ESUG – an important amendment of the German Insolvency Ordinance A brief overview over the main changes

Background Insolvency Ordinance from 1999 EIR from May 2002 Forum shopping Need for improvements

Purpose of the ESUG Primary goal: insolvency proceeding shall become more projectable Establishing a rescue culture Disempowerment of the insolvency stigma

The respective amendments I Increasing the creditors‘ influence on the administrator‘s selection: by instituting a preliminary creditors‘s committee, s. 21, 22a by selection of the administrator, s. 56a (56 par. 1 3rd sent.) Note: two professions! Restructuring experts vs. Insolvency administrators

The respective amendments II Better information of the court, s. 13 (for improving the quality of the decisions) See also s. 22 par. 6, 2dn s. GVG and s. 18 par. 4, 2nd s. RPflG for the education of the judges and judicial officers Non-reform: concentration of courts

The respective amendments III Improvements of the plan proceeding – Less remedies for obstructing creditors – Inclusion of the insolvent company‘s shareholders – Debt-equity swap – Permissibility of a plan containing solely directions for how to proceed until the nest step („verfahrensleitender Plan“)

The respective amendments IV Strengthening of the „debtor-in-possession“ (Eigenverwaltung) –G–General admissibility, s. 270 –P–Preliminary dip, s. 270a –R–Relationship with company‘s officials weakend, s. 276a

The respective amendments V Incentive for early opening – S. 270b: protective umbrella proceeding (Schutzschirmverfahren) – Germany‘s reaction to the English Scheme of Arrangement – A three months period for drafting a plan – Success dependent on communication with stakeholders

Outlook The legislator is expected to change the mentality! Success depends on the professionals What is needed are success stories The European competition will not stop here