Insolvency plan proceedings (Insolvenzplanverfahren), like self-administration, have been a key feature of German insolvency law for over a decade. However, a common criticism of insolvency plan proceedings has been the lack of participation of shareholders in the proceedings. Further, shareholder consent was required where any shareholder rights were affected by the insolvency proceeding. In practice, this resulted in a virtual inability for companies to implement debt-to-equity swaps as shareholders were effectively given the right to veto them.
Under the new law, shareholders will not be able to prevent creditors from swapping their debt into equity. Further, shareholders will be able to be crammed down to accept the restructuring of the company (i.e. capital increase or new shareholder injections) provided that a sufficient quorum of creditors have voted in favour of the insolvency plan and that shareholders will not be put in a worse position as a result of a plan.