies. In addition, within the scope of the Regulation, secondary or territorial insolvency proceedings confined to German assets can be opened if the foreign debtor has an establishment in Germany, for example a non‑transitory branch or operational site with staff and assets used to carry on economic activity in Germany in the three months before the foreign main proceeding was requested.

b) Outside the EU Insolvency Regulation: StaRUG and German InsO

Outside the scope of the Regulation – for example, for non‑EU debtors or for non‑public StaRUG proceedings – German law applies its own international jurisdiction rules. For StaRUG preventive restructuring, the decisive criterion mirrors the idea of COMI: the centre of the debtor’s economic activity must be located in Germany. This typically requires that the key management functions, main business operations or principal financing arrangements are genuinely centred in Germany. If that test is met and the debtor is in a state of imminent illiquidity, a foreign‑incorporated company can access StaRUG proceedings in Germany on the same terms as a German entity.

For main insolvency proceedings under the InsO in non‑EU constellations, the usual rule is that German courts are competent if either the debtor’s general place of jurisdiction (in substance, its principal seat) or the centre of its self‑employed business activities is in Germany. Even where this is not the case, German law allows for secondary or territorial proceedings limited to domestic assets, provided the foreign debtor has an establishment in Germany and a creditor files an appropriate application. In exceptional cases, territorial proceedings may also be opened without a German establishment, in particular where the applying creditor can show a concrete interest because it would foreseeably fare significantly worse in sole reliance on foreign proceedings than it would if a German territorial proceeding were opened.

c) Restrictions and practical limitations

The main “restriction” for foreign debtors is therefore jurisdictional in nature. There is no blanket bar against non‑German companies using German procedures, but access is conditioned on a sufficiently strong German nexus. Attempts at aggressive forum shopping through last‑minute shifts of apparent head office without real operational substance are increasingly scrutinised. Where the link to Germany is thin, German courts are correspondingly reluctant to accept jurisdiction for main proceedings and may confine themselves to territorial proceedings over domestic assets, or decline altogether if no meaningful German interest is shown.

Another practical limitation is the interplay with foreign proceedings. Within the EU framework, the Regulation allocates main and secondary jurisdiction; outside that framework, German international insolvency law is built around a limited universalist approach. This means that German courts assume that main proceedings should usually be opened where the debtor’s primary business centre lies, and that territorial German proceedings over a foreign debtor’s assets are the exception and must be justified by the structure of the case and the creditor’s interests.

d) Countries causing the most cross‑border friction

There is no single foreign jurisdiction with which Germany has constant, systemic insolvency conflicts, but the landscape has changed markedly since the end of the Brexit transition period. In the post‑Brexit environment, the UK now presents the highest degree of legal complexity for German cross‑border restructurings and insolvencies. The absence of a harmonised EU framework between Germany and the UK, the continued effect of English rules that protect English‑law governed claims from discharge in foreign insolvency processes without consent, and the dense network of financing and holding structures connecting the two systems mean that recognition and coordination questions frequently arise and are often harder to resolve than with EU‑based debtors.

Beyond the UK, challenges tend to be case‑specific rather than country‑specific. Structures routed through jurisdictions such as the Netherlands or Luxembourg may raise intricate issues around COMI, establishment, and the interaction between local holding companies and German operating subsidiaries, but these are generally managed within the existing EU and German frameworks. By contrast, the UK’s third‑country status after Brexit, combined with the volume of German‑related financings under English law, has made it the main practical source of cross‑border friction for German restructuring and insolvency practice in recent years.

 

German law is built on the principle of separate legal personality. Each group company is tested for insolvency on its own, and any restructuring or insolvency proceeding is opened and conducted per legal entity. There is no consolidated “group insolvency proceeding” that combines several estates into one pool, and there is no substantive pooling of assets and liabilities across the group. In practice, however, both the InsO and StaRUG now contain a number of tools that are designed to cope more effectively with group structures and to avoid purely entity‑by‑entity outcomes where this would destroy value.

a) Group treatment in formal insolvency proceedings

Within formal insolvency under the InsO, the most important development of recent years is the statutory “group jurisdiction” framework. For German corporate groups, the InsO allows a single insolvency court to assume jurisdiction for several insolvent group entities where it is already competent for at least one material group company and certain statutory conditions are met (sections 3a to 3e InsO). This creates a procedural hub for the group and permits consolidated handling of multiple filings that would otherwise be scattered across different local courts.

Once a group forum has been established, there is scope to appoint the same insolvency administrator (or at least insolvency administrators from the same firm) for several or even all group companies, provided that this is compatible with creditor interests in the individual estates. The legislation expressly encourages coordination between courts and between creditors’ committees where several group companies are in proceedings. The objective is to align strategies, avoid contradictory measures and give effect, where sensible, to a group‑wide restructuring or going‑concern sale, while still respecting the separate nature of each estate and the ranking rules outlined in the answer to Question 11.

These group tools do not change the basic rule that each company has its own proceeding, its own estate and its own schedule of creditors. A formal group-coordination proceeding may also be initiated, in which a court-appointed coordination administrator proposes a coordination plan as a reference framework for the individual proceedings, without any substantive consolidation of the estates (sections 269a to 269i InsO). Instead, the German regime relies on intensive procedural coordination, joint planning and, where appropriate, mirror‑image insolvency plans in the individual estates to implement a coherent solution across the group.

b) Group treatment in StaRUG preventive restructurings

The StaRUG framework, which is discussed in detail in the answer to Question 3, also contains specific provisions for corporate groups. The statute allows the use of a group court venue for preventive restructuring proceedings, mirroring the group jurisdiction concept under the InsO. Where several group entities intend to use the StaRUG framework, a single court may be declared competent for the group if the statutory requirements for group affiliation and a sufficient German nexus are met.

At the substantive level, StaRUG is built around a restructuring plan per debtor, not around a consolidated group plan in the strict sense. That said, it is possible and increasingly common in practice to design parallel StaRUG plans for different group companies that are coordinated in timing, capital structure and creditor group formation. StaRUG explicitly allows the inclusion of affiliated entities as plan parties for certain purposes, for example to deal with intra‑group guarantees and security in the way described in the answer to Question 5. This gives group restructurings a targeted tool to address intra‑group dependencies and to cut off ricochet claims that would otherwise undermine the restructuring of a central borrowing entity.

c) Scope for cooperation between office holders and stakeholders

German law now assumes, and to some extent mandates, active cooperation between office holders and courts where several members of a group are in insolvency or StaRUG proceedings. In insolvency, the courts seized with different group entities must cooperate when a group venue is requested, and creditors’ committees are expected to coordinate where this serves the common interest of the creditor bodies. If the same administrator is appointed for several entities, the practical scope for an aligned strategy increases further: joint sale processes, coordinated use of intra‑group set‑off and cash‑pool unwindings, and aligned litigation against former management or shareholders become more straightforward.

In StaRUG proceedings, the restructuring court may appoint a restructuring officer, and where several group entities use the framework, it is possible in practice to have the same individual act as restructuring officer across the group if this fits the overall concept. That person then has a natural coordinating role, in particular on valuation questions, group‑wide business planning, plan design, and cross‑class cram‑down assessments that cut across several entities. At the same time, coordination is not confined to formal office holders. In larger group situations, creditors typically form ad hoc groups and steering committees spanning several debtors, and these informal bodies often drive the negotiation of group‑wide solutions both in and outside formal proceedings.

d) Changes following the transposition of Directive 2019/1023

The implementation of Directive (EU) 2019/1023 through StaRUG and the associated amendments to the InsO has clearly elevated group considerations in German restructuring and insolvency practice. On the preventive side, StaRUG introduced a statutory group court venue for restructuring cases and, by design, invites group‑oriented solutions through its flexible plan architecture, class‑formation rules and the possibility to bind selected creditor and shareholder groups while leaving others unaffected. This is particularly significant for complex group financing structures with intra‑group guarantees, security packages spanning several jurisdictions and layered shareholder funding.

On the insolvency side, the formal introduction of group jurisdiction and codified coordination duties between courts and administrators has strengthened and systematised practices that previously had to be built on soft law and ad hoc arrangements. The net effect is that German law is better equipped to handle the reality of integrated corporate groups without abandoning its core principle that each legal entity is treated separately and that creditors’ rights are determined at entity level, subject to the ranking rules and avoidance regime described in the answers to Questions 11 and 12.

e) Cross‑border group issues

Cross‑border group restructurings involving German entities are shaped by the EU Insolvency Regulation and, for StaRUG, by its “public” variant being listed in Annex A, as outlined in the answer to Question 17. Within the EU, group jurisdiction, secondary proceedings and group coordination mechanisms under the Regulation interact with the German group tools described above. Outside the EU, coordination is more dependent on contractual arrangements, protocols and the willingness of foreign courts to cooperate, but the German framework is designed to be compatible with international soft‑law standards on cooperation in enterprise group insolvencies.

In practice, the most challenging cross‑border group cases currently tend to involve non‑EU jurisdictions with powerful restructuring tools of their own, such as the UK after Brexit, where questions of recognition, COMI migration and the interplay between German and foreign plans are at the forefront. The German statutory group instruments do not resolve these conflicts on their own, but they provide a coherent domestic platform from which to coordinate with foreign office holders and courts and to pursue group‑wide strategies in a way that is consistent with EU law and with the directive’s emphasis on early, coordinated restructurings of enterprise groups.

 

Germany has not adopted the UNCITRAL Model Law on Enterprise Group Insolvency. At the time of writing, there is also no concrete legislative project aimed at incorporating this specific model law into German insolvency legislation. The current German approach to enterprise group insolvencies is based instead on a combination of the group‑related provisions of the EU Insolvency Regulation and the domestic group‑insolvency instruments that were added to the InsO in recent years, as outlined in the answer to Question 20.

That current framework already provides for a concentration of group proceedings before one insolvency court, the possibility of appointing the same insolvency administrator for several group entities, and a statutory coordination mechanism without any substantive consolidation of estates (sections 3a to 3e and 269a to 269i InsO). Together with the group‑coordination rules of the EU Insolvency Regulation for cross‑border cases, this is regarded as sufficient to address most practical needs in German practice. Against that background, there has so far been no political momentum to take the additional step of enacting the UNCITRAL Model Law on Enterprise Group Insolvency in Germany.

 

Germany is not currently preparing a wholesale overhaul of its restructuring and insolvency framework, but several targeted reforms and adjustments are on the horizon, driven both by European initiatives and by early experience with StaRUG and recent high‑profile restructurings.

a) Evaluation and targeted reform of StaRUG

The StaRUG preventive restructuring framework has now been in force long enough for an initial, informal evaluation of its practical performance to be underway. Market practice in larger cases has shown that StaRUG has moved from a niche instrument to a serious option for financial and ownership restructurings, but has also exposed stress points that are now being discussed as candidates for legislative fine‑tuning.

Key areas under discussion include, first, the position of shareholders in pre‑insolvency restructurings. Transactions where equity was fully wiped out and replaced by a new investor, including capital reductions to zero and exclusion of existing shareholders from subsequent capital increases, have prompted a debate about whether the current balance between efficient restructuring and minority protection is appropriate. Scenarios where shareholders are economically out of the money but can still attempt to obstruct a StaRUG plan are being examined particularly closely. Legislators and practitioners are therefore considering whether additional safeguards or clarifications on shareholder participation, information rights and challenge thresholds are needed, without undermining the ability to implement necessary balance‑sheet restructurings.

Second, the scope of claims that can be modified under StaRUG remains under review. The regime is deliberately focused on financial and balance‑sheet measures and excludes, for example, employee claims and most public‑law liabilities. Some voices argue for a cautious extension or better coordination with labour and regulatory tools, while others prefer to preserve the current narrower focus and steer operational restructurings into insolvency proceedings where the full labour‑law and contract‑modification toolkit is available. At this stage, any change is more likely to take the form of clarification and incremental adjustment than of a fundamental expansion of StaRUG’s remit.

Third, practice has identified a need for clearer, more predictable standards on valuation and the “no creditor worse off” comparison, both for cross‑class cram‑down in StaRUG plans and for investor‑driven ownership changes. The government‑led evaluation is taking these issues into account, especially in light of complex cases where valuation and scenario analysis have become the decisive battlefield. This discussion ties into the broader debate on how far StaRUG should go in facilitating pre‑insolvency equity shifts and creditor‑led takeovers.

b) Implementation of the EU Directive on harmonisation of insolvency law

Directive (EU) 2026/799 does not replace German insolvency law, but it sets a floor of common rules that all Member States must meet in specific areas. For Germany, which already has a comparatively sophisticated insolvency and restructuring regime, the main impact will be in selected “hot spots” rather than across the entire system.

One central building block is the harmonisation of avoidance (claw‑back) law. German law already provides a detailed set of avoidance rules with differentiated look‑back periods and creditor‑protective doctrines, so wholesale change is unlikely. The Directive’s minimum standards will nevertheless require a review of time periods, categories of vulnerable transactions and defenses to ensure that German rules are compatible with the European framework, particularly in cross‑border situations. The aim is to make it easier for investors and lenders to predict which pre‑insolvency acts can be challenged across the EU, and to avoid major divergences that invite forum shopping.

Another focus is the introduction of a harmonised pre‑pack sale framework. German practice has long used preliminary insolvency proceedings and debtor‑in‑possession cases to prepare going‑concern sales, but there is no codified pre‑pack procedure with explicit rules on marketing, court supervision and creditor information. The Directive now requires Member States to put in place a structured two‑phase pre‑pack concept, combining a confidential preparation phase with a short formal liquidation phase in which the pre‑negotiated sale is approved and executed. The German legislator will have to decide whether to adapt existing preliminary proceedings and self‑administration tools to meet these standards or to create a distinct pre‑pack instrument alongside the current toolbox.

The Directive also addresses directors’ duties in the vicinity of insolvency and the duty to open proceedings. German law already imposes strict filing duties and personal liability for delayed petitions. The harmonised European rules are broadly consistent with this approach but will still require a careful alignment of concepts such as the trigger for the obligation to file, the maximum filing period and the link between breach and civil liability. The existing German framework on early crisis detection and filing duties (as described in the answers to Questions 7, 15 and 16) will therefore be adjusted rather than fundamentally rewritten.

Further building blocks of the Directive include asset tracing tools and minimum standards for creditor committees. German law already provides for powerful investigative powers of insolvency administrators and well‑established creditors’ committees, but the details of access to registers, information rights and committee structure may need to be fine‑tuned to match the directive’s requirements.

Overall, the directive’s entry into force means that Germany is moving from a phase of internal and academic debate about the Commission’s proposals to a concrete legislative implementation phase. The core architecture of the German system remains in place: StaRUG as the preventive restructuring regime for imminent illiquidity, and the InsO as the backbone for formal collective proceedings and insolvency plans. The upcoming reform steps will operate more as targeted adjustments and additions to this architecture – particularly in the areas of pre‑pack sales, cross‑border avoidance and asset tracing, and codified group and creditor protections – than as a full paradigm shift.

c) Group insolvency and cross‑border coordination

As described in the answer to Question 20, Germany already has a framework for group jurisdiction, coordinated administration and the use of joint strategies for corporate groups. On the cross‑border side, the interplay between StaRUG, the EU Insolvency Regulation and recognition of third‑country proceedings is addressed in the answers to Questions 17 to 19. Current reform discussions in this area do not focus on adopting the UNCITRAL Model Laws, but rather on making the existing regime more effective in practice, for example by refining rules on group venues, improving information flows between courts and office holders, and clarifying how German courts should deal with increasingly sophisticated foreign restructuring tools that sit at the boundary between insolvency and company law.

 

In our day‑to‑day practice on both the debtor and the creditor side, Germany is best understood as a system that remains creditor‑protective on the books while rewarding sophisticated, well‑advised navigation in practice. On paper, the German restructuring and insolvency framework is still primarily creditor‑friendly. The statutory starting point in both StaRUG and the InsO is that procedures are there to maximise recoveries for the collective body of creditors, with shareholders and management being clearly subordinated in the distribution and control hierarchy. As explained in the answers to Questions 7, 11 and 12, this is reflected in strict filing duties, a robust avoidance regime and an insolvency waterfall that subordinates shareholder loans and comparable instruments and gives secured creditors strong rights over specific assets.

a) Debtor‑ and advisor‑driven shifts since 2012

Since the 2012 reforms that strengthened the insolvency plan and introduced modernised debtor‑in‑possession and protective shield proceedings, and even more so since StaRUG came into force in 2021, the practical balance has shifted noticeably towards debtors and their advisers. There are now multiple pathways for debtor‑driven and adviser‑driven restructurings in which management, together with a well‑organised advisory team, can shape the process from an early stage: protective shield proceedings, well‑prepared self‑administration, insolvency plans and StaRUG plans. All of these instruments are ultimately justified by higher enterprise value and better aggregate recoveries. In practice, they also have the effect that a significant portion of the preserved value is absorbed by fees for debtor counsel, chief restructuring officers, restructuring experts certifying the feasibility of the turnaround, custodians, business and financial advisers and valuation specialists. Understanding precisely where value is created — and where it is consumed — across these roles is, in our experience, the central skill of effective restructuring counsel, and it is the lens to be applied on every project, whether acting for the company, for secured lenders or for the wider creditor body.

Several larger cases with consecutive insolvency filings have shown how fragile this equilibrium can be. On the surface, those cases followed the textbook playbook: a sophisticated plan, a CRO, expert opinions under recognised standards, carefully drafted comparison scenarios and valuation reports. Nevertheless, after a first “successful” plan implementation and corresponding fee flows to the various advisory firms, the businesses returned to distress and ended up in another insolvency or restructuring. For unsecured creditors, including public stakeholders such as the Federal Employment Agency and tax authorities, the end result was often significantly less favourable than suggested by the initial restructuring narrative. The German system has to some extent been “Americanised”: complex, front‑loaded and adviser‑intensive processes are now part of the landscape, and while fee levels have not yet reached U.S. magnitudes in absolute terms, they are often high in relation to the size of the businesses involved. Especially for mid‑sized German corporates, the relative weight of adviser and officer fees measured against the available value can be substantial.

A structural problem in this respect is scale. Many tools and process designs have been imported conceptually from very large U.S. style restructurings and adapted to the German legal environment. However, even large German corporates are frequently smaller than the archetypical U.S. Chapter 11 debtor. If similar advisory structures and fee models are applied to significantly smaller enterprises, the proportion of value consumed by professional costs becomes much higher relative to the estate, which can erode the position of ordinary unsecured creditors.

b) Control deficits on the court and creditor side

These developments are amplified by the comparatively limited expertise and resources on the side of some controlling bodies, especially courts and creditors’ committees. German insolvency judges are typically career civil servants with a purely legal education. They are often assigned to insolvency benches relatively early in their careers, sometimes on a part‑time basis alongside other judicial roles in areas such as family law or general civil litigation. Formal training in business, finance or accounting is not a prerequisite (and rarely at hand). It is therefore not uncommon for an insolvency judge to have only a few years of professional experience in total while being responsible for supervising complex corporate restructurings designed and executed by debtor counsel and restructuring advisers with decades of specialist practice.

In this environment, judges may find it difficult in practice to challenge sophisticated plan structures, valuation models or proposed fee arrangements in a meaningful way. Attempts to concentrate large and complex cases in a small number of better equipped and more experienced insolvency courts have had only partial success due to federal and local political resistance and concerns about shifting competencies and resources. Even heavily criticised instances of forum shopping have not yet led to a comprehensive and binding specialisation of insolvency courts for major corporate cases.

However, the same mechanisms criticised as forum shopping can also produce better outcomes for all stakeholders. By making use of the group-insolvency jurisdiction rules introduced in 2017 under sections 3a et seq. InsO, or simply by relocating the company’s centre of main interests or registered seat in advance of filing, parties may steer a major case towards a well-equipped court with an experienced insolvency judge. Where such a court is able to manage complex plan structures and valuation disputes competently and expeditiously, the concentration of proceedings can enhance the quality and predictability of the process, reduce delay and ultimately benefit creditors, the debtor and other participants alike. Viewed in this light, venue selection is not inherently illegitimate, but reflects a structural deficit that a binding specialisation of insolvency courts has so far failed to address.

c) Custodians, advisers, and conflicts of interest

In well‑prepared debtor‑in‑possession and protective shield proceedings, the choice of the court‑appointed custodian is frequently influenced by suggestions from the debtor and its advisers. It is market practice that debtors’ counsel propose candidates whom they know and trust and who are considered “restructuring‑friendly”. These candidates sometimes also act as advisers to debtors in other mandates, and, conversely, propose the same firms as debtor counsel when they themselves act as insolvency administrators or custodians. That advisory ecosystem is not per se unlawful, but it creates structural conflicts of interest that tend to disadvantage creditors, particularly unsecured ones.

The custodian is formally responsible for supervising management, reviewing potential liability and claw‑back claims against the management and stakeholders and safeguarding creditor interests. In practice, however, there can be a strong incentive in debtor‑driven processes to avoid aggressively pursuing management liability or challenging transactions that are closely tied to the restructuring strategy developed together with the same advisory circle. Legal uncertainties, the complexity of director liability and avoidance litigation and the significant costs and time involved can easily be invoked as reasons not to sue. Where management has participated in the de facto selection of the custodian, it is legitimate to ask whether this “cautious” approach to pursuing claims is entirely coincidental.

A degree of cooperation between debtor, advisers and custodian is, however, frequently in the creditors’ own interest, since a well-prepared, consensual process tends to preserve more value than a confrontational one. The point is therefore not that the system is routinely abused, but that it relies heavily on the integrity of the individuals involved and offers comparatively weak structural safeguards where that integrity is absent — and that a more robust framework should not have to depend on good faith alone.

d) Limited judicial steering and slow litigation

The formal powers of insolvency judges over the running of individual cases are limited. In a regular proceeding, the judge’s main active decision is the appointment of the insolvency administrator and the confirmation or (rarely) replacement of that appointment after the first creditors’ meeting. Day‑to‑day conduct of the case then passes largely to judicial officers (who are not judges) and the administrator. The judge is rarely involved in commercial decisions such as whether to pursue a director liability claim or an avoidance action, or how aggressively to negotiate with stakeholders during sales and plan processes.

Litigation arising from the insolvency estate, whether defending against creditor claims or pursuing claims by the administrator against third parties, is conducted before the ordinary civil courts, not the insolvency court. Such proceedings can easily last several years through first instance and appeals. As long as key litigation remains pending, the insolvency case itself generally stays open, which dampens the economic incentive to pursue borderline litigation if it extends the case duration without proportionately increasing the administrator’s remuneration. This fragmentation of jurisdiction also makes it more difficult to maintain strategic oversight over the overall cost‑benefit balance of litigation from the perspective of unsecured creditors.

However, lengthy litigation does not necessarily impair a successful restructuring. Where the business is rescued by way of an asset deal, the going concern can be transferred promptly to an acquirer and preserved irrespective of pending disputes; the outstanding litigation then bears only on the size of the estate, and thus on the distribution among unsecured creditors, rather than on the survival of the business.

The position is more delicate where a contested claim forms a critical element of an insolvency plan. Plan practice offers partial answers — disputed claims can be provisioned for, and a plan confirmed and implemented while individual disputes remain pending — but only at the price of tying up the affected amounts and leaving the ultimate distribution uncertain until the dispute is resolved. The limits of this approach are starkest where the disputed matter concerns not a sum of money but a person or relationship whose continued involvement is itself critical to the restructuring. A manager, key supplier or customer may be indispensable to the going concern yet simultaneously the target of liability or avoidance litigation pushed by other stakeholders. Such litigation can be corrosive in a way provisioning cannot cure: the threat of personal liability may prompt a manager to resign at the worst possible moment, or a strategically vital counterparty to withdraw cooperation, so that the dispute undermines the very business case on which the plan rests. Here the fragmentation of jurisdiction is a genuine weakness, and a concentration of such disputes before the insolvency court — coupled with the power to grant an expedited and binding decision — could benefit both the timely confirmation of the plan and the predictability of outcomes for all participants.

e) Outcomes for unsecured creditors and apathy in the creditor body

Germany has been praised internationally for having an efficient insolvency framework, including by the World Bank, and reported average returns in German insolvencies have occasionally been cited at levels as high as about 90 percent. Practitioners in Germany are often surprised when confronted with such numbers because they do not reflect the perspective of ordinary unsecured creditors – a typical measure of a successful insolvency case in Germany in addition to preservation of jobs. The explanation lies in the composition of the beneficiary group: those headline figures typically include secured creditors and other priority claims that are satisfied from specific assets or ahead of ordinary claims.

For normal unsecured creditors, especially trade creditors and public‑law creditors such as the Federal Employment Agency or tax authorities, distributions in corporate insolvencies frequently amount to only a few percent of their admitted claims and are often paid after several years. From their vantage point, investing time and money in an active role in the proceedings is, in many cases, not economically rational. This understandably leads to apathy: the creditors who are supposed to be the “masters of the proceedings” in policy terms rarely attend meetings, run for committee seats or challenge proposals. As a result, debtors, administrators and adviser teams often enjoy considerable freedom, in a setting where the courts are structurally under‑resourced and the creditor body is largely passive.

This contrasts with creditors holding significant stakes, who may find it far easier to take an active role. In large cases this has already given rise to a market in which professional distressed-debt investors acquire insolvency claims, often at a steep discount, and then closely monitor — and seek to influence — the administration of the case in order to maximise their return. Such creditors have both the economic incentive and the resources to attend meetings, contest seats on the creditors’ committee and scrutinise the administrator’s conduct, and they can thereby inject a degree of active oversight that the dispersed body of trade and public-law creditors structurally lacks.

f) Incentives under the remuneration system

Administrator remuneration in regular insolvency proceedings is calculated primarily as a percentage of the insolvency estate, with a statutory scale that is relatively high at the low end and decreases with estate size. For smaller estates, the basic rate can be around 40 percent; for the portion exceeding EUR 700,000 the default rate drops to just above 2 percent, and for large estates it declines further in tiers down to low single‑digit or even fraction‑of‑a‑percent levels.

This structure creates a natural incentive to focus on measures that quickly increase or preserve the estate in a visible way, such as sales of operating assets and collections, and to be more cautious about lengthy, resource‑intensive litigation against directors, shareholders or third parties, especially where the prospects of recovery are uncertain and the potential upside for the administrator’s fee is modest in relative terms. The general prohibition on pure success‑fee arrangements for the lawyers and advisers conducting such litigation adds to that reluctance: those advisers are paid regardless of the outcome, while the administrator’s percentage remuneration does not automatically increase if the litigation succeeds after a long delay. The economically rational decision may therefore be to pursue only the “low‑hanging fruit” and to abstain from complex suits that could, in theory, benefit unsecured creditors materially.

g) Creditor‑friendly in design, more mixed in practice

Taken together, these elements paint a nuanced picture — one that rewards parties who understand the system in depth. The German framework remains creditor‑oriented in its design: strict filing duties, a tough avoidance regime, strong positions for secured creditors, subordination of shareholder loans, and plan instruments built around the principle that no creditor should be worse off than in liquidation. StaRUG and modern debtor‑in‑possession formats add genuine value by enabling earlier, more flexible restructurings, debtor‑side negotiation leverage and sophisticated capital‑structure solutions.

At the same time, the practical distribution of power and value has shifted: better tools and more complex processes create more opportunities for debtor‑driven and adviser‑driven strategies, sometimes at the expense of ordinary unsecured creditors who lack the information, resources and incentives to scrutinise plans and fee structures in detail. Structural weaknesses on the bench and in oversight bodies, the way custodians and administrators are selected and rewarded, and the persistent apathy of unsecured creditors all contribute to outcomes that, in individual cases, are less creditor‑friendly than the statutory architecture would suggest.

In this sense, Germany today can be described as a jurisdiction with creditor‑protective rules on the books, but a practice in larger restructurings that often gives well‑organised debtors and their advisers substantial room to shape processes and capture a significant share of the preserved value. Whether forthcoming refinements to StaRUG, the implementation of the new EU insolvency harmonisation directive and future reforms of court structures and remuneration rules will rebalance the system in favour of unsecured creditors remains one of the central questions for the next phase of German restructuring and insolvency law. The practical takeaway is straightforward: in Germany, outcomes turn heavily on who designs and runs the process and on how well the relevant parties understand its dynamics. In a complex, advisor‑intensive system, experience and market knowledge make the decisive difference.

Sociopolitical considerations play an important, although largely informal, role in German restructurings and insolvencies. The statutory framework in the InsO and StaRUG is built around equal treatment and collective satisfaction of creditors, but the practical dynamics of larger cases are often shaped by stakeholders whose influence is rooted in employment policy, social security considerations and regional politics rather than in legal ranking alone.

a) Employees, works councils and unions

Employees and their representatives are the most visible example of this broader influence. Works councils and, where applicable, group and company works councils have extensive information, consultation and co‑determination rights whenever operational changes, mass redundancies or transfers of undertakings are planned. In a major restructuring, negotiations on the reconciliation of interests and the social plan can materially determine the timetable, cost and even the design of the solution.

In insolvency, the same labour‑law framework applies in principle, albeit with some insolvency‑specific modifications and caps. In practice, however, the threat of mass redundancies at a large employer tends to attract political attention at municipal, state and sometimes federal level. Local and regional politicians frequently exert pressure on management, lenders, administrators and potential investors to preserve as many jobs as possible, even where a strictly financial analysis would point towards a smaller remaining business. As a result, employee interests often carry a weight in negotiations that goes well beyond their formal position in the insolvency waterfall as ordinary unsecured creditors for their usually rather limited pre‑opening wage and severance claims (see the answers to Questions 11 and 13).

Trade unions can reinforce this dynamic. In industries with strong union presence, collective bargaining over “restructuring agreements” or site and employment guarantees often runs in parallel with the legal restructuring process. Strikes or the credible threat of industrial action, while subject to strict legal limits in the context of reorganisations, add an additional layer of pressure in politically sensitive cases and can significantly influence the outcome.

b) Pensions and social‑security institutions

Occupational pensions are another focal point. Entitlements under company pension schemes are partly protected by specialised insolvency insurance arrangements, and the statutory pension-insolvency insurer (the PSV; see the answer to Question 11) assumes certain obligations when an employer becomes insolvent. This reduces the immediate social hardship for beneficiaries but also changes the economic and negotiating landscape: large pension obligations can be decisive for whether a buyer is willing to take over certain entities or portfolios.

Social‑security institutions and the tax authorities also act as major stakeholders. They are often among the largest unsecured creditors and carefully balance strict collection mandates with the broader interest in preserving viable businesses and jobs. Their decisions on deferrals, waivers or participation in restructuring plans can determine whether a consensual out‑of‑court solution or a StaRUG plan is feasible, or whether a filing becomes unavoidable. At the same time, public creditors are expected to behave in line with market‑economy principles and state‑aid constraints, which limits their freedom to grant preferential treatment outside the established support schemes.

c) Transfer companies and labour‑market instruments

A particularly important sociopolitical instrument in German restructurings is the use of transfer companies. Where a restructuring or sale requires significant workforce reductions, affected employees can, for a limited period, move into a dedicated transfer entity. During that time, they receive transfer short‑time allowance funded by the Federal Employment Agency and, in many cases, a top‑up financed by the former employer or the insolvency estate. The transfer company provides qualification and placement services and acts as a bridge to new employment.

This mechanism allows the operating business to be restructured or carved out while the social consequences of redundancies are cushioned outside the distressed entity. Because a large part of the cost is borne by the publicly funded labour‑market system, transfer companies have become a standard component of larger German restructurings and are often a key condition for works council and union support. In economic terms, they function as a targeted, partly state‑financed social buffer that makes far‑reaching operational restructuring politically and socially more acceptable.

d) Insolvency money and other institutional cushions

The State also shapes restructuring dynamics through the architecture of the social‑security system. A central instrument is insolvency money. As explained in the answer to Question 11, the wage claims covered by insolvency money are subrogated to the Federal Employment Agency, which participates as a creditor.

The combination of insolvency money, transfer companies and the legal rules on continuation and termination of employment relationships in insolvency (see Questions 11 and 13) means that employee interests are protected to a degree that goes beyond their formal ranking: jobs can be preserved longer, redundancies can be structured more gradually, and the political cost of mass dismissals is partly internalised by the public system. All of this influences how investors, lenders and administrators design and time restructuring measures.

e) State support for distressed businesses

Direct State intervention at the level of individual distressed companies is, in normal times, the exception. Outside systemic crises, German governments have generally been cautious about granting company‑specific support, and any such measures must comply with EU State‑aid rules. Where support has been granted, it has typically taken the form of guarantees, loans or, in rare cases, temporary equity participations in businesses considered systemically or regionally important. These measures are usually tied to strict conditions on burden sharing, restructuring efforts and exit mechanisms, and are embedded in the broader EU framework on rescue and restructuring aid.

More routinely, the State supports distressed businesses indirectly through development banks and guarantee schemes that operate within a market‑conform framework. Public promotional banks provide loans and guarantees on conditions aligned with private‑creditor standards, and tax authorities can, within their own legal constraints, grant deferrals or adjustments of advance payments. These instruments do not replace the need for a robust restructuring concept, but they can be important building blocks in stabilising liquidity until a StaRUG plan, insolvency plan or going‑concern sale has been implemented.

f) Experience from the COVID‑19 pandemic

The COVID‑19 pandemic marked a clear departure from the usual, restrained role of the State and illustrates how far public intervention can go when there is a broad sociopolitical imperative to stabilise the economy and preserve employment. Two elements are particularly relevant for restructuring practice.

First, the rules on short‑time work were considerably relaxed and expanded. Short‑time work allowance, which partially compensates employees for wage losses when working time is temporarily reduced, became the central instrument for securing jobs on a massive scale. Access thresholds were lowered, benefits were increased over time, and social‑security contributions on reduced working time were reimbursed. This made it possible for a large number of businesses to bridge a severe, but ultimately temporary, demand shock without immediate mass layoffs, and reshaped the starting point for many later restructurings.

Second, the State deployed an unprecedented range of support measures, from non‑repayable grants and bridging aid for small businesses and the self‑employed to guarantees and stabilisation measures for larger companies, in some cases via a dedicated economic stabilisation fund. These were accompanied by temporary changes to insolvency law, including a time‑limited suspension of the obligation to file for insolvency under defined conditions. Many companies that might otherwise have failed were kept alive long enough to benefit from the new StaRUG framework or to complete consensual restructurings once conditions normalised.

The experience of the pandemic has therefore shown that, while the German system is in normal times characterised by a rules‑based, creditor‑oriented approach with limited company‑specific State involvement, the State retains both the instruments and the political willingness to intervene decisively when employment and macroeconomic stability are at stake. The policy discussion since has focused less on expanding such extraordinary support than on managing its phased withdrawal and dealing with businesses that survived primarily because of it. In current practice, the legacy of that period still affects restructurings, for example through lingering State‑backed liabilities, altered labour‑market expectations and a heightened sensitivity of policymakers to the employment effects of major insolvencies.

 

Despite a comparatively modern and internationally respected framework, several structural barriers continue to limit the efficiency and effectiveness of German restructurings and insolvencies. The evaluation of StaRUG and the entry into force of the new EU Insolvency Harmonisation Directive mean that many of these topics are currently under active review rather than being purely academic.

a) Valuation disputes and the comparison scenario in StaRUG

In preventive restructuring under StaRUG, valuation has emerged as perhaps the most prominent bottleneck. The feasibility of any cross-class cram-down and the “no‑creditor‑worse‑off” test both depend on a comparison between the plan and the relevant alternative scenario. In practice, the choice and calibration of that scenario have become the main battleground in contested cases.

A recurring criticism is that the insolvency counterfactual is invoked too readily and modelled on liquidation values, even where the company is clearly being continued as a going concern. The statutory framework, by contrast, assumes that the starting point should normally be a going‑concern continuation at going‑concern values, with a liquidation comparison reserved for defined exceptional cases. Practice has not yet fully caught up with that logic.

This tension is one of the reasons why reform discussions around StaRUG place so much emphasis on valuation discipline. Proposals under debate include clarifying that, where the company will be continued, the comparison scenario should in principle be based on going‑concern values, defining more precisely in which situations a liquidation scenario may be used as the relevant alternative, and tightening procedural rules around valuation reports, including external review of illiquidity forecasts and scenario assumptions. The statutory “no‑worse‑off” test would remain, but the tools used to apply it would be more standardised and less susceptible to tactical modelling.

b) Information asymmetries and minority protection

A closely related barrier is the structural imbalance between a well‑prepared debtor, often supported by a cohesive majority of lenders and sophisticated advisers, and dissenting or minority stakeholders. In StaRUG proceedings, information asymmetries can be pronounced: management controls the flow of financial and business‑plan data, and supporting creditors are usually involved early, while minority creditors and especially shareholders may feel that they are presented with a finished construct and told that insolvency is the only alternative.

The recent wave of high‑profile StaRUG cases in which existing shareholders were wiped out and new financial or strategic investors took control has sharpened this debate. Shareholders complain that equity can be written down to zero and subscription rights excluded, while new investors benefit from fresh equity allocations and an optimised capital structure. Creditors, in turn, argue that debt had long been economically under water and that equity was already out of the money, so the real controversy lies in valuation and process fairness rather than in the idea of shareholder cram‑down as such.

Against this backdrop, reform discussions focus less on re‑introducing veto powers and more on targeted safeguards. Ideas include clearer standards for plan disclosure, more predictable rules on class formation and intra‑class equal treatment, and a more structured approach to fairness review in confirmation, especially where control shifts and minorities are expropriated economically. The aim is to reduce the sense that StaRUG plans can be used as a pure change‑of‑ownership machine and to anchor the tool more visibly in the principle that no affected party should be forced into a position materially worse than its realistic alternative.

c) Late entry into restructuring and crisis early‑warning

The continuing tendency of German companies to enter restructuring processes very late remains a fundamental obstacle to efficient outcomes. StaRUG’s codified early‑warning duty was intended to counter this by obliging management to monitor existential risks and act before illiquidity or over‑indebtedness occur, but practice shows that many companies still seek help only after liquidity reserves have been largely exhausted.

The profession has begun to give this duty more concrete contours. Early‑warning and risk‑monitoring systems, including integrated business and liquidity planning over a 12‑ to 24‑month horizon, are increasingly seen as part of baseline corporate governance, not as optional extras. The Institute of Public Auditors (IDW) has developed standards (notably IDW S6 and IDW S11) to frame management’s monitoring obligations and the interaction between early‑warning, StaRUG eligibility and the subsequent insolvency filing duty.

The new EU Insolvency Harmonisation Directive adds another layer by prescribing minimum standards for directors’ duties in the vicinity of insolvency. German law already imposes strict filing obligations and liability for delayed filings, but there is ongoing debate on how the StaRUG early‑warning duty, the directive’s director‑duty provisions and the national filing regime should be aligned. The underlying policy question is whether management is given enough regulatory “space” to restructure early without fearing hindsight criticism, while still being held to account if early‑warning signals are ignored.

d) Procedural duration, cost and digitalisation

The length and cost of ordinary insolvency proceedings continue to be viewed as a weak point. Complex corporate insolvencies frequently remain open for many years because of litigation, tax issues or asset‑recovery work, and the comparatively modest recovery rates for ordinary unsecured creditors (described in more detail in the answer to Question 23) stand in tension with Germany’s reputation as an efficient insolvency jurisdiction.

Digitalisation is widely regarded as one of the necessary countermeasures. Electronic filing and claims management, better digital access to court files, and standardised online communication with courts and administrators could reduce delays and costs, especially for small and medium‑sized estates. There is also a discussion about making the insolvency profession more attractive and specialised, including by strengthening the role of specialised insolvency courts and enhancing training in finance and accounting for judges and judicial officers.

These issues are part of a broader reform agenda that also touches on the remuneration structure of administrators and the use of judicial officers, both of which were already highlighted in the answer to Question 23 as factors influencing behaviour in practice.

e) Privileges of public creditors and tax‑related obstacles

Another recurring theme in practice is the special position of public creditors and the tax treatment of restructuring situations. While the tax exemption for restructuring gains has now been codified (section 3a of the Income Tax Act, EStG) and provides important relief in many restructurings, questions around minimum taxation in insolvency, the treatment of loss carry‑forwards and the estate‑burdening character of certain public claims continue to be perceived as obstacles.

Tax authorities and social‑security institutions are often among the largest unsecured creditors and at the same time agents of public policy. Their decisions on deferrals, enforcement and participation in plans can determine whether a restructuring is feasible, but their scope of maneuver is constrained by fiscal rules and internal guidelines. The interplay between tax law and insolvency law, including the classification of tax claims in the insolvency hierarchy and the impact of set‑off and avoidance, is complex and has given rise to a steady stream of case law and doctrinal debate.

There is, therefore, continuing discussion on whether additional tax‑law adjustments are needed to support economically sensible restructurings, especially with regard to minimum taxation in situations where profits arise purely from balance‑sheet deleveraging and not from operating success. The insolvency‑related treatment of loss carry‑forwards and the tax consequences of debt‑equity swaps and insolvency plans also remain in focus.

f) Implementation of the EU Insolvency Harmonisation Directive

The recent adoption of the EU Directive harmonising certain aspects of insolvency law has shifted much of the forward‑looking discussion from abstract design questions to very concrete implementation choices. Member States must transpose the Directive by 22 January 2029, and Germany will need to adjust parts of its regime accordingly.

Key areas with direct impact on efficiency include the further harmonisation of avoidance actions, enhanced asset‑tracing and register access for practitioners, and the introduction of an EU‑wide pre‑pack framework. German avoidance law is already highly developed, but the directive’s minimum standards may require recalibration of some aspects.

Pre‑packs are even more controversial. German practice has long used a two‑phase approach, preparing going‑concern sales in preliminary insolvency proceedings and executing them upon opening. The Directive now envisages a more formalised pre‑pack concept with structured preparation, marketing and execution stages. While this promises speed and predictability, parts of the creditor community are skeptical about the risk of insider deals, inadequate marketing and insufficient scrutiny of related‑party purchasers. The national legislator will have to decide whether to embed the European pre‑pack model into existing tools or to create a distinct procedure, and how to design safeguards on transparency, marketing and connected parties.

How Germany chooses to implement these provisions will directly influence both the perceived fairness and the practical efficiency of future restructurings and insolvencies. The political and professional debate around the Directive is therefore one of the most important reform processes currently underway.

g) Licence protection and group insolvency

Two further structural gaps are repeatedly highlighted in policy discussions. The first concerns the absence of a robust insolvency‑proof licence protection regime comparable to the protection afforded to IP licensees in some other jurisdictions. Previous reform attempts to introduce stronger statutory safeguards for licensees in insolvency have not succeeded, and this is increasingly seen as a competitive disadvantage for IP‑ and technology‑driven businesses that rely on critical software or patent licences.

The second concerns the handling of group and cross‑border insolvencies. As explained in the answer to Question 20, Germany has taken important steps with its group jurisdiction rules under the InsO and the group‑related provisions of StaRUG, and it benefits from the group‑coordination mechanisms under the EU Insolvency Regulation. However, dealing with complex multi‑jurisdictional group structures remains challenging, and Germany has not adopted the UNCITRAL Model Law on Enterprise Group Insolvency. This means that coordination with non‑EU jurisdictions is still heavily dependent on contractual arrangements, court‑to‑court protocols and the goodwill of foreign courts, which can be a barrier to efficient group‑wide solutions in difficult cross‑border cases.

h) Overall direction of travel

Taken together, these barriers do not suggest a need for a wholesale redesign of the German restructuring and insolvency system. The core architecture of StaRUG and the InsO is generally regarded as sound. The current reform debate is instead focused on targeted recalibration: tightening valuation and comparison‑scenario discipline and improving minority protection in StaRUG, reinforcing early‑warning and directors’ duties so that tools are used earlier, accelerating and digitalising ordinary proceedings, addressing tax‑law and public‑creditor frictions, closing gaps in areas such as licence protection and group cases, and implementing the new EU Directive in a way that actually enhances efficiency and trust in the system rather than simply adding complexity.