Senior Partner & Managing Director
Five years after Germany established its insolvency law to facilitate earlier and simplified corporate restructuring, BCG’s latest annual analysis shows that the law has achieved many—but not all—of its stated goals.
In 2012, German lawmakers fundamentally reformed substantial portions of the country’s bankruptcy legislation when they established “a law to further aid in corporate restructuring” (ESUG). Ultimately, the ESUG was intended to streamline planned insolvency proceedings and thus shorten or condense the bankruptcy process.
Since the law went into effect, BCG has assessed the impact of ESUG legislation on corporate restructuring, surveying insolvency monitors, consultants, and company experts annually on the insolvency proceedings that have been undertaken. After analyzing data from almost 60 months and more than 1,200 proceedings, BCG has concluded in its 2017 report, Five Years of ESUG—Main Objectives Achieved, that the law has been largely successful, with a few exceptions.
Through its analysis, BCG has found that the duration and the process of insolvency proceedings have become easier to plan for corporations and creditors.
Proceedings can now be carried out within just 9 to 10 months. A simplified procedure promotes self-administration of the proceedings. The influence of creditors has been strengthened by granting them more decision-making authority in (temporary) committees and by allowing them to select the liquidator.
And the insolvency protection proceedings grant the debtor a new, stand-alone restructuring process that has contributed significantly to a more transparent approach to insolvency and restructuring in Germany.
However, the law has yet to deliver on one goal: creating incentives for an earlier start to in-court restructuring.
To date, the data available for BCG’s analysis does not reveal any evidence that restructuring applications are being submitted any sooner in the process than they were before the law took effect.
BCG also has found through its analysis: