Insolvency proceedings generally serve the realisation of liabilities and the satisfaction of creditors. The insolvency plan proceeding embodies the idea of carrying out a reorganisation alongside following the standard procedure that still provides for the best possible satisfaction of creditors. The Insolvency Statute (InsO) here incorporates elements of the older Rules of Conciliation (Vergleichsordnung) and also draws on the US Chapter 11 proceedings.
An insolvency plan is a reorganisation plan that serves to preserve a company during insolvency proceedings. In combination with the insolvency protection measures under section 270b of the Insolvency Statute and self-administration, the insolvency plan can offer the company reorganisation advantages. The insolvency plan has the form of a settlement on instalment payment agreements. It contains details on how the company may be reorganised and what quotas are possible for satisfying creditors’ claims. Provisions for the period after the end of the insolvency proceedings may be made that deviate from the provisions of the Insolvency Statute.
The aim of the insolvency plan proceeding is to enable stabilisation and continuation of the company through financial and performance reorganisation while preserving (non-transferable) assets. Creditors regularly waive a portion of their claims as part of an insolvency plan. In this respect, however, creditors may not be placed in a worse position than they would be without an insolvency plan if the regular insolvency proceedings were conducted instead. However, the company is generally expected to service all future claims.
The insolvency administrator and the debtor are entitled to submit an insolvency plan to the insolvency court. The submission of the insolvency plan is possible until the due date. The insolvency plan consists of a declaratory part and a constructive part. If the prerequisites for an admissible insolvency plan are met, then the insolvency court shall determine a date for discussion and voting. The parties to the proceedings participate in a meeting at which the insolvency plan and the voting rights of the parties are discussed and subsequently voted on.
Groups can be formed for the vote. This is appropriate if the number of creditors is large. These groups, insofar as creditors with different legal status are concerned, are determined by the author of the plan in accordance with statutory regulations. In order to adopt the insolvency plan, it is now necessary that over half of the voting creditors in each group agree to it and that the sum of the voting creditors’ claims amounts to more than half of the voting creditors’ total claims of the respective group. If the required majority is not reached, approval shall nevertheless be deemed to have been given if the court is satisfied that the group’s creditors will not be placed in a worse position by the insolvency plan than they would be without it, and that the creditors will have an appropriate participation in the economic value on the basis of the insolvency plan, and that the majority of the voting groups have approved the insolvency plan.
Following the vote, the insolvency court shall announce its decision: either the confirmation of or the refusal to confirm the insolvency plan. With legal effect of the confirmatory order, the effects as stipulated in the insolvency plan shall become effective for and against all parties involved. In the case of natural persons, this means that the discharge of residual debt can be obtained outside the legal procedural period of three, five or six years, in other words, the discharge of debt can be obtained faster.
One of the advantages of an insolvency plan for companies is that it is possible to obtain the existing legal entity and along with it the rights and contractual relationships that may not be transferable or may difficult to transfer by other means.
LEONHARDT RATTUNDE has been a pioneer in corporate reorganisation in insolvency plan proceedings and in self-administration for decades. We are among the most sought-after experts in the market thanks to our wide-ranging expertise and to our outstanding track record.
We, LEONHARDT RATTUNDE, were the first firm in Germany to restructure a group by mean of an insolvency plan. We were also the first firm in Germany to reorganise a listed company in insolvency using a capital increase with the issue of new shares as part of an insolvency plan proceeding.
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Focus insolvency plan: Company reorganisation and preservation.