The German restructuring framework underwent a significant transformation in 2021 with the introduction of the StaRUG (“Unternehmensstabilisierungs- und -restrukturierungsgesetz“) that allows financially distressed companies to implement court-supported restructuring plans with limited stakeholder involvement before formal insolvency proceedings become unavoidable.
At Valtus Alliance, we rely on a worldwide network of restructuring experts – because legislation and restructuring practices vary significantly from country to country. In this article, Heinrich Schaible, CEO of Valtus Germany, interviews restructuring expert Andreas Greis from Valtus Germany about restructuring in Germany.
What makes the legal framework for insolvency and restructuring unique in Germany?
Germany’s legal framework for restructuring is both highly structured and remarkably pragmatic. The StaRUG (“Unternehmensstabilisierungs- und -restrukturierungsgesetz“) and the Insolvency Code (InsO) provide well-defined procedures, while also allowing flexibility for consensual out-of-court solutions. This dual approach effectively balances creditor protection with business continuity.
There are three principal types of corporate insolvency proceedings regulated by the Insolvency Code:
1. Regular Insolvency Proceedings („Regelinsolvenzverfahren“)
- The standard procedure for companies (corporations, partnerships, or self-employed individuals with complex finances).
- May result either in liquidation or in restructuring through an insolvency plan.
2. Insolvency Plan Proceedings („Insolvenzplanverfahren“)
- A court-supervised restructuring process within regular insolvency proceedings.
- Comparable to Chapter 11 in the U.S.
- Enables a company to reorganize and continue operations while repaying debts under a negotiated plan.
3. Protective Shield Proceedings („Schutzschirmverfahren“)
- A special form of debtor-in-possession proceeding.
- Available only when insolvency is imminent but not yet realized.
- Management remains in control while developing a restructuring plan under court protection.
In addition, pre-insolvency procedures are available under the StaRUG:
StaRUG – Preventive Restructuring Framework
- Legal basis: Corporate Stabilization and Restructuring Act (StaRUG), effective since January 2021.
- Purpose: Enables companies facing imminent insolvency (“drohende Zahlungsunfähigkeit”) to restructure early — before formal insolvency.
- Objective: Avoid formal proceedings (and their stigma) through a court-approved plan agreed with specific creditors.
- Control: Management stays in charge (debtor-in-possession).
- Court involvement: Limited — the court intervenes only when necessary, e.g., to confirm the plan or impose a stay on enforcement actions.
Talking about restructuring you have to know two professional standards widely used in Germany and asked for mainly by banks and investors in order to be able to decide on specific cases: the IDW S6 and the IDW S11. These standards have been issues by the German Institute of Public Auditors and they define the structure and the content of expert opinions with regard to restructuring and insolvency. These standards are not legally mandatory, but they function as de facto market standards.
IDW S6 – Restructuring Opinion (Sanierungsgutachten)
Purpose: Standard for restructuring and viability assessments.
- Issued by: Institute of Public Auditors in Germany (IDW).
- Use: Determines whether a company can be successfully restructured and remain viable.
- Context: Often required by banks or courts before continuing financing during a crisis.
Focus:
- Causes of the crisis
- Operational and financial restructuring measures
- Financial projections demonstrating sustainable profitability and liquidity
In short: IDW S6 defines the professional standard for assessing whether a company can be saved.
IDW S11 – Insolvency Reason Analysis (Insolvenzgründeprüfung)
- Purpose: Standard for identifying and documenting insolvency reasons.
Focus:
- Illiquidity (Zahlungsunfähigkeit)
- Imminent illiquidity (drohende Zahlungsunfähigkeit)
- Over-indebtedness (Überschuldung)
- Use: Helps management, auditors, and advisors determine whether and when an insolvency filing is required.
In short: IDW S11 defines how to assess whether a company is — or is about to become — insolvent.
What is the most common mistake companies make in the early stages of a liquidity crisis?
The most common mistake is denial. Management often delays recognizing the severity of the situation and fails to act promptly. This loss of valuable time severely limits strategic options. A related mistake is inaction — either waiting too long to decide or avoiding difficult decisions altogether. At the same time, transparency is often lacking: key stakeholders, such as banks, are not informed or involved early enough.
At what point, and in what role, should an external restructuring expert be brought in – and who should appoint them?
Ideally, an external expert should be engaged as soon as early warning signs appear — shrinking margins, tightening liquidity, or declining stakeholder confidence. The role varies depending on the severity of the crisis: from consultant to CFO or CRO. The mandate should typically come from the board of management or shareholders, as they bear ultimate responsibility for the company’s continuity and have the greatest interest in preserving it.
What is your view on the use of protective shield proceedings as part of a restructuring strategy?
Protective shield proceedings (“Schutzschirmverfahren”) are a valuable tool within Germany’s restructuring landscape. They allow companies to reorganize under court supervision while management remains in place. These proceedings provide transparency and breathing space, but they are effective only when initiated early enough — before insolvency becomes unavoidable. However, they do not offer the same range of options as regular insolvency proceedings.
Do employees in Germany continue to receive salaries and bonuses in the event of insolvency?
Yes. Wages are covered by the state through insolvency benefits (“Insolvenzgeld”) for three months before the opening of insolvency proceedings. After this period, salaries must be financed by the business itself or through restructuring arrangements. Bonuses, however, are generally not protected.
Before the insolvency filing (“pre-filing period”)
- Unpaid salaries and bonuses from before the filing date become insolvency claims (“Insolvenzforderungen”) — treated like other pre-insolvency debts.
- They are not specially protected; employees typically receive only a pro rata payment from the insolvency estate, often just a small fraction.
However, there is an important state safety net:
Employees can claim Insolvency Pay (Insolvenzgeld) from the Federal Employment Agency (Bundesagentur für Arbeit).
- It covers net wages for up to three months before the filing date.
- The agency pays the employees directly and subsequently seeks reimbursement from the insolvency estate (“Masse”).
- This provides strong protection for employee wages shortly before insolvency.
Example:
If a company files for insolvency on October 1, the Federal Employment Agency covers unpaid wages for July, August, and September.
Which case in your career has most profoundly shaped your view of restructuring – and what did you learn from it?
The later insolvency of my own start-up. I learned first-hand how uncommitted investors may use insolvency strategically to acquire valuable assets at a fraction of their value — free of debt. It taught me that not everyone in the market acts with long-term intent; some simply speculate on distress.
In the event of a severe profitability and liquidity crisis, what would you consider the best course of action for a foreign corporation with a local subsidiary?
The best approach is to act decisively and transparently. A foreign parent company should swiftly engage local restructuring expertise to navigate legal, market, and cultural specifics, while ensuring close coordination between headquarters and local management.
Germany has its own regulatory, contractual, and competitive dynamics — as well as labor law specifics — all of which can significantly influence strategic options.
It is crucial to determine whether the issue is temporary or structural, and this requires qualified local insight. From experience, I can say: the quality of the restructuring team is decisive — well-known names alone are no guarantee of success.
How established is private equity in Germany with regard to restructuring?
Private equity plays an increasingly significant role in Germany’s distressed M&A market. While banks and traditional shareholders remain key stakeholders, private equity investors often provide the capital and operational expertise required to reposition companies for long-term success.
At Valtus we regularly collaborate with PE firms and family offices to assess opportunities and develop sustainable turnaround strategies in crisis situations.
What personal qualities do you consider most important for a restructuring leader?
Resilience, empathy, and decisiveness. A restructuring leader must inspire confidence, make tough decisions under pressure, and engage stakeholders with respect and authenticity.
If the goal is to secure a company’s long-term future, strategic vision is as essential as technical restructuring expertise.
In many crises, the root cause lies in a lack of leadership and accountability over time. Therefore, strong, visible leadership that managers, employees and stakeholder can identify with is absolutely essential.
How do you handle the emotional dimension of restructuring, especially with employees and management under stress?
It is vital to take tough decisions in a human way. Everything starts with honest and transparent communication — though not everyone is prepared to face it.
Recognizing emotions is crucial: people are more likely to accept difficult measures when they feel informed and treated fairly.
I believe in the principle that clarity is kindness and that courage must outweigh comfort. Staying human, even when making hard decisions, makes all the difference.
How do you balance short-term survival with long-term strategy in a restructuring?
The immediate priority is to secure liquidity and stabilize operations. However, success depends equally on developing a credible long-term strategy that convinces stakeholders of the company’s viability.
The art of restructuring lies in balancing both dimensions — ensuring survival today while positioning the company for sustainable success tomorrow.
In doing so, I always emphasize: keep your clients’ clients at the center of all mid- and long-term initiatives.
What does Valtus Germany offer with regard to restructuring?
Valtus can provide comprehensive services with regard to restructuring. We have many experiended Chief Restructuring Officers (CROs) and renowned restructuring CFOs in our talent pool, and together with Management Factory – A Valtus Company we can issue expert opinions like IDW S6 and IDW S11. Recently I also published a webinar on leadership in times of crisis which you can watch on YouTube. At the Handelsblatt you find an article that summarizes the services of Valtus with regard to restructuring very well: “Restructuring with integrity: the Valtus Group gets companies back on track”.
What trends do you expect to shape the restructuring landscape in the next five years?
I foresee a rapidly growing role for artificial intelligence (AI) in restructuring. AI will increasingly help to compensate for missing skills and accelerate decision-making in competitive environments.
Established industry standards such as IDW S6 and IDW S11 will continue to evolve, providing more dynamic and practical frameworks for restructuring and insolvency analysis.
As the VUCA world (volatility, uncertainty, complexity, ambiguity) becomes reality, traditional frameworks will need to adapt to faster dynamics and greater complexity. Therefore, I am convinced that the demand for CROs and interim restructuring managers will increase in the years to come.