A restructuring practitioner can be appointed only if the debtor is not already illiquid or overindebted. Once the debtor is required to file an insolvency application, the court will terminate the restructuring case ex officio in accordance with section 33 (2) No. 1 StaRUG. Imminent debtor illiquidity does not preclude appointment of a restructuring practitioner.
The restructuring practitioner appointed by the competent restructuring court (section 34 et seq. StaRUG) must be
- suitable in respect of the individual case,
- independent of the creditors and the debtor,
- a tax advisor, certified public accountant or lawyer experienced in restructuring and insolvency matters,
- or other comparably qualified natural person,
- chosen from among all those persons willing to undertake the office.
A restructuring practitioner appointed ex officio (a required restructuring practitioner) is appointed to protect creditors and facilitates successful restructuring. Under section 73 (1) No. 1 StaRUG, a restructuring practitioner must be appointed if the restructuring plan will modify or suspend the rights of creditors who are not able to represent their interests themselves (e.g. consumers, SMEs). This does not apply to creditors in the financial sector in the broader sense (section 73 (2) sentences 2-4 StaRUG).
A required restructuring practitioner must also be appointed
- if the debtor has made an application under section 49 StaRUG for an order prohibiting enforcement or realisation addressed to essentially all creditors (section 73 (1) No. 2 StaRUG) or
- fulfilment of claims to which creditors are entitled is to be monitored (section 73 (1) No. 3 StaRUG).
Before making the appointment, the court must conduct an assessment of proportionality (section 73 (1) section 2 StaRUG).
A required restructuring practitioner will also be appointed if there are indications that the restructuring objective can be achieved only against the wishes of holders of restructuring claims or entitlements to separate satisfaction (for the legal definitions of these terms see section 2 (1) StaRUG) and confirmation of the plan would only be possible by means of a cross-class cram-down under section 26 StaRUG with the stringent requirements that that entails (section 73 (2) sentence 1 StaRUG).
Under section 73 (3) StaRUG, a required restructuring practitioner can also be appointed as an expert; here his or her role is particularly to assess on behalf of the court whether the requirements for confirmation of the restructuring plan are met (section 63 et seq. StaRUG) and whether the planned compensation for modification of rights is reasonable.
Under section 74 (2) sentence 1 StaRUG, the debtor, the creditors and the persons holding an interest in the debtor may propose a restructuring practitioner to the court. Such proposal does not in itself mean that the person is not independent.
The debtor’s proposal has binding effect if it presents a substantiated statement in accordance with section 74 (2) sentence 2 StaRUG and the person proposed is not clearly unsuitable. Under section 74 (2) sentence 3 StaRUG, creditors whose legal status will be modified by the restructuring plan (parties affected by the plan) may also make a proposal.
If the court accepts a binding proposal, under section 73 (3) StaRUG a “special practitioner” may be appointed and assigned all the duties of the first restructuring practitioner except the managerial function.
Under section 76 StaRUG, the duties of the required practitioner are as follows:
- Duty to notify the restructuring court (subsection (1)) of circumstances justifying termination of the restructuring case pursuant to section 33 StaRUG (such as an application for commencement of insolvency proceedings)
- If the practitioner was appointed to protect creditors, a managerial function (subsection (2)) regarding voting on the restructuring plan; verification of claims and clarification regarding voting rights (No. 1)
- Review the debtor's economic position and monitor its management (No. 2a) if he or she has been specifically assigned the power to do so; accept and make payments (No. 2b)
- If a stabilisation order (section 49 StaRUG) has been issued, the duty to review on an ongoing basis whether the requirements for the order continue to exist and whether there are grounds for terminating it (subsection (3) No. 1) and to assert such grounds (subsection (3) No. 2)
- Act in a supporting function for the court by commenting on the declaration pursuant to section 14 (1) StaRUG (subsection (4)) and carrying out service of documents (subsection (6))
Section 76 (5) StaRUG requires the debtor to support the practitioner in the performance of his/her duties by providing him/her with the necessary information and permitting him/her to inspect its books and records.
Remuneration of the restructuring practitioner is governed by sections 80-83 StaRUG; the standard hourly rate may not exceed EUR 350. With the consent of the debtor and having regard to the specific features of the procedure concerned, other remuneration models involving higher payment may also be agreed.
In accordance with section 75 (1) StaRUG, the restructuring practitioner is subject to the supervision of the restructuring court; he or she can be removed from office ex officio for good cause (section 75 (2) StaRUG). There is good cause if, for example, the conditions for appointment of a practitioner are no longer met (section 73 et seq. StaRUG). Dismissal on application by the debtor or a creditor is possible only if the practitioner is not independent (section 75 (2) 3 StaRUG). The remedy of immediate appeal is available against dismissal and refusal of an application for dismissal.
If the restructuring practitioner has not fulfilled the duties which he or she has specifically assumed with the required care and diligence, he or she is liable pursuant to section 75 (4) StaRUG for the damage caused. Compensation claims in this regard become time-barred as provided in section 195 et seq. of the German Civil Code (Bürgerliches Gesetzbuch, BGB), although section 75 (4) sentence 5 StaRUG provides that they become time-barred at the latest three years from the date on which the pendency of the restructuring case ended.
A restructuring practitioner appointed on application (optional restructuring practitioner) has more of a facilitating role and assists in negotiations between the various parties involved.
An optional restructuring practitioner is appointed by the court on application by
- the debtor or
- a group of creditors holding 25% of the voting rights in a group pursuant to section 9 StaRUG who undertake to pay the costs.
Under section 78 (2) StaRUG, creditors who collectively represent all groups likely to be included in the restructuring plan have the right to make a proposal as to the person to be appointed as optional restructuring practitioner. The court can deviate from such proposal if the person proposed is unsuitable or the debtor opposes his/her appointment (but only if the practitioner is to be appointed in a facilitating role). The Act does not explicitly give the debtor a right of proposal, though this is desirable and logical if the debtor applies for the procedure.
Under section 79 StaRUG, the role of the optional restructuring practitioner is to assist the debtor and the creditors in drafting and negotiating the restructuring concept and the plan based on it. Under section 77 (2) StaRUG, an application for appointment of an optional restructuring practitioner may also request that the practitioner be assigned the duties under section 76 StaRUG.
The remuneration of the optional restructuring practitioner is governed by sections 80-83 StaRUG, and he or she is appointed only after payment of an advance on the court fee(section 81 (5) StaRUG).
Like the required restructuring practitioner, the optional restructuring practitioner is also subject to the supervision of the restructuring court (section 78 (3) StaRUG in conjunction with section 75 (1) StaRUG). If the optional practitioner has assumed the duties of the required practitioner pursuant to section 76 StaRUG, his or her liability is likewise governed by section 75 (4) StaRUG. Otherwise, the only sanction he or she is subject to is dismissal in accordance with section 78 (3) StaRUG in conjunction with section 75 (2) StaRUG.
Experience to date:
Firstly, it should be noted that very little use has been made of the StaRUG proceedings so far. Not all cases which started out with an application for StaRUG proceedings ended up as such – in some cases, a switch to insolvency proceedings was required.
It has become clear that the (main) focus of the role of the restructuring practitioner is the “expert activitiy” pursuant to section 73 (3) StaRUG. The use in the Act of the word “particularly” means that the court has broad scope to decide what expert activities to assign to the restructuring practitioner.
It therefore remains to be seen whether the restructuring practitioner will play a significant role in practice. As things stand, the numbers suggest not.
Dr Alexandra Josko de Marx, LL.M., Attorney at Law in Germany
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