2012-10-10 Schultze & Braun
New statistic from Schultze & Braun: Insolvency plan under-used

13 years after its introduction, the insolvency plan is still not an established restructuring tool in German insolvency proceedings, as the latest insolvency plan index from law firm Schultze & Braun confirms. According to the index, an insolvency plan was submitted in only approximately one per cent of all insolvency proceedings in 2011.

Achern/Germany. Around 23,500 insolvency proceedings (including sole traders and professionals) were initiated in the last year in Germany’s 182 insolvency courts, 124 of which (approximately two thirds) took part in the survey. An insolvency plan was submitted in only 247 of those insolvency proceedings. Thus, on average, one plan is presented for every 100 insolvency proceedings, or two in every court (see the diagram in the appendix PDF-Download 180kB).

Annerose Tashiro, lawyer and a partner at Schultze & Braun, summarises the results of the latest insolvency plan index: “13 years after its introduction, the insolvency plan is still not being implemented sufficiently often as a restructuring tool, nor is it used as a real alternative to a liquidation by transfer of the business (a so-called “übertragende Sanierung”). “This is due, amongst other things, to the fact that drawing up such an insolvency plan can be a challenging task, both legally and economically. Unfortunately, the parties involved are simply ignoring the interesting opportunities available.”

Nevertheless, according to Tashiro, the insolvency plan has already proven its practical suitability in many proceedings and offers all of the parties to the proceedings numerous advantages over an ordinary insolvency involving the realisation of individual assets or smaller or larger units of the company. “The level of satisfaction is generally higher, the legal entity survives and the period between the insolvency petition and the end of the proceedings is shorter”, says the specialist. “In my estimation, the insolvency plan could already be the restructuring tool of choice in five to ten per cent of corporate insolvencies today”. Thus, up to 2,000 companies per annum could be restructured using a plan since, at 23,500, the number of corporate insolvencies recorded in the index has also more than doubled in comparison to 1999 (when there were around 10,500 proceedings).

Indeed, entrepreneurs, insolvency administrators, creditors and courts are increasingly resorting to the insolvency plan. According to the insolvency plan index, the average number News release of insolvency plans submitted per court has increased more than five-fold between 1999 (0.39) and 2011 (1.99). Of the total number of corporate insolvencies initiated, the proportion of insolvency proceedings with a plan has more than doubled in the same period. “At first sight, this is a positive development,” says Tashiro, before going on to qualify this: “However, the proportion has remained static at what is still a low level for two years”.

Schultze & Braun’s insolvency plan expert anticipates a rise in the number of restructurings by insolvency plan as a result of the ESUG (German Act to Facilitate the Restructuring of Companies)

In the current year, however, Schultze & Braun expects a renewed increase in the number of restructurings using the insolvency plan. The reason: the new regulations of the Act to Facilitate the Restructuring of Companies (Gesetz zur Erleichterung der Sanierung von Unternehmen, ESUG), which entered into force on 1st March 2012. “The new options streamline the plan procedure and make the insolvency plan more attractive as a restructuring tool, particularly for creditors, whose position is strengthened,” says restructuring expert Tashiro. The ESUG improves the creditors’ negotiating position vis-à-vis companies, allows the conversion of debt into equity (debt/equity swap), creates the opportunity to transfer shares in a company without the consent or involvement of existing shareholders and restricts legal remedies against endorsement of the plan.

For the purposes of its insolvency plan index, Schultze & Braun has conducted a survey of the German insolvency courts every year since the entry into force of the German Insolvency Act in 1999. Since the introduction of the insolvency plan as an insolvency tool, our firm has drawn up such plans for clients ranging from sole traders right through to international corporations.

Notes for editors:
Schultze & Braun is Germany’s leading business recovery and insolvency law practice covering over one third of all of Germany’s 182 Insolvency Courts (unmatched by any other law firm). Founded over 50 years ago in Achern, Germany, Schultze & Braun now employs more than 600 employees: Attorneys, tax advisors and auditors provide a range of legal and financial advisory services to clients throughout Europe and also in America.

In the UK its London-based bureau particularly advises financial institutions and their UK legal advisers on all matters related to business recovery, distressed debt and corporate insolvency matters in Germany.
Additional information:
  • 2016-07-13 Dr Stefan Schmittmann to assist Schultze & Braun as of counsel
  • 2009-02-23 Appointment of Frank Tschentscher
  • 2008-12-19 Germany’s crunch to hit even harder in 2009 warn top insolvency lawyers
  • 2008-12-05 Comments on the outlook for investment in distressed debt in 2009
  • 2008-10-23 Warning for hedge funds with investments in Germany
  • 2008-07-25 Schultze & Braun wins landmark case against the Ordre des Avocats de Strasbourg
  • 2008-07-02 Law hits distressed debt investors
  • 2008-04-12 German credit crunch warning
  • 2008-03-03 German ministers seek to inflict pesticide on financial “locusts”
  • 2007-09-28 Leading german insolvency law firm launches in London
  • 2006-09-21 First book on restructuring with the insolvency plan under German law
  • 2005-03-21 New head of Schultze & Braun’s international team
Schultze & Braun Rechtsanwaltsgesellschaft für Insolvenzverwaltung mbH
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