The StaRUG lays out a procedure by which the parties affected by the restructuring plan vote on whether to accept it. The debtor can either organise plan voting on its own or have voting conducted in court-supervised proceedings. Section 24 StaRUG addresses the allocation of voting rights. In the case of interest-bearing claims, voting rights are determined by the amount of the claims (section 24 (1) No. 1 StaRUG). For contingent, unmatured, non-interest-bearing claims and claims for unspecified amounts of money, the amount of the claim is to be set in accordance with sections 41 et seq. InsO (section 24 (2) StaRUG).

For holders of entitlements to separate satisfaction or intra-group third-party collateral, the value of the security is controlling (section 24 (1) No. 2 StaRUG). If the debtor is personally liable to the holder of the entitlement, this may result in the voting rights being split up: If the holder waives satisfaction from the entitlement or is likely to fail with it, the holder may be taken into consideration with its claims against the debtor in the group of restructuring claims (section 24 (1) No. 1 StaRUG), and it is entitled to a voting right in that group in the amount of the expected shortfall claim (section 24 (3) StaRUG).

For holders of share or membership rights, voting rights are determined by the participation in the capital or the debtor’s assets, although in line with the model of section 238 (1) sentence 2 InsO, restrictions on voting rights, special voting rights and multiple voting rights are to be disregarded.

If a dispute arises concerning the basis or amount of a claim, and thus the voting right allotted to it, this is not to delay the vote. In the case of out-of-court plan voting, the debtor may allocate voting rights subject to subsequent clarification by the court. In such case, for the purposes of court verification, the debtor must document the extent to which the voting right is disputed and the reason for same.

Pursuant to section 25 StaRUG, acceptance of the restructuring plan requires that, in each group, the members of the group who approve the plan account for a minimum of three-quarters of the voting rights in that group. Parties affected by the plan who are entitled to a claim or a right jointly are to be taken together as one affected party. The sum of the voting rights allotted to the claims pooled in a group constitutes the figure for determining the majority of the votes required to approve the plan. In order to prevent large creditors from dominating a group, section 9 (2) sentence 4 StaRUG requires the formation of groups of minor creditors, to the extent they are affected by the plan.

If a majority is not achieved in a group, plan approval can be effected through a cross-class cram-down (gruppenübergreifende Mehrheitsentscheidung) pursuant to section 26 StaRUG. This is permissible only if the members of the group who voted against the plan are likely to be in no worse a position as a result of the restructuring plan than they would be in without a plan (section 26 (1) No. 1 StaRUG). The standard for making the comparison here is the next best alternate scenario, i.e. the position in which the creditors would again find themselves if the plan were to fail. This is not always the liquidation scenario. A further requirement is that the members of the outvoted group participate to a reasonable extent in the economic value (plan value) accruing to the parties affected by the plan on the basis of the plan (section 26 (1) No. 2 StaRUG). Whether participation in the plan value is reasonable is determined by the principle of absolute priority, the terms of which are set out in detail in section 27 StaRUG. Section 28 StaRUG permits exceptions to this principle.

Absolute priority means that no creditor affected by the plan may receive more than the full amount of its claim (prohibition of over-satisfaction: section 27 (1) No. 1 StaRUG), alteration is permissible only if the ranking under insolvency law is preserved (requirement of ranking preservation: section 27 (1) No. 2 StaRUG), and other creditors affected by the plan who rank equally with the creditors in the group may not receive better satisfaction (requirement of equal treatment of groups of the same ranking: section 27 (1) No. 3 StaRUG). In addition to section 28 StaRUG, section 27 (2) StaRUG also provides narrowly defined exceptions to the rule of absolute priority for persons holding a participating interest in the debtor.

In derogation from section 27 (1) No. 3 StaRUG, section 28 (1) StaRUG permits creditors whose claims would rank equally in insolvency proceedings to be treated differently if the provision is appropriate in terms of the nature of the economic difficulties that are to be overcome and in terms of the circumstances. Under section 28 (2) StaRUG, an exception to the rule of absolute priority may be made in favour of the debtor or one of its managing shareholders where he/she undertakes to furnish the involvement required for plan implementation (section 28 (2) No. 1 StaRUG) or if alteration of the rights of the dissenting group of creditors is negligible (section 28 (2) No. 2 StaRUG).

In addition, pursuant to section 26 (1) No. 3 StaRUG, the cross-class cram-down requires that the majority of the voting groups approved the plan with the required majorities. If there are only two groups, the approval of one group is sufficient, unless it consists solely of shareholders or subordinated creditors. This is also in derogation from the model for plan approval under insolvency law.

To facilitate group restructurings, section 2 (4) StaRUG also allows the alteration of intra-group third-party collateral securing restructuring claims. Accordingly, separate groups of affected creditors are to be formed pursuant to section 9 (1) sentence 3 StaRUG. By virtue of section 26 (2) StaRUG, plan approval can still be achieved where a group of holders of intra-group collateral votes against the plan, but only if the plan reasonably compensates them for the alteration of their collateral.

 

Dr H. Philipp Esser, LL.M. (Chicago), Attorney at Law

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