Protective Shield Proceedings and Recapitalization

In September 2020, the German Federal Ministry of Justice and Consumer Protection (BMJV) published the draft of the German Act on the Further Development of Restructuring (SanInsFoG), which entered into force at the turn of the year. At its core is the Corporate Stabilization and Restructuring Act – StaRUG, which takes into account the special situation of the COVID-19 pandemic, among other things. It helps entrepreneurs to implement the restructuring of their company outside of insolvency proceedings, i.e. without the stigma of insolvency, and thus brings with it many positive effects. For example, it offers the possibility to implement the reorganization or restructuring plan, even if not all creditors’ support is guaranteed. With the protective shield procedure, the consent of these creditors can be replaced and a restructuring plan can even be implemented against their will.

Our Approach

Situation

Situation

If a company is threatened with insolvency or over-indebtedness as a result of the crisis, it is forced to restructure in order to avert insolvency. The instruments of the StaRUG can be used for this purpose, provided that the court is notified of this restructuring project and the restructuring capability is given. Alternatively, in the event of insolvency or over-indebtedness, the company is obliged to file for insolvency.

Target

Target

The target is to secure the liquidity of the client’s company, to assist in its complete reorganization and to avert insolvency. Specifically, our specialists assist in the preparation of a restructuring plan to seek provisional self-administration and the early submission of an insolvency plan.

Situation

Situation

ensign advisory’s consultants accompany reorganization projects from the very beginning. Within the scope of the protective shield proceedings, our consultants support the application to the court to ensure that an insolvency reason of inability to pay does not exist and that the intended reorganization is not obviously hopeless and can be initiated.

Together with our clients, we discuss the conditions stipulated by the Insolvency Code even before the opening of protective shield proceedings. This is done to decide which concrete restructuring measures should be taken to lead the company out of the crisis. Our specialists help to identify and apply for the most suitable selection of stabilization and restructuring framework-related instruments for each individual client.

Procedural aids, which consist of conducting a court plan voting procedure, court preliminary examination for confirmation of the restructuring plan, court order of regulations limiting measures, individual legal enforcement (stabilization), and court confirmation of a restructuring plan, can be used independently of each other.

Furthermore, we review current orders, contracts and operating agreements together with our clients and terminate them if they prove to be uneconomical. We also investigate the necessity of making use of further protective measures and special rights granted by the proceedings, such as the assumption of personnel costs or protection against foreclosure.

As part of the restructuring plan, our consultants also help to restructure the claims and rights of creditors and shareholders. We support the consistent implementation of the restructuring and persuade opposing creditors to agree to the restructuring plan by means of cram down and court confirmation of the plan.

Result

Result

ensign advisory’s consultants are specialized in bringing medium-sized companies and international group companies on the road to success, both inside and outside the crisis. In particular, the possibilities of reorganization under protective shield proceedings require rapid, decisive action and a specialized team that finds and implements the right solution even in critical situations. We provide support even in very difficult stages, create room for maneuver once again, accompany the client through all areas of change and get companies back on track for the future again. We develop holistic and sustainable solutions that are coordinated from a legal, tax, business, and financial perspective and implement them in restructuring and reorganization projects in a goal-oriented manner.

Our Core Competencies

Preparation of a Restructuring Plan

Our experienced, interdisciplinary team of consultants will work with our clients to develop a restructuring plan that is tailored to the client organization and can be implemented. Within this framework, we will help clients to restructure the claims and rights of creditors and shareholders.

Communication with Key Steakholders

Our experienced team accompanies clients, e.g. at creditor committees and meetings, and supports in proactive communication with the key stakeholders to represent client interests and enforce them as quickly as possible.

Selection of Concrete Instruments of the Stabilization and Restructuring Framework

We analyze the client situation and, together with the client, identify the procedural tools that are relevant for them - court plan approval, preliminary review, stabilization and/or plan confirmation. In the next step, we help to apply for the measures at the relevant restructuring court.

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