Definition and Legal Classification of the Reorganisation Plan
Der Reorganisation Plan is a central instrument in German and Austrian restructuring and insolvency law. It enables businesses or organizations in financial distress to restructure both structurally and financially through targeted measures, in order to enable sustainable continuation. The reorganisation plan differs from other restructuring tools such as the insolvency plan in its objectives, content, and effect, and plays a significant role especially in the context of the preventive restructuring framework and out-of-insolvency restructuring proceedings.
Legal Basis and Scope of Application
Germany
In Germany, the term “reorganisation plan” has come to the fore in particular through the Corporate Stabilisation and Restructuring Act (StaRUG), which came into force on January 1, 2021. The StaRUG implements the requirements of the European Directive on preventive restructuring frameworks. Here, the reorganisation plan generally differs from the insolvency plan under the Insolvency Code (InsO), as it is applied outside of insolvency proceedings and has a preventive character.
Austria
In Austria, the reorganisation plan is regulated by the Unternehmensreorganisationsgesetz (URG). It provides a binding basis for the restructuring of endangered companies. The aim is to rehabilitate companies that have fallen into financial distress with a legally regulated process and a package of measures.
Function and Purpose of the Reorganisation Plan
The purpose of the reorganisation plan is to systematically analyse and address the existing causes of crisis within an organization. It is intended to restore and secure an organization’s liquidity and competitiveness in the long term. During the process and upon successful implementation, jobs are preserved and the interests of creditors are protected.
Preventive Character
The preventive element of the reorganisation plan lies in the fact that it is often applied before the risk of insolvency arises. This gives companies the opportunity to initiate necessary restructuring measures before over-indebtedness or insolvency occurs.
Content and Requirements of a Reorganisation Plan
Legislators impose strict requirements on the preparation of a reorganisation plan. The plan is a comprehensive written document that outlines in detail the economic situation, the causes of the crisis, and the planned restructuring measures.
Minimum Content according to StaRUG (Germany)
An effective reorganisation plan as defined in the StaRUG must include, among other things, the following points:
- Analysis of the Current Situation: Presentation of the economic, legal, and financial position of the company.
- Description of the Causes of the Crisis: Identification and justification of the causes of financial distress.
- Restructuring Objectives: Definition of the intended restructuring and rehabilitation successes.
- Catalogue of Measures: Specific measures for sustainable restructuring, such as restructuring of liabilities, operational and strategic adjustments.
- Timetable and Action Plan: Timeline and responsibilities for the planned measures.
- Financial Forecast: Detailed projection of future financial and profit situations to demonstrate the restoration of liquidity.
- Impacts on Creditors: Description of the expected impacts on affected creditor groups.
- Comparison Calculation: Demonstration of the benefits for creditors compared to other alternatives, especially regular insolvency.
Requirements according to the Unternehmensreorganisationsgesetz (Austria)
The reorganisation plan according to § 6 URG must include at least the following:
- Description of the Financial Crisis and its causes,
- Measures to Overcome the Crisis,
- Presentation of Planned Improvements,
- Forecast of Corporate Development,
- Financial Plan for at least two years.
Involvement and Rights of Creditors and Corporate Bodies
A key element of the reorganisation plan is the involvement of the creditors. In StaRUG proceedings, the affected creditors are grouped and vote on the plan by group. A consent quota of at least 75 percent of the claims (per group) is required for acceptance. After court confirmation, the plan has a binding effect on all affected creditors. In Austria, the URG does not provide for comprehensive creditor involvement as in insolvency proceedings, but there is a duty of notification and information to the court and key stakeholders.
Court Confirmation and Legal Effects
Germany
The reorganisation plan may be confirmed by the restructuring court (so-called plan confirmation procedure according to §§ 74 et seq. StaRUG). Upon final confirmation, the measures and legal changes stipulated in the plan become binding for all affected parties. In particular, deviating arrangements for debt reduction or structuring can also be enforced against the will of individual creditors (so-called cram-down).
Austria
The plan is submitted to the court for examination and monitoring of implementation. The court decides on the adequacy and rescues the company by supervising the implementation of the reorganisation plan.
Distinction from the Insolvency Plan and Other Restructuring Tools
The reorganisation plan differs significantly from the insolvency plan. While the insolvency plan is part of insolvency proceedings, the reorganisation plan is submitted and implemented in advance to avert insolvency. In addition, the reorganisation plan must be distinguished from other instruments such as out-of-court restructuring agreements, protective shield proceedings, or self-administration proceedings, each of which has specific fields of application and legal frameworks.
Practical Significance and Typical Applications
Reorganisation plans are a key means of managing corporate crises, particularly for medium-sized businesses and larger corporations. They are used when timely business and financial countermeasures must be initiated. Examples include looming over-indebtedness, loss of essential business foundations, or significant market setbacks.
Tax and Corporate Law Implications
The implementation of measures within a reorganisation plan can have tax implications. These include, for example, book gains from debt waivers or the taxation of restructuring gains. In terms of company law, there can be changes to the shareholder base, capital measures, or amendments to the company’s constitution.
Summary
The reorganisation plan is a comprehensive and legally binding instrument for restructuring companies in crisis situations. Depending on the legal system, it offers the possibility to implement sustainable restructuring with court assistance and protection from creditor actions, thereby averting the risk of insolvency. Compliance with statutory minimum requirements and effective involvement of all stakeholders are key prerequisites for the success of this restructuring instrument.
Literature and Further Information
- Corporate Stabilisation and Restructuring Act (StaRUG)
- Insolvency Code (InsO)
- Unternehmensreorganisationsgesetz (Austria)
- Directive (EU) 2019/1023 on preventive restructuring frameworks
- Specialist literature on restructuring and insolvency law
Frequently Asked Questions
Who is entitled to submit a reorganisation plan?
As a rule, only those legal entities directly involved in the proceedings may submit a reorganisation plan in the legal sense. These are primarily the insolvent company itself (the representative body, usually the managing director or board), but under certain conditions, creditors or the insolvency administrator may also submit one. The key requirement is that the company is subject to legal restructuring for which there is a statutory possibility to introduce such a plan as part of the restructuring or insolvency process. Submission is subject to specific deadlines and formal requirements. Particularly in the context of the insolvency plan process under §§ 217 et seq. of the Insolvency Code (InsO), it is clearly regulated which body is entitled to submit a plan at what time. Additionally, in restructuring matters under the Corporate Stabilisation and Restructuring Act (StaRUG), various parties may also submit a reorganisation plan.
At what stage of the proceedings is the reorganisation plan submitted?
The reorganisation plan is typically submitted in the legal context when either insolvency or impending insolvency has been established and a court insolvency, restructuring, or rehabilitation proceeding has been opened. Submission generally takes place after the respective proceeding is opened, with the exact deadline depending on the type of proceeding. In the insolvency plan proceeding, for example, the plan can be submitted to the court at any time during the insolvency proceedings (§ 218 InsO). In StaRUG proceedings, the plan must be available in good time before the court’s confirmation decision. The stage is decisive, as it often determines which creditor groups are involved and how the acceptance conditions are shaped.
What are the minimum legal requirements a reorganisation plan must meet?
The reorganisation plan is subject under German law to strict substantive and formal requirements, which are regulated in the respective special law. In the insolvency plan process, for example, § 219 InsO requires that the plan must contain an explanatory and a formative section. The explanatory part describes the current situation and causes of the crisis, while the formative part lists the intended measures and legal changes for the debtor company and creditors. In addition, it must be compared with regular resolution (comparison calculation). Formal requirements such as written form, signature, and attachment of necessary documents are mandatory. In restructuring proceedings under StaRUG, similar specifications apply, e.g. the obligation to detail the economic situation and transparently show the affected claims and measures. Errors in compliance with these requirements will invalidate or result in rejection of the plan.
How is the vote on a reorganisation plan conducted legally?
The vote on a reorganisation plan is detailed under German law. After submission of the plan, the competent court orders the participation of the affected creditor groups (§§ 222 et seq. InsO, § 18 StaRUG). Each group votes in separate meetings or written ballots. Approval generally requires a majority in headcount and claim amount within each creditor group: more than 50% of the creditors present and more than 50% of the claim amounts must approve. Especially relevant is the so-called prohibition of obstruction: Under certain conditions, the court can substitute the consent of individual groups (“cram-down”) if the plan as a whole is appropriate and balanced, and rejection by a group does not result in a disproportionate disadvantage (§ 245 InsO, § 26 StaRUG).
What are the legal effects of a confirmed reorganisation plan?
If a reorganisation plan is confirmed by court decision, this brings with it several far-reaching legal consequences. The confirmed plan has an immediately binding effect on all parties involved and affected (§ 254 InsO, § 60 StaRUG). Specifically, claims, rights, and legal relationships are amended, reduced, or restructured according to the plan provisions. The binding effect also covers creditors who opposed the adoption of the plan, as long as the statutory requirements for group voting and the prohibition of obstruction have been met. Companies may be released from liabilities or receive new payment deadlines. Moreover, further enforcement or independent legal pursuit by creditors is no longer permitted after plan confirmation. Certain side effects, such as liability or avoidance privileges, can also be triggered by law.
What legal control mechanisms exist against a reorganisation plan?
The reorganisation plan is subject to various judicial and extrajudicial control mechanisms. Above all, the competent insolvency or restructuring court examines the plan for legal compliance, especially compliance with the minimum requirements (§ 231 InsO, § 55 StaRUG). In addition, creditors or other parties involved may challenge the confirmation of the plan in an appeal procedure if they can credibly demonstrate a specific legal violation, such as disadvantage compared to other groups or errors in the procedure (§ 253 InsO, § 66 StaRUG). In extreme cases, a faulty plan can be annulled by the court. Furthermore, general civil law control mechanisms apply, such as the prohibition of immoral conduct under § 138 BGB.
Can existing contracts be legally terminated or amended by a reorganisation plan?
A confirmed reorganisation plan may, in individual cases, result in existing contractual relationships being modified, terminated, or their rights restructured. The law expressly provides that contractual relationships – such as continuous obligations, credit lines, or leasing contracts – may be restructured in the formative part of the plan (§ 225a InsO, § 31 StaRUG). The prerequisite is that the rights of the contracting parties are regulated in the plan and the changes are clearly and transparently set out for all parties involved. However, individual terminations or amendments still require court approval and must comply with the principle of equal treatment. Special rules apply to employment relationships and certain corporate law ties (e.g., management contracts).
