ARTICLE · 07 MARCH 2012

Game Change For German Restructurings

Paul Hastings LLP

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On March 1, 2012, the "Act Concerning the Improvement of Restructurings under German Insolvency Law" (ESUG) will come into force and effect.

GermanyInsolvency/Bankruptcy/Re-Structuring

Dr. Christopher Wolff

Dr. Christian Mock

On March 1, 2012, the "Act Concerning the Improvement of Restructurings under German Insolvency Law" (ESUG) will come into force and effect. The new act will substantially change the landscape for restructurings in Germany: (i) it will materially increase the creditors' influence, (ii) insolvency plan proceedings will be strengthened and shortened, (iii) the frequency of debtor-in-possession proceedings will dramatically rise, and (iv) debtors may want to use the new protective shield mechanism to prepare an insolvency plan. The new rules provided for and will result in new opportunities and risks for market participants. As a result, shareholders, managing directors, senior and junior lenders, agents, as well as servicers, should be well aware of the impact of the changes in order to be well positioned.

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