On 1 March 2012 new German insolvency law rules will come into effect which are intended to facilitate and promote debtor-in-possession proceedings and the use of restructuring plans and debt-equity swaps. In addition, the new insolvency law will introduce new rules to enhance creditor autonomy and control, in particular over the appointment of the insolvency administrator. When it comes into effect the new insolvency law is likely to drastically change the rule set for insolvency proceedings in Germany, increasing the number of plan proceedings versus liquidations and making distressed investment targets more attractive to financial investors. It will also further align German insolvency rules to international standards, in particular to US Chapter 11 proceedings.
With its new rules the German legislator has reacted to increasing criticism among German insolvency law experts about the unwieldy German legal environment for company restructurings. Over the past years there have been several cases of German distressed companies that have relocated their centre of main interest (COMI) to the United Kingdom to make use of a legal environment which was perceived to be more restructuring friendly to debtors and major creditors...
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