Expansion and streamlining of the insolvency plan procedure

Intervention in shareholders’ rights

It is now possible, along the lines of the American Chapter 11 procedure, to modify the rights of shareholders through regulations contained in the insolvency plan. In practice, the conversion of creditor demands into share rights or membership rights – the so-called Debt-Equity-Swap (Section 225a InsO) – opens up some extremely interesting organizational options.

Limiting the scope for blocking the plan

  • Up until now it was possible for creditors to invoke the regulations of Section 251 InsO to prevent the implementation of the insolvency plan, or at least to significantly delay it by lodging appeals, if they could argue plausibly that they would be worse off because of the plan (Section 251 Para 2 InsO, old version). In practice, in particular in the case of large-scale procedures, this meant that the debtor was forced to provide these creditors illegally with special advantages in order to bring the plan to a conclusion. From now on, the debtor has the opportunity to make allowance in the plan for these creditors to be provided with funds in the event that they can prove that they are worse off. It is not within the purview of the insolvency proceedings to clarify whether the parties involved can obtain compensation from these funds (Section 251 Para 3 InsO). Thus, even procedures that have been dragging on for years do not bar the realization of the plan.
  • In the past, it was possible, without giving any reason, for appeals to be lodged against the decision that confirmed the insolvency plan. This was even possible if the plan had originally been approved by the person lodging the appeal. Now, appeals according to Section 253 InsO are only admissible if the plan is objected to in writing at the voting meeting, the plan is voted against, and it is plausibly shown that the objecting creditor would be significantly worse off under the plan, and that this disadvantage cannot be compensated for by making payment out of the funds mentioned in Section 251 Para 3 InsO.

For more information read:  Facilitating the cancellation of the insolvency plan

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