In a crisis, the so-called restructuring moderation of the StaRUG is particularly suitable for small companies. We explain how it works and when it makes sense.
- What is restructuring moderation?
- For whom is restructuring moderation useful and possible?
- How to apply for restructuring moderation?
- What is the procedure for appointing a restructuring moderator and what requirements does the moderator have to meet?
- What are the duties and powers of the restructuring moderator?
- What does the court confirmation of the settlement mean?
- Costs of the restructuring moderation
- What are the advantages and disadvantages of restructuring moderation?
1. What is restructuring moderation?
A restructuring moderation (sections 94 to 100 StaRUG) can be carried out regardless of the restructuring and stabilisation framework and its instruments. The debtor gets support from a restructuring moderator who mediates between the debtor and its creditors in finding a solution to overcome the economic or financial difficulties.
The focus is on the development of a restructuring concept. On a consensual basis, it is possible to agree on a restructuring settlement, which, if confirmed by the restructuring court, can only be contested to a limited extent during the insolvency proceedings.
2. For whom is restructuring moderation useful and possible?
Restructuring moderation is particularly suitable for those micro and small enterprises that cannot afford advice and support from professional restructuring advisors but are dependent on external support.
In addition, restructuring moderation can be suitable for any type of debtor if the use of a neutral mediator is deemed necessary in restructuring negotiations. Moderation can then serve as a preliminary stage to the possible use of instruments of the stabilisation and restructuring framework.
3. How to apply for restructuring moderation?
A restructuring moderator is only appointed upon application by a person capable of restructuring, section 94 StaRUG.
The application must be addressed to the restructuring court. It must contain the following:
4. What is the procedure for appointing a restructuring moderator and what requirements does the moderator have to meet?
The appointment of the restructuring moderator is generally for a period of up to three months, § 95 StaRUG. At the request of the moderator, the appointment period may be extended by up to three months. This request requires the consent of the debtor and the creditors involved in the negotiation. If the confirmation of a restructuring settlement is requested, an extension is possible until the decision thereon.
The appointment is made by the restructuring court and is not made public.
The restructuring moderator must be a person who is suitable for the individual case, in particular an independent person, but who does not have to be listed with the court as a person eligible to assume the office.
5. What are the duties and powers of the restructuring moderator?
The debtor must allow the restructuring moderator to inspect its books and business records. In addition, the debtor shall provide the restructuring court with information upon request so that the restructuring court can form an opinion on the debtor's economic or financial situation and verify the information provided by the debtor, section 96 StaRUG.
The restructuring moderator shall report to the restructuring court on a monthly basis on the progress of the restructuring process. This serves to hold the moderator accountable for his work to the court appointing him. If the debtor is insolvent or, in the case of a limited liability entity, over-indebted, the moderatorator shall report this to the court as soon as he becomes aware of it.
The restructuring moderator is subject to the supervision of the court, whereby the supervision by the court is limited to compliance with the reporting obligation. The court not only verifies compliance with the monthly deadlines, but also whether the reports essentially contain explanations of the points on which the restructuring moderator is to report at least. This does not involve an examination of the reports for accuracy of content, unless the reports are obviously erroneous or are based on obviously false assumptions.
6. What does the court confirmation of the settlement mean?
The debtor has the possibility to have a settlement concluded with his creditors confirmed by the court, section 97 StaRUG. The court can only reject the confirmation under limited preconditions. The restructuring moderator makes a statement to the court on the existence of these preconditions.
Pursuant to section 97(1) StaRUG, confirmation may only be refused if the restructuring concept underlying the settlement
- is not conclusive (no. 1),
- is not based on the actual circumstances (no. 1) or
- has no reasonable prospect of success (no. 2).
7. Costs of the restructuring moderation
The restructuring moderator is entitled to appropriate remuneration, which is calculated on the basis of the time and material expenditure for the tasks associated with the restructuring, section 98 (1) StaRUG.
The calculation of the remuneration shall follow the principles according to which the remuneration of the restructuring officer is also calculated, section 98 (2) in conjunction with sections 80 - 83 StaRUG.
In the case of the standard remuneration (section 98 (2) in conjunction with section 81 StaRUG), the remuneration shall accordingly be based on hourly rates. In assessing and setting the hourly rates by the restructuring court, the following factors are taken into account
- the size of the enterprise,
- the type and extent of the debtor's economic difficulties, and
- the qualifications of the restructuring moderator and the qualified staff.
As a rule, the hourly rate for the personal work of the restructuring moderator is up to EUR 350 and for the work of qualified staff up to EUR 200. In special cases, hourly rates may be set that exceed these maximum amounts, section 98 (2) in conjunction with section 83 StaRUG. In agreement with the debtor and the restructuring moderator, other remuneration models shall also be permissible.
8. What are the advantages and disadvantages of restructuring moderation?
Restructuring moderation offers debtors the opportunity to be supported in confidential proceedings by a court-appointed restructuring moderator who explores possible restructuring prospects and moderates the negotiations between the debtor and his creditors.
Practice Note by Julia Nadine Warnke, LL.M.:
The confidentiality of restructuring moderation - a significant advantage of this procedure - also serves to protect the debtor's reputation, as a moderator may be called upon well in advance of a possible insolvency. The earlier restructuring is considered by the debtor, the greater the scope for action and thus ultimately the greater the chances of success in overcoming the debtor's economic or financial difficulties
Restructuring moderation is a voluntary procedure for the debtor in which - unlike the measures of the stabilisation and restructuring framework - coercive effects cannot be enforced against the creditors involved. However, due to the court confirmation of a consensual arrangement, it is subject to the same legal privileges as the measures of a restructuring plan, so that moderation can be a first step towards a reorganisation if the creditors' resistance is not expected.
If it turns out in the course of moderation that the plan can only be implemented against the resistance of individual creditors, the debtor can move to the stabilisation and restructuring framework in the second step and use its instruments, which remain available.
Julia Nadine Warnke, LL.M.
Author of this article
Julia Nadine Warnke, LL.M. advises national and international companies on insolvency law and restructuring. Her advice covers all areas of insolvency law, restructuring and crisis-related corporate law.