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ESUG – an important amendment of the German Insolvency Ordinance

ESUG – an important amendment of the German Insolvency Ordinance. A brief overview over the main changes. B ackground. Insolvency Ordinance from 1999 EIR from May 2002 Forum shopping Need for improvements. Purpose of the ESUG.

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ESUG – an important amendment of the German Insolvency Ordinance

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  1. ESUG – an importantamendment of theGerman Insolvency Ordinance A briefoverviewoverthe mainchanges

  2. Background • Insolvency Ordinancefrom 1999 • EIR from May 2002 • Forum shopping • Needforimprovements

  3. Purpose of the ESUG • Primarygoal: insolvencyproceedingshallbecomemoreprojectable • Establishing a rescueculture • Disempowerment of theinsolvencystigma

  4. The respectiveamendments I • Increasingthecreditors‘ influence on theadministrator‘sselection: byinstituting a preliminarycreditors‘scommittee, s. 21, 22a byselection of theadministrator, s. 56a (56 par. 1 3rd sent.) Note: twoprofessions! Restructuringexperts vs. Insolvency administrators

  5. The respectiveamendments II • Betterinformation of thecourt, s. 13 (forimprovingthequality of thedecisions) • See also s. 22 par. 6, 2dn s. GVG and s. 18 par. 4, 2nd s. RPflGfortheeducation of thejudges and judicialofficers • Non-reform: concentration of courts

  6. The respectiveamendments III • Improvements of the plan proceeding • Lessremediesforobstructingcreditors • Inclusion of the insolvent company‘sshareholders • Debt-equityswap • Permissibility of a plan containingsolelydirectionsforhow to proceeduntiltheneststep („verfahrensleitender Plan“)

  7. The respectiveamendments IV • Strengthening of the „debtor-in-possession“ (Eigenverwaltung) • General admissibility, s. 270 • Preliminarydip, s. 270a • Relationship with company‘sofficialsweakend, s. 276a

  8. The respectiveamendments V • Incentiveforearlyopening • S. 270b: protectiveumbrellaproceeding (Schutzschirmverfahren) • Germany‘sreaction to the English Scheme of Arrangement • A threemonthsperiodfordrafting a plan • Successdependent on communication with stakeholders

  9. Outlook • The legislatorisexpected to changethementality! • Successdepends on theprofessionals • Whatisneededaresuccessstories • The European competition will notstophere

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