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22 December 2011
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Actual publications

Update on cross-border restructurings in Europe: English Schemes of Arrangement
Financier Worldwide 08/2011, 56
Dr. Christoph von Wilcken, Attorney at Law in Germany

Bank Restructuring as an Instrument to Counter ‘Moral Hazard’?
European Company Law, 08/2011, 175-178
Dr. Christoph von Wilcken, Attorney at Law in Germany

Intellectual Property Licenses in U.S. Bankruptcy Proceedings - A Review of N.C.P. Marketing Group, Inc. v. BG Star Productions, Inc. (129 S.Ct. 1577)
International Insolvency Law Review 2011, 156 ff.
Dr. H. Philipp Esser, LL.M. (Chicago), Attorney at Law in Germany, Attorney at Law (New York State)


Act for the Further Facilitation of the Restructuring of Companies (Gesetz zur weiteren Erleichterung der Sanierung von Unternehmen “ESUG”) has been adopted by the legislature

The purpose of the Act for the Further Facilitation of the Restructuring of Companies (“ESUG” – latest draft version: Bundestag Document 17/7511 dated 28 October 2011) is to simplify the reorganisation of distressed companies. Debtors and creditors are both to be given more certainty in planning with respect to the course of insolvency proceedings. Opportunities for obstructing insolvency proceedings are also to be limited. This Newsletter addresses the principle legal changes and their effects in practice. The new ESUG will be sent into force on 1 March 2012.

The international team of Schultze & Braun wishes you a Merry Christmas, a wonderful festive season and a Prosperous New Year!

Schultze & Braun - Practice Group Cross-Border Restructurings and Insolvencies

Enhancing the influence of creditors

The expansion of creditor participation in insolvency proceedings represents one of the central aspects of the ESUG. One of the principal planned new features is the introduction of a preliminary creditors’ committee in insolvency proceedings. Following its appointment, this committee may influence items such as the selection of the insolvency administrator.

In a related change, an insolvency administrator may no longer be ruled out as insufficiently independent simply because he or she was proposed by the debtor or a creditor or had generally advised the debtor prior to the filing of the insolvency petition.

>>> Further ESUG issues...

Structuring shareholders’ rights in insolvency proceedings

The ESUG has further developed and streamlined the insolvency plan process. The consideration of shareholders’ rights represents a significant innovation in this area. In future, creditors will be able to convert their claims into equity. As a result, they will have the opportunity to influence a company’s management decisions and participate in surplus company value.

Previously, creditors were generally unsuccessful in acquiring equity interests during insolvency proceedings due to opposition from shareholders - who had to consent to a share transfer. Now, the ESUG permits a change in shareholders even if opposed by existing shareholders.

>>> Further ESUG issues...

Self-Administration: from the exception to the rule

To date, self-administration has played only a minor role in practice. This resulted not only from an unwillingness on the part of the participants in the process to work with the insolvency debtor’s apparently unsuccessful management bodies, but also stems from a number of legal hurdles.

The ESUG is intended to remedy this situation; various measures are planned in order to make self-administration more attractive and even the rule. In future, it will be possible to have self-administration ordered as of right in cases in which factors which would militate against this process cannot be positively established.

>>> Further ESUG issues...

From a provider of financing to an owner of the business: the debt-equity swap

As a result of the continuing financial and economic crisis, over recent years the debt-equity swap has gained in importance as a means of restructuring the balance sheet.

This option has been given an additional boost by the ESUG, because in future claims by creditors may also be converted to shareholder and partnership rights in the corporate debtor as part of insolvency plan proceedings even without the cooperation of the legacy shareholder. This results in a debt-equity swap over the objection of the legacy shareholder – previously this had only been possible with the cooperation of the legacy shareholder.

>>> Further ESUG issues...


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