protective shield proceedings

The abbreviation “ESUG” stands for “Gesetz zur weiteren Erleichterung der Sanierung von Unternehmen” [Further Facilitation of the Restructuring of Businesses Act], which came into force in 2012. The intention of the legislature is that businesses should undergo restructuring and use the restructuring tools set forth in the German Insolvency Act autonomously and without great difficulties.

Even before ESUG, it was possible to restructure businesses by way of the insolvency plan procedure [Insolvenzplanverfahren]. This procedure allows for the implementation of a restructuring on the basis of a business’s own restructuring proposal, in so far as the majority of creditors agree. Since ESUG has come into force, share rights in a business can be included in the proceedings so that an ideal shareholder structure can be set up. What is more, “hold out creditors”, for example, now find it harder to torpedo restructuring efforts.

“Self administration” and “protective shield proceedings” are two of the most recent features. Both procedures enable the responsible body to implement a restructuring plan, allmonitored by a custodian [Sachwalter] with limited powers who is appointed by the insolvency court. The ESUG has facilitated the access to self administration proceedings.

Under the supervision of a custodian [Sachwalter] chosen by the business, and in consultation with the creditors so-called “protective shield proceedings” allow the management of the business to prepare a restructuring concept (in form of an insolvency plan of restructuring) within three months. With the business, the custodian and the Court working together, the procedure can be processed within a short period of time. By that debt can be restructured for the long term through votes with simple majorities. The prospects for success are extraordinarily high for protective shield proceedings when attended to, and implemented, optimally.

BBL has already successfully been in charge of many of the aforementioned proceedings. We have advised businesses of every size in preparing and implementing financial restructuring by way of the insolvency plan procedure. Our experience extends to groups of companies with several thousand employees, companies with cross-border activities, and also to smaller businesses and businesses of the German Mittelstand [mid cap family business]. We have special expertise in the reorganisation of businesses that are financed with bonds, participation rights or promissory note bonds.

In self administration and protective shield proceedings we act as consultants for businesses, custodians, or chief restructuring officers. Moreover, we represent supervisory board members or creditors and participate in creditors’ committees. In our cases we pay particular attention to clear communication with all stake-holders as this is the only way to gain trust and acceptance for restructuring concepts that are often complex.