How to Restructure a Company in Germany in 2026, Starug, Timing & Director Filing Obligations

Understanding how to restructure a company in Germany has never been more urgent. The Unternehmensstabilisierungs- und -restrukturierungsgesetz (StaRUG), Germany’s preventive restructuring framework in force since 1 January 2021, has matured into one of Europe’s most powerful tools for companies that are financially distressed but not yet insolvent. Ongoing EU-level harmonisation discussions, including proposed rules on pre-pack recognition and cross-border group restructuring, are adding further momentum in 2026, prompting boards and CFOs across multinational groups to reassess their restructuring options under German law. This guide provides the company-side, step-by-step operational playbook that managing directors, in-house counsel and financial officers need: when to act, which route to choose, what deadlines apply, and how to minimise personal liability throughout the process.

Quick Decision Tree: Should You Use StaRUG for Pre-Insolvency Restructuring in Germany?

The single most important decision at the outset of any German restructuring is route selection: StaRUG preventive restructuring, formal insolvency proceedings, or self-administration under the German Insolvency Code (InsO). The answer depends on six factors that every board should evaluate immediately upon recognising signs of financial distress.

• Liquidity test. Can the company still meet its payment obligations as they fall due? StaRUG is only available to companies that are not yet unable to pay their debts (zahlungsunfähig).
• Imminent insolvency vs. overdue payments. If the company is merely imminently insolvent (drohend zahlungsunfähig), meaning it will likely become unable to pay within the forecast horizon, StaRUG is designed precisely for this stage.
• Creditor composition. StaRUG works best when the restructuring involves financial creditors (banks, bondholders, intercompany lenders). It does not cover employment claims or pension obligations.
• Cross-border exposures. Groups with subsidiaries outside Germany must assess whether a StaRUG plan will be recognised abroad, a question that remains jurisdiction-specific in the absence of a finalised EU recognition framework.
• Management capacity and appetite. StaRUG leaves the company in control; there is no court-appointed administrator. This requires a board willing and able to drive the plan.
• Director risk profile. If insolvency filing obligations have already been triggered (Insolvenzantragspflicht), directors cannot choose StaRUG; they must file under the InsO without culpable delay.

When StaRUG Is the Right Tool

StaRUG is the optimal route when a company identifies a looming liquidity shortfall well in advance, its creditor base is predominantly financial, and the board is prepared to lead restructuring negotiations directly. The framework allows management to propose a restructuring plan, negotiate with affected creditor classes, and, where necessary, apply to the restructuring court for plan confirmation, all without the stigma or operational disruption of formal insolvency. Industry observers expect StaRUG usage to increase further in 2026 as more mid-market companies gain familiarity with the process and advisors build track records.

When to File for Insolvency Instead

StaRUG is not available once the company has crossed the line into actual inability to pay (Zahlungsunfähigkeit) or balance-sheet over-indebtedness (Überschuldung) without a viable restructuring prospect. Where insolvency filing obligations under § 15a InsO have already been triggered, directors must initiate formal insolvency proceedings. Self-administration (Eigenverwaltung) under §§ 270 et seq. InsO can preserve a degree of management control within insolvency, but it requires court approval and the appointment of a creditor-appointed administrator (Sachwalter). If operational restructuring (workforce reductions, lease terminations) is essential, formal insolvency proceedings may also offer tools, such as the ability to terminate contracts under § 103 InsO, that are unavailable under StaRUG.

StaRUG Fundamentals: How to Restructure a Company in Germany Using the Preventive Framework

The StaRUG implements the EU Restructuring Directive (Directive 2019/1023) into German law and provides a debtor-in-possession procedure for companies facing imminent insolvency. Its core mechanism is the restructuring plan (Restrukturierungsplan), which can modify financial liabilities, reschedule debt maturities, convert debt into equity, or adjust security interests, all without requiring unanimous creditor consent.

Key Legal Triggers Under StaRUG

A company may access the StaRUG framework only if it is imminently insolvent (drohende Zahlungsunfähigkeit) within the meaning of § 18 InsO, but it must not yet be actually insolvent. The relevant test asks whether, based on the company’s cash flow forecast, it is more likely than not that the debtor will become unable to meet its payment obligations as they fall due. The forecast horizon is typically 24 months. The company is not required to notify the court at the outset; it may pursue a purely out-of-court plan negotiation. However, if it needs court assistance, for example, to enforce a cramdown or impose a standstill, it must formally notify the restructuring court and enter the structured StaRUG process.

Restructuring Plan Cramdown and Binding Creditors

The StaRUG’s most powerful feature is its cross-class cramdown mechanism. Affected creditors are divided into classes based on the nature and ranking of their claims. Each class votes on the plan, and acceptance within a class requires a majority of 75 % of voting rights by value. If the required majorities are achieved in every class, the plan is confirmed. Where one or more classes reject the plan, the restructuring court may nevertheless confirm it through a cross-class cramdown, provided that:

• The majority of classes have voted in favour of the plan.
• No dissenting class is placed in a worse position than it would be without the plan (the “best-interest-of-creditors” test).
• The plan does not unfairly discriminate against the dissenting class relative to other classes of the same rank.
• Members of the dissenting class participate appropriately in the economic value generated by the plan (the “absolute priority rule,” subject to certain deviations permitted under StaRUG).

The court’s role remains limited to confirming the plan’s legality; it does not conduct a commercial review. This makes the procedure faster and more flexible than formal insolvency proceedings.

The Step-by-Step StaRUG Playbook for Companies

How do you restructure your company in practice? The following six-step sequence is the operational core for any board pursuing a StaRUG-based pre-insolvency restructuring in Germany. Each step identifies the responsible party, key deliverables, and indicative deadlines.

Step 0: Immediate Director Actions on Signs of Crisis

The moment a managing director identifies material signs of financial distress, covenant breaches, accelerating payment defaults, or a deteriorating cash flow forecast, the clock starts running on director duties. Before any restructuring route is chosen, directors should immediately: (a) document the factual basis and date of crisis recognition in board minutes; (b) commission an updated 13-week cash flow forecast and a going-concern assessment; and (c) seek preliminary legal advice on whether insolvency filing obligations have already been triggered. Failure to act at this stage exposes directors to personal liability under § 15a InsO and § 823(2) of the German Civil Code (BGB).

Step 1: Crisis Assessment, Valuation and Creditor Mapping

A thorough financial assessment forms the foundation of any StaRUG plan. The company should prepare: a detailed balance-sheet analysis and going-concern valuation; a complete creditor matrix identifying each creditor, the nature and amount of their claim, any security interests, and their likely classification; and an integrated business plan demonstrating the path back to viability. For SMEs, this step can be streamlined using standardised templates, but the creditor mapping must still be exhaustive, omissions at this stage undermine the plan’s legal robustness later.

Step 2: Engage Restructuring Counsel and Financial Advisor

Early engagement of experienced restructuring counsel is critical. The scope of the retainer should cover: legal assessment of eligibility for StaRUG; advice on insolvency filing obligations and safe-harbour conduct; plan drafting and creditor negotiation strategy; and, if needed, court proceedings. A financial advisor (often a restructuring-focused accounting firm) should simultaneously be retained to prepare the independent viability opinion that lenders and the court may require. For smaller companies, a single multidisciplinary advisory mandate may suffice.

Step 3: Draft the Restructuring Plan and Identify Classes

The restructuring plan is the central document. Under the StaRUG, it must contain a descriptive section (darstellender Teil), explaining the company’s situation, the causes of the crisis, and the proposed restructuring measures, and a structuring section (gestaltender Teil), setting out the specific modifications to creditor rights. Creditors must be grouped into classes that reflect meaningfully different legal positions. Getting class formation right is essential: incorrect classification is one of the most common grounds on which plans are challenged.

Step 4: Protective Measures, Creditor Negotiation and Interim Financing

StaRUG allows the company to apply to the restructuring court for stabilisation measures (Stabilisierungsanordnungen) during plan negotiations. These may include a moratorium on enforcement actions and a prohibition on creditors terminating contracts essential to the business. Protective measures are limited in duration, initially up to three months, extendable in exceptional cases, and require the company to demonstrate that the plan is likely to succeed. In parallel, the board should open bilateral negotiations with key creditors, particularly secured lenders. Where bridge or interim financing is needed, the StaRUG provides for the possibility of granting new-money lenders a priority ranking in the plan, incentivising fresh capital.

Step 5: Voting, Cramdown, Confirmation and Implementation

Once the plan is finalised and creditor negotiations are advanced, the company may either: (a) seek consensual acceptance through an out-of-court voting process, or (b) request court-managed plan voting. Acceptance requires 75 % by value within each voting class. Where a class dissents, the cross-class cramdown mechanism described above comes into play. After confirmation, the plan becomes binding on all affected creditors, including dissenters, and the company must implement its terms according to the agreed timeline. Monitoring provisions should be built into the plan to maintain creditor confidence.

Director Duties and Insolvency Filing Obligations, Concrete Checklist

Are directors liable for insolvency? Yes, German law imposes personal civil and criminal liability on managing directors who fail to file for insolvency proceedings once statutory triggers have been met. Understanding these obligations is essential for any director considering how to restructure a company in Germany, because the boundary between StaRUG eligibility and mandatory insolvency filing is the single most consequential legal line in the process.

Under § 15a InsO, the managing directors of a GmbH, the board members of an AG, or the personally liable partners of a KG must file an insolvency application without culpable delay (ohne schuldhaftes Zögern) once the company becomes unable to pay its debts as they fall due (Zahlungsunfähigkeit, § 17 InsO) or balance-sheet over-indebted (Überschuldung, § 19 InsO) without a positive going-concern prognosis. The statutory maximum period for filing is three weeks from the point of illiquidity and six weeks from the point of over-indebtedness, but these are outer limits, not safe harbours. Directors should treat them as absolute deadlines, not targets.

Practical Dos and Don’ts for Managing Directors

• Do commission and regularly update rolling cash flow forecasts (13-week minimum).
• Do document every board discussion about the company’s financial position, including the date of recognition of crisis indicators.
• Do obtain written legal advice on insolvency filing obligations as soon as distress is identified.
• Do not make payments to individual creditors that could later be challenged as preferential transfers (Insolvenzanfechtung).
• Do not delay seeking advice on the assumption that the situation will resolve itself, late filing is one of the most common bases for director liability claims.

Liability Scenarios and Record-Keeping Best Practice

Directors who file late face both civil liability (personal obligation to reimburse payments made after the point of material insolvency under § 15b InsO) and criminal penalties (up to three years’ imprisonment under § 15a(4) InsO for intentional late filing, and fines for negligent late filing). Maintaining a comprehensive decision audit trail is the most effective defence. Best practice includes: timestamped board minutes for every crisis-related meeting; dated copies of all financial analyses and cash flow forecasts; written records of legal and financial advice received; and a chronological log of all creditor communications. These records establish that the director acted diligently and within the statutory window, even if the restructuring ultimately fails.

StaRUG Plan Mechanics: Contents, Class Structure and Cramdown

What are the common mistakes when restructuring? The most frequent errors occur in the construction of the restructuring plan itself, particularly in class formation, the treatment of secured claims, and the exclusion of non-eligible liabilities. A robust StaRUG plan must contain the following elements:

• Descriptive section: analysis of the company’s financial position, causes of distress, and proposed restructuring concept.
• Structuring section: precise description of the modifications to each class of claims, haircuts, maturity extensions, debt-to-equity conversions, or changes to security interests.
• Creditor class schedule: clear allocation of every affected creditor to a class, with a statement of the criteria used for classification.
• Comparison calculation: demonstrating that no class is worse off under the plan than it would be in a hypothetical insolvency scenario (the “best-interest” test).

How to Treat Secured Creditors, Tax and Employee Claims

Secured creditors form their own class and can be included in the plan, but only to the extent that the plan modifies the security interest itself or the underlying secured claim. Tax claims owed to the German fiscal authorities can be included in a StaRUG plan, a notable distinction from some other European restructuring frameworks. However, employee claims (wages, severance, pension entitlements) are expressly excluded from the scope of StaRUG plans. Intercompany claims within a corporate group can be included and are often a critical element of group-wide restructurings. Failing to correctly identify and exclude ineligible claims is one of the most common grounds for a court refusing plan confirmation.

Cross-Border Issues and Recognition in StaRUG Restructurings

For multinational groups, the question of cross-border recognition is central to route selection. The EU Insolvency Regulation (Recast) applies to formal insolvency proceedings but does not currently cover StaRUG proceedings directly, because StaRUG was not listed in Annex A of the Regulation at the time of implementation. This creates uncertainty: a StaRUG plan confirmed by a German court is binding within Germany but may not be automatically enforceable in other EU member states, or in non-EU jurisdictions, without further steps.

Industry observers expect that proposed EU-level reforms, including the draft Insolvency III Directive and discussions on pre-pack and preventive restructuring recognition, may eventually close this gap. In the interim, companies with significant cross-border creditor exposures should consider parallel protective measures: obtaining contractual acknowledgements from key foreign creditors, structuring the plan to minimise the impact of non-recognition, or, where available, seeking recognition through bilateral treaty mechanisms or local court proceedings in the relevant jurisdiction.

Practical Steps for Multinationals

• Map jurisdictional exposures early. Identify every jurisdiction in which significant creditors, assets, or contracts are located.
• Assess recognition risk per jurisdiction. Seek local counsel opinions on whether the StaRUG plan will be enforceable.
• Consider COMI (centre of main interests) positioning. Ensure the German entity’s COMI clearly supports German jurisdiction for restructuring purposes.
• Negotiate foreign creditor buy-in contractually. Where automatic recognition is uncertain, obtain written commitments from key foreign creditors to be bound by the plan.

When to Choose Insolvency Proceedings or Self-Administration Instead

StaRUG is not always the right answer. Formal insolvency proceedings, potentially with self-administration under §§ 270 et seq. InsO, may be preferable when: the company requires operational restructuring tools (e.g., the right to terminate burdensome contracts or implement collective redundancies through a social plan); the creditor base is highly fragmented and consensus is unrealistic; the company’s financial position has deteriorated beyond imminent insolvency into actual inability to pay; or interim financing is unavailable without the protective umbrella of preliminary insolvency proceedings (vorläufiges Insolvenzverfahren). Self-administration preserves a degree of management control and can be combined with an insolvency plan (Insolvenzplan) to achieve outcomes functionally similar to a StaRUG restructuring, but within a court-supervised, publicly disclosed process.

Implementation, Monitoring and Turnaround Governance

A confirmed restructuring plan is only as good as its implementation. Best-practice turnaround governance includes: appointing a dedicated chief restructuring officer or plan implementation manager; establishing KPI dashboards covering cash flow, covenant compliance, and milestone tracking; instituting monthly reporting to affected creditor classes (or their representatives); and building early-warning triggers into the plan that mandate re-engagement with creditors if specific financial thresholds are breached. Creditor confidence during the implementation phase is the single greatest determinant of whether the company achieves a sustainable turnaround or slides back into distress. Clear, frequent communication is non-negotiable.

Practical Resources for Directors and Advisors

To support operational execution, the following resources should be assembled at the outset of any StaRUG process. Companies can work with their restructuring counsel to customise each item for their specific situation.

• Director crisis checklist (PDF): A timestamped action list covering the first 72 hours after recognition of financial distress, documentation steps, immediate legal requirements, and insolvency filing obligation triggers.
• Creditor communication template: A standardised letter framework for initial creditor notification, including mandatory disclosures and confidentiality provisions.
• Restructuring plan skeleton: A section-by-section outline of the StaRUG plan, aligned with the statutory requirements, with guidance notes on typical content for SMEs and mid-market companies.
• StaRUG timeline template: A Gantt-style project plan covering all phases from crisis assessment through plan confirmation and implementation.

For access to specialist restructuring counsel in Germany, consult the Global Law Experts lawyer directory and filter by country and practice area.

Sources

1. German StaRUG text, Gesetze im Internet
2. German Insolvency Code (InsO), Gesetze im Internet
3. Bundesministerium der Justiz (BMJ), StaRUG Guidance
4. CMS, Corporate Restructuring Under the German StaRUG-Scheme
5. A&O Shearman, Germany Restructuring Outlook (2026)
6. GÖRG, Restructuring & Insolvency in Germany (2025)
7. Baker Tilly, ESUG / Self-Administration Restructuring
8. BUSE Rechtsanwälte, StaRUG Practical Article