ESUG

The German act facilitating the restructuring of companies (Gesetz zur weiteren Erleichterung der Sanierung von Unternehmen, ESUG) of 7 December 2011 essentially came into force on 1 March 2012. It strengthened Eigenverwaltung (debtor-in-possession management) in insolvency proceedings. Under Section 270 of the German Insolvency Code, the existing management continues to run the company in Eigenverwaltung, supervised by an insolvency monitor (Sachwalter) instead of being replaced by an insolvency administrator. This applies to companies of every legal form, the only exception being consumer insolvency proceedings.

Anyone applying for Eigenverwaltung submits Eigenverwaltung planning under Sec. 270a InsO: a financial plan for six months, a concept setting out the objective and measures, the status of negotiations with creditors, the arrangements for fulfilling obligations under insolvency law and the expected additional or reduced costs. If the planning is complete and conclusive, the court orders preliminary Eigenverwaltung under Sec. 270b InsO.

If the company is still solvent and illiquidity is only imminent, or if it is over-indebted, the Schutzschirmverfahren (protective shield proceedings) under Sec. 270d InsO may be an option. With a certificate from an adviser experienced in insolvency matters, the company is given up to three months to submit an Insolvenzplan (the plan creditors vote on in German insolvency proceedings).