Restructuring & Insolvency Comparative Guide

1 Legal framework

1.1 What domestic legislation governs restructuring and insolvency matters in your jurisdiction?

In Germany, restructuring and insolvency matters are primarily governed by:

• the Insolvency Code; and
• the Corporate Stabilisation and Restructuring Act.

The Insolvency Code, which entered into force in 1999 and has since been amended several times, encompasses provisions for:

• standard insolvency proceedings protective shield proceedings; and
• debtor-in-possession proceedings.

The Corporate Stabilisation and Restructuring Act offers a pre-insolvency restructuring framework designed to facilitate the early reorganisation of companies. These legal instruments are complemented by specific statutory provisions from statutes such as:

• the Commercial Code;
• the Civil Code; and
• the Limited Liability Companies Act.

1.2 What international / cross-border instruments relating to restructuring and insolvency have effect in your jurisdiction?

At the European level, the EU Insolvency Regulation (2015/848) governs jurisdiction, recognition and the conduct of insolvency proceedings with cross-border implications within the European Union (excluding Denmark). In addition, the Restructuring Directive (2019/1023) is of relevance; in Germany, the Restructuring Directive was implemented by the Corporate Stabilisation and Restructuring Act. Foreign insolvency proceedings are recognised in Germany pursuant to the autonomous rules of international insolvency law.

1.3 Do any special regimes apply in specific sectors?

In certain regulated sectors – such as banking, insurance and financial services – special insolvency regimes apply. For credit institutions and certain financial undertakings, the Recovery and Resolution Act, which is based on the European Bank Recovery and Resolution Directive, governs restructuring and resolution. For insurance undertakings, the supervisory regime of the Federal Financial Supervisory Authority pursuant to the Insurance Supervision Act applies. While insolvency proceedings are generally conducted under the Insolvency Code, sector-specific modifications apply.

Energy suppliers, operators of critical infrastructure and public law entities may also be subject to specific insolvency provisions or practical limitations. For example, municipal undertakings are often governed by special corporate law requirements or approval obligations in the event of restructuring or the sale of assets. Moreover, there are sector-specific particularities in the application of general provisions – for instance, in the healthcare sector, among operators of care facilities or in the aviation sector (eg, aviation operating licences) – which may affect the feasibility of restructuring or continued operation.

Taken as a whole, it becomes apparent that the legislature provides for divergent or supplementary rules in particularly regulated or systemically relevant sectors in order to:

• manage sector-specific risks; and
• safeguard public interests.

1.4 Is the restructuring and insolvency regime in your jurisdiction perceived to be more creditor friendly or debtor friendly?

German insolvency law adopts a balanced approach that takes into account both creditor and debtor interests. Traditional insolvency proceedings are generally considered creditor-friendly, particularly due to:

• the strong position of the insolvency administrator; and
• the participatory rights of the creditors' assembly.

In recent years, however, a shift towards a more debtor-friendly framework has emerged, driven by legislative reforms aimed at enabling early-stage restructuring for distressed companies. This development is particularly evident in:

• debtor-in-possession proceedings;
• protective shield proceedings; and
• the preventive restructuring framework introduced under the Corporate Stabilisation and Restructuring Act.

Furthermore, the reduction of the good conduct period for individuals seeking discharge of residual debt to three years constitutes another debtor-friendly measure.

1.5 How well established is the legal regime and infrastructure relevant to restructuring and insolvency in your jurisdiction (e.g. extent of recent legislative changes, availability of specialist judges / courts / advisers)?

The legal framework and the institutional infrastructure for restructurings and insolvencies are considered highly developed and efficient by international standards. German insolvency law is sophisticated, reform oriented and practice driven, as evidenced by its ongoing alignment with European requirements and economic developments. A key milestone was the introduction of the Corporate Stabilisation and Restructuring Act in 2021. The act established an autonomous preventive restructuring framework, enabling companies to implement restructuring measures with the involvement of their creditors at an early stage and outside of formal insolvency proceedings. Significant reforms have also been implemented within the Insolvency Code in recent years, including:

• the strengthening of debtor-in-possession proceedings;
• the introduction of protective shield proceedings;
• the reduction of the residual debt discharge period to three years for natural persons; and
• adjustments in group insolvency law.

A large number of specialised insolvency courts exist, particularly in local courts with dedicated insolvency divisions in economically strong regions, staffed with experienced judges. In addition, there is a high number of qualified insolvency administrators, restructuring advisers and auditors. Many law firms also maintain dedicated teams specialising in restructuring, insolvency and distressed M&A, ensuring the professional handling of complex cases.

Overall, both the legal framework and the human and institutional capacities in Germany are well equipped to facilitate restructurings in an effective and legally secure manner. The German legislature has introduced numerous practice-oriented reforms in recent years, positioning Germany as a pioneer of modern, economically oriented insolvency law in the international context.

2 Security

2.1 What principal forms of security interest are taken over assets in your jurisdiction?

In Germany, several principal forms of security interests are commonly used to secure claims and play a significant role in restructuring and insolvency scenarios. These security interests typically grant creditors preferential satisfaction in insolvency proceedings. One of the most prevalent proprietary security instruments is the transfer of title for security purposes over movable assets. Legal ownership is transferred to the creditor, while the debtor retains possession and may continue to use the assets.

Another instrument is the assignment of receivables, frequently structured as a global assignment, whereby present and future claims – particularly those arising under customer or supplier contracts – are assigned to the creditor as security. In the area of immovable property, the land charge is the standard form of collateral. It constitutes a non-accessory, flexible security interest widely used in real estate finance; whereas mortgages are less commonly employed due to their accessory nature. Pledges over movable property or rights are also frequently used. Intangible assets, such as bank account balances or IP rights, may likewise be assigned as security.

In insolvency proceedings, secured creditors generally have a right to separate satisfaction, allowing them to receive payment with priority from the proceeds of the realisation of their collateral. In practice, security interests are often structured collectively in syndicated financing arrangements, typically administered via a security agent or trustee.

2.2 How can those security interests be enforced (and what factors could complicate or prevent this process)?

Under German law, security interests are typically enforced through the realisation of the secured asset or right. In the context of insolvency proceedings, this is generally conducted by the insolvency administrator, with the proceeds used to satisfy the secured creditor's claim with priority. Enforcement of security over immovable property (eg, land charges or mortgages) usually takes place via compulsory auction or compulsory administration proceedings. Movable assets or rights – such as those transferred for security purposes or pledged shares – may be enforced either extrajudicially by the creditor (outside insolvency) or by the insolvency administrator during the proceedings.

However, various factors may hinder or impede enforcement. The commencement of insolvency proceedings imposes an automatic stay on individual enforcement actions and disposals, meaning that creditors can no longer unilaterally enforce their security rights. Defects in the creation or perfection of the security interest or the risk of insolvency claw-back actions may render the security ineffective. Vague or overly broad security arrangements – particularly in the case of global assignments or transfers – may be invalid or unenforceable. Further complications may arise from valuation issues, such as:

• volatility in asset prices;
• illiquidity of collateral; or
• competing third-party rights.

Priority conflicts with other secured creditors – especially where subordinate security interests are involved – can also create enforcement challenges.

3 Restructuring

3.1 Are informal workouts available in your jurisdiction? If so, what forms do they typically take, and what are the benefits and drawbacks as compared to formal restructuring proceedings?

In Germany, informal workouts are generally permissible and frequently implemented in the form of restructuring agreements. These are negotiated arrangements between the debtor and its creditors to stabilise the company's financial position without initiating formal insolvency proceedings. A major advantage of informal workouts is their flexibility: they can be tailored to the specific needs of the parties without being subject to rigid statutory requirements, allowing for rapid and pragmatic solutions. They also avoid court and insolvency administrator fees and typically preserve the debtor's reputation, as such workouts are not public – unlike formal proceedings, which often result in reputational damage and deteriorated business relationships.

However, informal restructurings have limitations. There are no binding legal mechanisms to compel dissenting creditors to participate, meaning that the refusal of even a single creditor can derail the entire process. As a result, the success of such workouts depends heavily on creditor cooperation. This limitation is particularly problematic in complex corporate structures or international settings. Moreover, there is a risk that certain restructuring measures – such as preferential payments or security grants – may later be subject to insolvency claw-back actions if formal insolvency proceedings are subsequently opened.

3.2 What formal restructuring proceedings are available in your jurisdiction, and what are the benefits and drawbacks of each?

German law provides for two principal formal restructuring mechanisms:

• the restructuring framework under the Corporate Stabilisation and Restructuring Act; and
• the insolvency plan procedure.

These differ significantly in terms of:

• creditor involvement;
• degree of interference;
• debtor control; and
• public visibility.

The Corporate Stabilisation and Restructuring Act allows for a pre-insolvency restructuring outside formal insolvency proceedings in cases of imminent illiquidity. The debtor retains control and may propose a restructuring plan targeting specific creditor groups. A major benefit is the possibility of confidential proceedings, which helps to protect the company's reputation. Furthermore, only selected liabilities can be included in the plan, enabling targeted solutions. However:

• labour-related claims cannot be modified; and
• each creditor group must approve the plan by a 75% majority, making consensus-building challenging.

The insolvency plan procedure, by contrast, takes place within formal insolvency proceedings and is overseen by the insolvency court. It permits broad restructuring measures, including:

• debt haircuts;
• modifications of (payment) terms of existing contracts; and
• interventions in shareholder rights.

Creditors are grouped and must approve the plan by majority within each group. The key advantages are the binding effect on all creditors and the extensive restructuring tools available. Disadvantages include:

• the public nature of the proceedings, which may impair the company's reputation; and
• the greater procedural and administrative complexity.

3.3 How, by whom and on what grounds are formal restructuring proceedings initiated? What are the main preconditions for success?

The initiation of formal restructuring proceedings in Germany depends on:

• the chosen procedure; and
• the stage of the company's financial distress.

The Corporate Stabilisation and Restructuring Act process can only be initiated by the debtor. It requires a state of imminent illiquidity – defined as a forecasted inability to pay due obligations within the next 24 months absent remedial action. The insolvency plan procedure, by contrast, presupposes the opening of insolvency proceedings. It may be initiated:

• by the debtor;
• once proceedings have commenced, by the insolvency administrator; or
• in rare cases, by creditors.

The insolvency plan procedure allows for a court-supervised restructuring of liabilities. The success of either process depends on several key factors. Early initiation is critical, as late intervention may limit available restructuring options and erode stakeholder confidence. A robust restructuring plan – with sound financial projections and a credible turnaround concept – is essential to gain creditor support and satisfy judicial scrutiny. Moreover, the competence and credibility of the management or restructuring team play a decisive role; experienced and trusted leadership significantly increases the likelihood of a successful outcome by fostering confidence among creditors, courts and potential investors.

3.4 What are the effects of the commencement of formal restructuring proceedings, both for the debtor and for creditors?

The commencement of formal restructuring proceedings has significant implications for both the debtor and its creditors. For the debtor, the primary benefit is protection from individual enforcement measures. Typically, a stay on creditor enforcement actions is imposed, preserving operational stability and creating breathing space for negotiations and plan development. This protection enables the debtor to pursue a structured and coordinated reorganisation. For creditors, the proceedings result in limitations on the enforcement of their individual claims. Their rights are subordinated to a collective restructuring approach. However, creditors are granted procedural participation and voting rights, enabling them to influence the course of the restructuring – particularly through their role in approving the restructuring plan or the insolvency plan. This collective approach fosters the development of comprehensive and balanced solutions acceptable to all stakeholders.

3.5 Does a moratorium or stay apply and, if so, what is its scope? Are there exceptions?

Under the preventive restructuring framework pursuant to the Corporate Stabilisation and Restructuring Act, a moratorium may be ordered. Its purpose is to shield the debtor from piecemeal enforcement actions during financial distress, thereby preserving the business as a going concern while allowing for plan negotiations with creditors. The moratorium generally includes stays on enforcement measures such as foreclosures or asset seizures. Typically, the duration of the moratorium is limited to three to six months but may be extended upon application. The scope and application of the stay can be tailored to the needs of the restructuring process. Certain exceptions apply – for example, claims that are not subject to the restructuring plan or that are considered non-deferrable under specific statutory provisions may not be affected.

3.6 What process do restructuring proceedings typically follow (including likely length of process and key milestones)?

A restructuring proceeding in Germany under the Corporate Stabilisation and Restructuring Act framework typically follows a clearly structured, multi-phase process aimed at the early reorganisation of a financially distressed company. The process begins with a preparatory phase, during which the debtor develops a comprehensive restructuring plan. This plan typically includes an analysis of:

• the company's financial situation;
• the restructuring objectives; and
• the intended contribution of creditors to the restructuring effort.

During this phase, the creditor structure is analysed and preliminary discussions with affected creditors may take place.

The next phase involves initiating the formal process by filing an application with the competent restructuring court. This requires the debtor to be facing imminent illiquidity, but not yet actual insolvency or over-indebtedness. Upon request, the court may issue a stabilisation order to suspend individual enforcement actions.

Subsequently, the restructuring plan is further developed, specifying measures for debt restructuring (eg, waivers, deferrals or debt-to-equity swaps). The plan must then be submitted to the affected creditors for approval. Within each voting class, a 75% majority (by the amount of the claim) is required for approval.

If the plan is approved, it is submitted to the court for confirmation. The court reviews whether:

• creditors were properly involved;
• procedures were followed; and
• creditor rights are safeguarded.

Upon court confirmation, the plan becomes binding and enforceable. Implementation follows, consisting of contractual and operational measures as set out in the plan. The duration of the entire process typically ranges from three to 12 months but may be longer in complex cases.

3.7 What are the roles, rights and responsibilities of the following stakeholders in restructuring proceedings? (a) Debtor, (b) Directors of the debtor, (c) Shareholders of the debtor, (d) Secured creditors, (e) Unsecured creditors, (f) Employees, (g) Pension creditors, (h) Insolvency officeholder (if any), (i) Court.

Restructuring proceedings involve a number of stakeholders, each with distinct roles, rights and obligations, often intertwined.

(a) Debtor

The debtor (typically represented by its management) bears primary responsibility for initiating and conducting the restructuring. Under the Corporate Stabilisation and Restructuring Act framework, the debtor must:

• draft a restructuring plan; and
• seek creditor approval.

The debtor is required to ensure full transparency, especially by disclosing all relevant financial information.

In insolvency plan proceedings, the debtor retains the initiative – particularly under debtor-in-possession proceedings – and submits the plan to the court.

(b) Directors of the debtor

Management plays a central role in both Corporate Stabilisation and Restructuring Act and insolvency plan proceedings. It is responsible for:

• preparing the restructuring or insolvency plan; and
• safeguarding creditor interests.

Under debtor-in-possession proceedings, directors remain in control of operations under the supervision of a court-appointed insolvency monitor.

(c) Shareholders of the debtor

Shareholders generally play a subordinate role in both restructuring and insolvency plan proceedings. In Corporate Stabilisation and Restructuring Act proceedings, their involvement is limited to cases involving corporate measures (eg, capital decreases, changes in shareholder structure). Shareholders are typically included in the plan if their rights are affected.

(d) Secured creditors

Secured creditors, by law, form their own group of affected parties under the Corporate Stabilisation and Restructuring Act procedure and play a crucial role by participating in the voting process on the proposed restructuring plan. While their rights are generally upheld, they may agree to adjustments or modifications to their claims as part of the broader restructuring efforts, provided that they consent to the terms set out in the plan.

(e) Unsecured creditors

Unsecured creditors are also involved in the proceedings. Their claims may be reduced or adjusted in the restructuring plan. They typically receive only a quota of their claims and exercise their rights through class-based voting on the plan.

(f) Employees

Employment relationships cannot be modified under the Corporate Stabilisation and Restructuring Act. Therefore, dismissals or changes to employment terms cannot be implemented via the restructuring plan. In insolvency plan proceedings, however, general insolvency rules apply, which allow for termination under simplified conditions.

(g) Pension creditors

Pension entitlements remain protected in Corporate Stabilisation and Restructuring Act proceedings and cannot be modified. In insolvency plan proceedings, certain pension obligations may be adjusted, subject to legal constraints.

(h) Insolvency administrator (if any)

Corporate Stabilisation and Restructuring Act proceedings do not involve the appointment of an insolvency administrator. The debtor remains in charge. In contrast, insolvency plan proceedings involve either:

• an insolvency administrator (in standard insolvency proceedings); or
• an insolvency monitor (under debtor-in-possession).

(i) Court

The court supervises the restructuring process to ensure that:

• the plan is properly developed; and
• creditor rights are respected.

It is responsible for confirming the restructuring or insolvency plan after reviewing its formal and substantive compliance.

3.8 Can restructuring proceedings be used to "cram down" and bind dissentient creditors to a transaction supported by other creditors? Are creditors separated into classes for the purposes of voting in the proceedings? What are the relevant voting thresholds? Is "cross-class cramdown" available?

Yes. Under both the Corporate Stabilisation and Restructuring Act framework and the insolvency plan regime, it is possible to bind dissenting creditors to a restructuring or insolvency plan through cram-down mechanisms. In both frameworks, creditors are divided into classes – typically:

• secured creditors;
• unsecured creditors;
• subordinated creditors; and
• if applicable, shareholders.

Under the Corporate Stabilisation and Restructuring Act, a class is deemed to have approved the plan if 75% (by claim amount) of the class members vote in favour. In insolvency plan proceedings, each class approves the plan if:

• a majority of voting creditors within the class vote in favour; and
• those supporting creditors hold more than 50% of the claims within that class.

Both procedures allow for a cross-class cram-down, meaning that dissenting classes can be overruled if the plan does not disadvantage them compared to a realistic alternative scenario (typically liquidation in insolvency or regular insolvency in Corporate Stabilisation and Restructuring Act). In such cases, the court may confirm the plan despite the objection of one or more classes.

3.9 Can restructuring proceedings be used to compromise secured debt?

Yes, secured debt can be compromised in restructuring proceedings, though the scope and mechanism differ between Corporate Stabilisation and Restructuring Act and insolvency plan proceedings. Under the Corporate Stabilisation and Restructuring Act, modifications to secured claims (eg, removal or reduction of collateral such as mortgages or assignments) are generally restricted. Such changes require either:

• the consent of the affected secured creditors within their class; or
• judicial approval through a cross-class cram-down.

The protection of secured rights is relatively strong in the Corporate Stabilisation and Restructuring Act process, as it is an out-of-court framework not designed to automatically impair creditor positions. By contrast, the insolvency plan framework permits more extensive modifications to secured claims. Such rights may be altered in the plan, subject to creditor consent and court confirmation. As with unsecured claims, affected creditors must not be worse off under the plan than in the event of liquidation absent a plan.

3.10 Can contracts / leases be disclaimed or otherwise addressed through restructuring proceedings?

The treatment of contracts and leases depends on the type of proceeding. In insolvency plan proceedings, executory contracts (including leases) may be terminated if continued performance would be economically detrimental to the debtor. The debtor, particularly under debtor-in-possession, may use shortened notice periods to exit burdensome long-term obligations.

In contrast, the Corporate Stabilisation and Restructuring Act does not provide a legal mechanism for the unilateral termination of ongoing contractual obligations. Contracts cannot be modified or rescinded through the restructuring plan without mutual agreement or specific legal authority outside the Corporate Stabilisation and Restructuring Act framework.

3.11 Can liabilities of third parties (e.g. guarantors) be released through restructuring proceedings?

Restructuring proceedings do not provide for the release of liabilities of third parties such as:

• guarantors;
• advisers; or
• other persons liable for the debtor's liabilities.

These proceedings focus exclusively on the restructuring of the debtor's own liabilities. Third-party liability remains intact and creditors may continue to pursue claims against such third parties. Releases require a separate agreement or a statutory basis explicitly permitting such discharge.

3.12 Is any protection and/or priority afforded to the providers of new money in the context of restructuring proceedings (i.e. is "DIP financing" available)?

Yes, both frameworks provide mechanisms to protect new money (DIP financing), although the level of legal protection differs. In Corporate Stabilisation and Restructuring Act proceedings, new money can be incorporated into the restructuring plan and contractually structured to support the company's recovery. However, there is no statutory priority status for new financing.

In contrast, in formal insolvency proceedings, financing provided post-commencement to support continued business operations qualifies as estate claims, which are accorded priority over ordinary insolvency claims. This significantly increases the legal protection and attractiveness of DIP financing.

3.13 How do restructuring proceedings conclude?

Restructuring proceedings conclude with:

• the judicial confirmation of the plan; and
• subsequent implementation of its provisions.

Under the Corporate Stabilisation and Restructuring Act, the proceeding ends upon court confirmation of the restructuring plan, which becomes binding on all affected creditors, including dissenters. The implementation phase then begins, during which measures such as debt waivers, subordination or debt-for-equity swaps are carried out. Once implementation is complete, the process is formally concluded.

In insolvency plan proceedings, the process similarly ends with final and binding court confirmation of the plan. Upon confirmation:

• the insolvency court terminates the insolvency proceedings; and
• the debtor regains control over its business.

The measures stipulated in the plan are then executed accordingly.

4 Insolvency

4.1 What types of insolvency proceeding are available in your jurisdiction, and what are the benefits and drawbacks of each?

The Insolvency Code primarily provides for the regular insolvency procedure, which is initiated when a company is illiquid or over-indebted. The advantage of the regular insolvency procedure is the comprehensive protection for creditors, as an insolvency administrator takes over the management of the insolvency estate and oversees the procedure. This ensures an orderly resolution, whether through liquidation or restructuring of the company. Disadvantages of this procedure include the following:

• The management loses control over the company, as the insolvency administrator takes over the operational management; and
• The procedure has public effects, which can result in reputational damage.

The consumer insolvency procedure applies to individuals who:

• do not engage in significant entrepreneurial activity; and
• are illiquid or over-indebted.

A major advantage of this procedure is the possibility of obtaining a discharge of residual debt after a three-year period, significantly reducing or even eliminating the debtor's debt. During this period, the debtor must:

• surrender part of their income; and
• comply with certain rules of conduct.

The self-administration procedure allows a company that is insolvent or over-indebted to retain control over the business. This is particularly advantageous if the company seeks restructuring, as the debtor can continue to manage the business. The administrator only assumes a control and supervisory function. Another key aspect of self-administration is the protective shield procedure, which:

• shields the debtor from creditor interference; and
• allows early restructuring preparation before formal insolvency begins.

4.2 How, by whom and on what grounds are insolvency proceedings initiated? Can the instigating party (or any other parties) select the identity of the relevant insolvency officeholder?

Insolvency proceedings in Germany are initiated either by the debtor or by creditors. If the debtor is a legal entity, the management must file the insolvency petition when the debtor is either illiquid or over-indebted. Illiquidity occurs when the debtor can no longer meet its due payment obligations, while over-indebtedness occurs when:

• the liabilities of the company exceed its assets; and
• it is no longer predominantly likely to continue operations.

The debtor must file the petition without delay, as a late filing can result in liability for damages and potentially criminal consequences. Creditors can also file an insolvency petition if they can demonstrate a legal interest and a due claim. The petition must be submitted to the insolvency court, which then assesses whether the conditions for opening the procedure are met. Regarding the insolvency administrator, the debtor may only propose a specific person for the role in the petition. The court may accept this proposal if the person is suitable and independent to perform the duties of the insolvency administrator. However, the court has the final say and may appoint an administrator different from the one proposed if it deems this to be in the interests of the proceedings or the creditors.

4.3 What are the effects of the commencement of insolvency proceedings, both for the debtor and for creditors?

The commencement of insolvency proceedings has far-reaching effects for both the debtor and creditors. Upon the opening of the regular insolvency procedure, the debtor generally loses the authority to manage and dispose of its assets, meaning that it cannot dispose of its assets unless self-administration has been ordered by the court. This authority is transferred to the insolvency administrator. The debtor must cooperate fully with the insolvency administrator and provide all necessary information. This includes disclosing and surrendering:

• its entire assets; and
• any relevant documents and records required for the proceedings and to establish creditor claims.

With the opening of the insolvency proceedings, individual enforcement actions by creditors are suspended. This means that creditors can no longer attempt to satisfy their claims through garnishment or other enforcement measures. Instead, the insolvency administrator organises the liquidation of the debtor's assets. Creditors must register their claims in the insolvency proceedings. Ongoing legal disputes between creditors and the debtor are suspended.

4.4 Does a moratorium or stay apply and, if so, what is its scope? Are there exceptions?

Upon the opening of insolvency proceedings, a comprehensive moratorium generally applies. This means that after the proceedings are opened, no individual enforcement actions can be carried out against the debtor. Creditors can no longer enforce their claims through garnishment or other enforcement measures independently. The aim of the moratorium is to:

• ensure the equal treatment of creditors; and
• conduct the proceedings in an orderly manner.

However, there are exceptions to the general moratorium, particularly regarding rights of separation. These rights grant certain creditors whose claims are secured by collateral (eg, security assignments or mortgages) a preferential right to satisfaction from the pledged or encumbered assets. These creditors can generally continue to exercise their rights of separation – even through enforcement – but only under specific conditions:

• They must comply with the proceedings and the legally prescribed framework;
• The exercise of separation rights must not violate the interests of other creditors; and
• The material legal requirements for the realisation of the collateral must be met.

4.5 What process do insolvency proceedings typically follow (including likely length of process and key milestones)?

Insolvency proceedings follow several key stages. The process begins with the filing of the petition, which can be initiated by the debtor or by a creditor due to illiquidity or over-indebtedness. After the petition is submitted, the insolvency court examines it. A provisional insolvency administrator is usually appointed to assess the debtor's financial situation and secure the insolvency estate (preliminary insolvency procedure). If the insolvency procedure is opened, the insolvency administrator takes over the management and liquidation of the insolvency estate. Meanwhile, creditors must register their claims with the insolvency administrator and the registered claims are reviewed at the examination and reporting meeting. In the course of the distribution of the debtor's assets, creditors receive a share. The insolvency proceedings end with the closure of the procedure. In the case of discharge of residual debts for an individual, the debtor can be released from remaining liabilities after successfully completing the procedure.

A typical regular insolvency procedure lasts between one and three years, depending on the complexity of the case. In the consumer insolvency procedure, which applies to individuals without significant entrepreneurial activity, the duration of the discharge of residual debts has been shortened to three years since 2021.

4.6 What are the respective roles, rights and responsibilities of the following stakeholders during the insolvency proceedings? (a) Debtor, (b) Directors of the debtor, (c) Shareholders of the debtor, (d) Secured creditors, (e) Unsecured creditors, (f) Administrator, (g) Employees, (h) Pension creditors, (i) Insolvency officeholder, (j) Court.

No answer submitted for this question.

4.7 What is the process for filing claims in the insolvency proceedings?

In Germany, the process for filing claims in insolvency proceedings is crucial to:

• ensuring fair treatment of creditors; and
• maximising their recovery from the insolvency estate.

The process begins with a public announcement from the insolvency administrator, informing creditors about the proceedings and the deadline for filing claims. Late filings are possible but are usually associated with (minor) additional costs for the creditor. Creditors must prove the validity of their claims by submitting a written statement (usually using a standard form), along with supporting documents such as contracts or invoices. In the subsequent examination meeting, the claims are reviewed; they can be contested in terms of either their basis (ie, in full) or their amount. In this case, the creditors may attempt to have the objection withdrawn. If they are unsuccessful, they may enforce the claim through litigation. Approved claims are recorded in the claims register (insolvency table), which is accessible to all creditors.

4.8 How are claims ranked in the insolvency proceedings? Do any claims have "super priority" and is there scope for subordination by operation of law (e.g. equitable subordination)?

In Germany, the principle of equal treatment of creditors applies. However, certain claims are given priority and others are subordinated. Claims classified as estate liabilities are paid in full, not pro rata. These include (procedural) costs of the insolvency proceedings, including:

• the insolvency administrator's fees; and
• court costs.

Claims arising from actions taken by the insolvency administrator are also considered estate liabilities. Creditors with rights of separation (typically those which can claim that an asset belonging to the insolvency estate is actually theirs – that is, typically owners of goods) are also given priority. These creditors are not involved in the distribution process and can demand the return of the respective asset. Also preferred are creditors with rights of retention – those whose claims are secured by collateral. There are also subordinated creditors, whose claims are paid only after all 'ordinary' insolvency creditors have been satisfied. These include:

• claims from shareholder loans;
• interest accrued after the opening of the insolvency procedure; and
• certain claims subordinated through an agreement of subordination (ie, an agreement stipulating that the claim will be paid only after all other obligations have been settled).

If there is a surplus after the satisfaction of all creditors, it is distributed among the shareholders.

4.9 What is the effect of insolvency proceedings on existing contracts? Is the counterparty free to terminate? Can they be disclaimed?

In Germany, insolvency proceedings considerably affect existing contractual relationships. As a rule, contracts remain in force throughout the proceedings, except in specific cases – particularly service or agency contracts with the debtor as principal. However, the performance of such contracts is subject to certain statutory limitations. Under the Insolvency Code, the insolvency administrator has the discretion to decide whether to perform executory contracts. The administrator will usually opt for performance if it benefits the insolvency estate but may refuse if the contract is economically detrimental. In such cases, the counterparty may assert damages as an unsecured claim, to be filed in the schedule of claim, typically resulting in only partial recovery. The Insolvency Code provides for exceptions to this rule for certain agreements, such as lease contracts, thereby restricting the administrator's discretion. Until the administrator makes a determination, the contractual counterparty is generally barred from terminating the contract. German case law holds that clauses allowing termination solely upon the other party's insolvency are generally unenforceable. Retention of title clauses – where ownership remains with the seller until full payment – are usually effective during insolvency, provided that the goods are still identifiable and have not been sold or used. This allows the seller to reclaim the goods in case of non-payment. The right to offset claims remains intact, but only if the conditions for setoff were already fulfilled prior to the opening of insolvency proceedings.

4.10 Can transactions entered into by the debtor prior to be insolvency be challenged and set aside? What are the relevant grounds / look-back periods / defences?

Certain transactions entered into by the debtor prior to the opening of insolvency proceedings may, under specific conditions, be subject to claw-back. Insolvency law empowers the insolvency administrator to contest and nullify legal acts that result in a detriment to the creditors. In addition to causing such a detriment, the contested transaction must satisfy the specific requirements of an avoidance provision as set forth under the Insolvency Code. Transactions detrimental to creditors may be challenged under Sections 130–135 of the Insolvency Code, provided that they occurred within specific timeframes prior to the insolvency filing. These include:

• intentional creditor prejudice pursuant to Section 133 (up to 10 years);
• gratuitous transactions pursuant to Section 134 (within four years);
• shareholder loan repayments pursuant to Section 135 (within one year); and
• certain preferential transfers (within three months).

Collateral provided to secure shareholder loans may also be challenged if granted within 10 years. The recipient of a contested transaction may raise specific defences against the clawback claim. Several avoidance provisions require that the recipient had knowledge of:

• the debtor's financial distress; or
• the debtor's intent to disadvantage creditors.

If the recipient can demonstrate a lack of such knowledge at the time of the transaction, the clawback action may be successfully defended. Additionally, the recipient of a contested transaction may invoke so-called 'cash transaction privilege' pursuant to Section 142 of the Insolvency Code, which protects the contemporaneous exchanges of performance and counter-performance where the mutual consideration is of equivalent value and rendered within a short timeframe.

4.11 How do the insolvency proceedings conclude? Can any liabilities survive the insolvency proceedings?

In Germany, insolvency proceedings can be concluded in various ways, depending on the circumstances and the progress of the procedure. A common conclusion occurs with the distribution of the insolvency estate and the termination of the proceedings. This indicates that:

• all realisable assets of the debtor have been distributed; and
• the proceedings are officially concluded.

For individuals, the procedure may also end with the discharge of residual debts. In this case, the respective individual is discharged from the remaining liabilities, provided that certain conditions are met. These conditions primarily include the regular payment of a portion of the income of the debtor to creditors during a good conduct period, which typically lasts for three years. However, this discharge does not apply to all liabilities – particularly those arising from intentional torts or criminal fines, which remain enforceable even after the conclusion of the insolvency proceedings. If, after the initiation of insolvency proceedings, it becomes apparent that the insolvency estate is insufficient to cover the costs of the procedure, the insolvency court will terminate the proceedings due to lack of assets. A rare case is the termination of proceedings pursuant to Section 213 of the Insolvency Code, which requires the consent of all creditors that have filed claims in the insolvency schedule. Equally rare is the termination of proceedings under Section 212, which occurs when the debtor's insolvency ceases after the commencement of proceedings.

5 Cross-border / Groups

5.1 Can foreign debtors avail of the restructuring and insolvency regime in your jurisdiction?

Foreign debtors can avail of German insolvency law, provided that their centre of main interests (COMI) is located in Germany. This means that the debtor's primary business activities, personal interests or financial management must be concentrated in Germany. The same applies to restructurings under the Corporate Stabilisation and Restructuring Act.

5.2 Has the UNCITRAL Model Law on Cross Border Insolvency or the UNCITRAL Model Law on Recognition and Enforcement of Insolvency-Related Judgments been adopted or is it under consideration in your country?

Germany has not yet implemented the UNCITRAL Model Law on Cross-Border Insolvency.

5.3 Under what conditions will the courts in your jurisdiction recognise and/or give effect to foreign insolvency or restructuring proceedings or otherwise grant assistance in the context of such proceedings?

In Germany, foreign insolvency or restructuring proceedings are recognised and supported under certain conditions. Within the European Union, foreign insolvency proceedings are statutorily recognised pursuant to the EU Insolvency Regulation (2015/848) if the debtor's COMI is located in an EU member state. If the debtor holds assets in Germany:

• secondary proceedings may be initiated; and
• foreign insolvency rulings from other EU member states may be recognised.

For proceedings from non-EU countries, recognition and enforcement are governed by German national law, particularly Sections 343 and following of the Insolvency Code. Recognition of such proceedings is based on the principle of reciprocity and international agreements. It must be ensured that:

• the proceedings meet the minimum standards of fairness; and
• there is no apparent violation of German ordre public, meaning that the proceedings must align with the fundamental values and principles of German law.

In such cases, German courts may provide support by:

• freezing assets;
• appointing administrators; or
• recognising foreign decisions if they meet the fairness requirements under German law.

5.4 To what extent will the courts cooperate with their counterparts in other jurisdictions in the case of cross-border insolvency or restructuring proceedings?

German courts work closely with the authorities in other jurisdictions in cross-border insolvency or restructuring proceedings. The basis for cases within the European Union is the EU Insolvency Regulation (2015/848), while cooperation with non-EU countries is based on the Insolvency Code and international agreements.

5.5 How are corporate groups treated in the context of restructuring and insolvency proceedings? If there is no concept of a group proceeding (or consolidation), is there any regime through which insolvency officeholders must / may cooperate?

German insolvency law does not provide for a separate group insolvency regime. As a general rule, a separate insolvency proceeding is initiated for each company within a corporate group. However, German insolvency law contains specific provisions for dealing with group insolvencies. Notably, it allows for the application of a group forum for insolvency proceedings. Additionally, there is the possibility of coordinating the proceedings of debtors that belong to the same corporate group. For instance, insolvency administrators of group-affiliated debtors must inform and cooperate with one another.

5.6 Is your country considering adoption of the UNCITRAL Model Law on Enterprise Group Insolvency?

Germany has not yet adopted the UNCITRAL Model Law on the Insolvency of Corporate Groups, and currently, no legislative initiative for such adoption is under preparation. While the Model Law is acknowledged in legal academic discussions, formal implementation into German law is not yet under consideration.

5.7 How is the debtor's centre of main interests determined in your jurisdiction?

The debtor's COMI is determined in Germany in accordance with the provisions of the EU Insolvency Regulation (2015/848). The COMI is the place where the debtor typically conducts its activities and is identifiable to third parties, particularly creditors. For companies, it is presumed that the COMI is located at the place of the central administration, unless there are clear indications that the actual management and significant business activities take place elsewhere. For natural persons without independent economic activity, the COMI is generally presumed to be at their habitual residence. However, these presumptions can be rebutted if the actual circumstances suggest a different conclusion.

5.8 How are foreign creditors treated in restructuring and insolvency proceedings in your jurisdiction?

Foreign creditors are generally treated equally in German restructuring and insolvency proceedings. They are afforded both procedural and substantive equality with domestic creditors, regardless of their nationality or place of business. This principle of equal treatment is enshrined in German insolvency law and aligns with the EU Insolvency Regulation (2015/848), as well as international standards. Foreign creditors have the right to:

• file claims in the insolvency schedule;
• participate in creditors' meetings;
• vote on insolvency or restructuring plans; and
• in accordance with the statutory ranking, participate in distributions.

6 Liability risk

6.1 What duties do the directors of the debtor have when the company is in the "zone of insolvency" (or actually insolvent)? Do they have an obligation to commence insolvency proceedings at any particular time?

Managing directors of a company must monitor the financial situation of the company. If the company is in crisis, the managing directors must exercise particular diligence. Specifically, they must continuously assess the company's liquidity. If the assessment reveals that the company is insolvent and/or over-indebted, the managing directors are legally required to file for insolvency:

• without delay; and
• in any case, no later than three weeks thereafter.

Failure to comply with this obligation renders the managing directors liable. Furthermore, during the period in which an insolvency petition is due to be filed, the managing directors are generally prohibited from making payments on behalf of the company. Should such payments occur, the directors must reimburse them.

6.2 Are there any circumstances in which the directors could incur personal liability in the context of a debtor's insolvency?

In Germany, managing directors can be held personally liable in connection with a company's insolvency if they breach their statutory duties. One of the principal obligations is the timely filing of an application to open insolvency proceedings. If such an application is filed late, the managing director may face both:

• civil liability for damages; and
• criminal sanctions, such as for:
• • delayed filing of insolvency; or
  • fraudulent bankruptcy.

In addition, managing directors are generally personally liable for any payments made from the company's assets after the company has become illiquid and/or over-indebted. Further liability risks arise from breaches of other statutory duties, such as:

• failure to remit wage tax and social security contributions; or
• violations of accounting and financial reporting obligations.

6.3 Is there any scope for any other party to incur liability in the context of a debtor's insolvency (e.g. lender or shareholder liability)?

Under certain conditions, third parties such as shareholders and financiers may also be held liable under German law. Shareholders may incur liability if they commit a destructive intervention by withdrawing assets from the company in a manner that leads to its economic collapse. Financiers, particularly banks, may in exceptional cases be held liable if they unlawfully interfere in the management of the company's business operations.

7 The Covid-19 pandemic

7.1 Did your country make any changes to its restructuring or insolvency laws in response to the Covid-19 pandemic? If so, what changes were made, what is their effect and are they temporary or permanent?

In response to the COVID-19 pandemic, Germany enacted extensive and, in part, far-reaching reforms to its restructuring and insolvency laws. At the heart of the emergency measures was the COVID-19 Insolvency Suspension Act, which came into force in March 2020. The key element of this legislation was the temporary suspension of the obligation to file for insolvency, provided that:

• the insolvency situation was caused by the effects of the pandemic; and
• there was a reasonable prospect of overcoming the debtor's illiquidity.

As a result, the statutory filing obligation was temporarily lifted. In addition, dedicated legislation was introduced to facilitate new financing arrangements and restructuring measures by shielding creditors and shareholders from liability or avoidance actions merely on the basis of their involvement in such restructuring efforts. These provisions were explicitly temporary in nature and are no longer in force under the current legal framework.

8 Other

8.1 Is it possible to effect a "pre-pack" sale of assets, and is it possible to sell the assets free and clear of security, in restructuring and insolvency proceedings in your jurisdiction?

Germany does not have a formal pre-pack procedure and the draft directive proposed by the European Commission has not yet been transposed into national law. Nonetheless, it is common practice for the sale of assets:

• to be prepared prior to the opening of insolvency proceedings; and
• to become effective upon commencement of the proceedings.

It is generally permissible to sell assets free of encumbrances in the context of restructuring and insolvency proceedings; however, this typically requires the consent of the secured creditor. In case of a so-called 'transferring reorganisation', assets are transferred to a new acquirer by way of individual legal succession. The insolvency administrator usually ensures that any third-party security interests are discharged (at the latest) upon transfer so that title passes to the acquirer unencumbered. The same principles apply in proceedings under the Corporate Stabilisation and Restructuring Act framework.

8.2 Is "credit bidding" permitted?

In Germany, the practice of credit bidding is generally permitted in insolvency proceedings, but it is subject to certain conditions. Secured creditors may participate in the sale of assets and use their secured claims as a form of 'currency' by waiving a cash payment and instead offsetting their claim against the purchase price. However, the execution of such sales falls within the responsibility of the insolvency administrator, who must oversee the realisation process and ensure that it is conducted in a transparent, competitive, and creditor-oriented manner.

9 Trends and predictions

9.1 How would you describe the current restructuring and insolvency landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Germany's current restructuring and insolvency landscape is characterised by stable yet evolving dynamics, shaped by:

• economic uncertainty;
• regulatory adjustments; and
• the aftermath of the COVID-19 pandemic.

After a period of suppressed insolvency figures – mainly due to government support measures – corporate insolvencies are now increasing. Contributing factors include:

• inflation;
• rising interest rates;
• energy price volatility; and
• persistent global supply chain disruptions.

Companies are increasingly turning to preventive restructuring tools, particularly under the Corporate Stabilisation and Restructuring Act, to address financial distress at an early stage. Small and medium-sized enterprises in particular use this framework to restructure out of court under judicial supervision. This reflects a broader trend towards early intervention and negotiation-based solutions. In parallel, digitalisation continues to advance, streamlining insolvency and restructuring proceedings through electronic communication between courts, administrators, and creditors. Another trend is the growing relevance of environmental, social and governance factors, which are increasingly integrated into restructuring plans to attract investors and meet stakeholder expectations.

Looking ahead, several developments are expected within the next year:

• The Corporate Stabilisation and Restructuring Act is likely to be refined to increase its practical usability and legal certainty, especially by better balancing debtor and creditor interests.
• Broader reforms to insolvency law may also be considered to enhance procedural efficiency and access.
• At the European level, further harmonisation of insolvency regimes is underway and Germany may adopt corresponding measures, particularly in cross-border contexts.
• Given the current economic climate, a continued rise in insolvencies is anticipated, especially in:
• • energy-intensive industries;
  • retail; and
  • construction.

10 Tips and traps

10.1 What are your top tips for a smooth restructuring and what potential sticking points would you highlight?

Successful corporate restructurings require a combination of:

• strategic foresight;
• legal diligence; and
• effective stakeholder coordination.

Early identification of financial distress and a proactive response are critical, including:

• comprehensive planning; and
• the timely engagement of experienced legal, financial and restructuring advisers to mitigate unforeseen risks.

Transparent communication with key stakeholders – creditors, employees and shareholders – is essential to build trust and reduce resistance. A realistic financial assessment and securing a stable financing base at the outset help to avoid liquidity shortfalls. Reviewing and, where necessary, renegotiating material contracts, as well as developing a sustainable long-term business plan, are further key elements of an effective restructuring. The use of preventive restructuring frameworks, such as the Corporate Stabilisation and Restructuring Act, can facilitate orderly out-of-court resolutions. Classifying creditors, securing requisite approvals and ensuring full compliance with legal requirements are central to the success of such proceedings. Detailed documentation of restructuring efforts is also vital to withstand later scrutiny by courts or regulators. Common pitfalls include delayed insolvency filings, which may trigger significant personal liability for company directors. Uncoordinated, isolated actions by individual creditors can also undermine restructuring efforts if not aligned with a comprehensive strategy. Inadequate documentation may further impede enforcement or recognition of restructuring measures, especially under judicial review.

In sum, successful restructurings require:

• careful planning;
• transparent communication; and
• strict adherence to legal obligations.

Addressing potential challenges early:

• enhances procedural efficiency; and
• reduces the risk of failure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.