StaRUG (German preventive restructuring framework)
Since 2021 the StaRUG has allowed a restructuring outside formal insolvency proceedings: a restructuring plan can be imposed on dissenting creditors by majority vote while management stays in office. Access is open only to companies that are imminently illiquid – not yet illiquid or over-indebted.
The gap it closes
Before 2021 Germany offered two routes: a consensual restructuring requiring every party to agree – where a single creditor could defeat what all the others wanted – or formal insolvency proceedings with their publicity. The StaRUG closes the gap: it permits interference with claims, security interests and shareholder rights through a restructuring plan adopted by majority decision, without public proceedings and without management giving up control.
The window
Under section 29(1) StaRUG, access is available only to a debtor that is imminently illiquid within the meaning of section 18 InsO. The forecast horizon for that test is as a rule 24 months. If actual illiquidity or over-indebtedness occurs, it must be reported to the restructuring court and the matter is normally discontinued.
From this follows what decides success or failure in practice: the StaRUG is an instrument for the early stage of a crisis. Anyone who waits until cash is tight has missed the window and ends up in insolvency proceedings. That is precisely why a robust cash flow plan is not an accessory but the entry ticket.
The four instruments
Once the project has been notified to the restructuring court, four instruments are available and may be used individually and independently of each other (section 29(2) and (3) StaRUG):
- Court-supervised plan voting on the restructuring plan.
- Preliminary review of questions relevant to later confirmation.
- Stabilisation – court-ordered stays on enforcement and realisation. Initially up to three months, extendable by a further month, and no more than eight months in total from the first order (section 53 StaRUG).
- Plan confirmation of the adopted restructuring plan by the court.
The majorities
Each creditor class requires at least three quarters of the voting rights (section 25(1) StaRUG). If a class withholds consent, the plan can still be confirmed where the conditions of section 26 StaRUG are met – the cross-class cram-down. This is what allows a single blocking creditor class to be outvoted, and it is the real advance over a purely consensual restructuring.
The duty that applies to everyone: section 1 StaRUG
Regardless of whether restructuring proceedings ever take place, section 1 StaRUG creates a continuing duty: the managing directors of limited-liability companies must monitor developments that could jeopardise the company’s continued existence on an ongoing basis, take suitable countermeasures once they identify them, and report to the supervisory bodies without undue delay.
It addresses GmbH managing directors, management board members of stock corporations, cooperatives and registered associations, and partnerships without a directly liable natural person. In practice the provision requires an installed early-warning system – at its core an ongoing liquidity and earnings plan with defined thresholds. This is the point where the legislator’s duty and the finance function’s work coincide directly.
This entry is an overview, not legal advice.