The Act on the Further Development of Restructuring and Insolvency Law (SanInsFoG) essentially serves to transpose the European Restructuring and Insolvency Directive of 19 June 2019 into German law. Following several amendments, the SanInsFoG was adopted by the German Bundestag on 17 December 2020 and entered into force on 1 January 2021. It is intended to help avert imminent corporate insolvencies and thus provide enhanced support to companies particularly affected by the pandemic. In addition, lengthy insolvency proceedings are to be avoided by granting companies threatened by insolvency greater individual responsibility.
Changes Introduced by the SanInsFoG
The SanInsFoG is divided into two parts, with the Corporate Stabilisation and Restructuring Act (StaRuG) constituting the first part as a separate statute. The key provisions of Part 1 are as follows:
Review and Warning Obligations of the Reviewing Third Party
In principle, reviewing third parties (e.g. Steuerberater (German Certified Tax Advisor), attorneys, Wirtschaftsprüfer (German Statutory Auditor)) are subject to review and warning obligations toward the client where there is a risk of insolvency, according to a ruling by the Federal Fiscal Court. Under the new rules, reviewing third parties are now also statutorily required to advise clients on potential grounds for insolvency and to pay particular attention to conceivable causes of insolvency when reviewing the documents (§ 102 StaRuG).
Procedure for Avoiding Insolvency Proceedings
The StaRuG also sets out a dedicated programme for avoiding insolvency proceedings. This procedure can be divided into three stages:
- Requirements for proceedings under the StaRuG
A prerequisite for proceedings under the StaRuG is an imminent inability of the company to pay its debts within the next 24 months. If this requirement is met, the company may file an application under this procedure with the competent court. Until the court issues a final decision, the obligation to file for insolvency is suspended.
- Submitting a restructuring plan
Once the court has approved the procedure, the company or its representative may submit a restructuring plan. This plan should contain a going-concern statement, a statement of assets, a profit and financial plan, and a description of the effects of the restructuring. The groups affected by the plan must also be identified, and the support measures must be presented by group (§§ 5–16 StaRuG).
- Implementing a restructuring plan
When implementing the restructuring plan, the company has the option of either carrying it out itself or filing an application with the competent court, which then carries it out for the company. In addition, the restructuring plan must be accepted by the creditors. Previously, many restructuring plans failed due to the three-week deadline for filing for insolvency and the required unanimity of creditors. Under the StaRuG, the restructuring plan now only needs to be accepted by 75% of the voting rights (§ 9 StaRuG).
Further Changes under the SanInsFoG
Aside from the StaRuG, Part 1 of the SanInsFoG introduces a number of further changes. These include:
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The obligation to file for insolvency is suspended until 30 April 2021 if an application for COVID-19 aid was filed between 1 November 2020 and 28 February 2021.
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Apart from the exception regarding the suspension of the obligation to file for insolvency (first bullet point), this filing must still be made within 3 weeks in the case of illiquidity and within 6 weeks in the case of over-indebtedness.
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Companies facing imminent insolvency now only have to demonstrate 4 months in advance, rather than 12, that they will be able to settle their debts.
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VAT liabilities incurred by the company or the insolvency administrator count as liabilities of the insolvency estate.
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New rules on payment prohibitions (§ 15b InsO); payments may only be made:
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to maintain business operations
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for measures to eliminate the insolvency
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to prepare for the insolvency proceedings
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with the agreement of the insolvency administrator
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Frequently asked questions
Frequently asked questions
What is the SanInsFoG and when did it take effect?
The Sanierungs- und Insolvenzrechtsfortentwicklungsgesetz (SanInsFoG, German Act on the Further Development of Restructuring and Insolvency Law) transposes the European Restructuring and Insolvency Directive of 19 June 2019 into German law. It was passed by the Bundestag on 17 December 2020 and came into force on 1 January 2021. Its aim is to avert imminent corporate insolvencies and prevent lengthy insolvency proceedings by granting companies greater self-responsibility.
What review and warning duties do Steuerberater have under § 102 StaRuG?
Under § 102 StaRuG, Steuerberater (German Certified Tax Advisors), Rechtsanwälte (German Attorneys-at-Law) and Wirtschaftsprüfer (German Statutory Auditors) acting as external reviewers are legally required to alert their clients to potential grounds for insolvency. When examining client records, they must specifically watch for any indications of insolvency. This obligation supplements the warning duties already established by BFH case law.
What are the requirements for restructuring proceedings under the StaRuG?
The prerequisite is imminent insolvency of the company within the next 24 months. If this applies, an application can be filed with the competent restructuring court. Until the court issues its decision, the obligation to file for insolvency is suspended.
What majority is required to approve a restructuring plan?
The restructuring plan no longer requires unanimous approval; a majority of 75% of the creditors' voting rights is sufficient (§ 9 StaRuG). This removes a key reason why restructuring plans have failed in the past. The plan can be implemented by the company itself or through the court.
When was the obligation to file for insolvency suspended in connection with Corona aid?
The obligation to file for insolvency was suspended until 30 April 2021, provided that the company had applied for Corona aid between 1 November 2020 and 28 February 2021. Outside of this exception, the following still applies: in the event of illiquidity, the application must be filed within 3 weeks; in the event of over-indebtedness, within 6 weeks.
Which payments remain permissible in an insolvency scenario under § 15b InsO?
Under § 15b InsO, payments may only be made to maintain ongoing business operations, to implement measures aimed at remedying the insolvency, to prepare insolvency proceedings, or with the consent of the insolvency administrator. VAT liabilities incurred by the company or the insolvency administrator qualify as liabilities of the insolvency estate (Masseverbindlichkeit).