New institutes in German insolvency law

Germany was one of the first EU members to harmonize its legislation with the provisions of the European Union Directive no. 1023/2019 on preventive restructuring frameworks. The Law on Stabilization and Restructuring of Enterprises (StaRUG) introduced several new institutes through a modular approach with the aim of preventing insolvency. It entered into force on 1st January 2021 and provided a pre-bankruptcy procedure, as a novelty, rearranged procedure of personal administration of debtors in bankruptcy and the mediation procedure in restructuring. This enables business entities to timely determine the existence of circumstances that may jeopardize business, but also established the obligation to act appropriately in a timely manner. The instruments of the new legal framework are the adoption of the restructuring plan in court proceedings, the court examination of the contents of the restructuring plan, the court moratorium on executions and the court confirmation of the restructuring plan, as well as adoption of the plan in the mediation procedure. The aforementioned reform further strengthened the principles of consensualism in insolvency law. Also, this law represents a good model for other EU states and for candidate states in the process of harmonization of legislation with EU regulations as well. The aim of this paper is to provide an insight into the new institutes in German legislation, to analyze them and to give a critical review of their application in practice.