Corporate Restructuring Before Insolvency

The threshold for insolvency in Germany is strictly regulated. For many companies facing financial distress, the German Act on the Stabilization and Restructuring Framework for Companies (StaRUG) provides a vital "pre-insolvency" toolbox.

The StaRUG Advantage

StaRUG allows companies to restructure their debt based on a majority vote of creditors, without the need for a full public insolvency proceeding. This maintains management control and protects the company's reputation while shedding unsustainable liabilities.

Duties of Management

Management must be vigilant. Once "imminent illiquidity" (drohende Zahlungsunfähigkeit) is detected, the window for a StaRUG proceeding opens. Delaying this assessment can lead to personal liability for the directors.

A successful restructuring requires a multi-disciplinary approach involving legal, financial, and operational experts to ensure the long-term viability of the business entity.