Restructuring & Turnaround in Germany: Expert Insights

Germany’s restructuring landscape combines legal structure with operational flexibility. Over the past few years, the introduction of StaRUG has significantly expanded the ability of companies to act before formal insolvency becomes unavoidable.

In this interview, Heinrich Schaible (CEO, Valtus Germany) engages Andreas Greis (Valtus Germany) to explore how restructuring works in Germany — from formal insolvency frameworks to market-driven standards such as IDW S6 and IDW S11.

A Structured but Flexible Framework

Heinrich

What makes the restructuring framework in Germany unique?

Andreas

Germany combines a highly structured legal system with a pragmatic approach to execution.

The Insolvency Code (InsO) defines clear procedures, while StaRUG introduces a preventive restructuring framework that allows companies to act before insolvency becomes unavoidable. Together, they create a system that balances creditor protection with business continuity.

In practice, this means companies can choose between formal proceedings and consensual out-of-court solutions, depending on the situation.

Understanding the Core Insolvency Pathways

Germany provides several structured routes for companies in distress.

Regular insolvency proceedings remain the standard route and may lead either to liquidation or restructuring through an insolvency plan. Within this framework, insolvency plan proceedings allow companies to reorganise under court supervision, similar in principle to Chapter 11 in the United States.

A more specialised option is the protective shield proceeding. This allows companies to prepare a restructuring plan while management remains in control, provided insolvency is imminent but not yet realised.

Alongside these formal routes, StaRUG enables preventive restructuring. It allows companies facing imminent illiquidity to restructure early, with limited court involvement and continued management control.

IDW S6 and IDW S11: Market Standards That Shape Decisions

Heinrich

What role do IDW S6 and IDW S11 play in restructuring?

Andreas

These standards are essential in practice, even though they are not legally mandatory.

IDW S6 focuses on whether a company can be successfully restructured. It examines the causes of the crisis, defines operational and financial measures, and evaluates whether the business can achieve sustainable profitability.

IDW S11, on the other hand, determines whether insolvency conditions exist. It assesses liquidity, imminent illiquidity, and over-indebtedness, helping management decide whether a formal filing is required.

Together, these standards provide a structured basis for decision-making and are widely used by banks, investors, and advisors.

The Most Common Mistake: Delay and Lack of Transparency

Heinrich

What do companies get wrong early in a crisis?

Andreas

The most common mistake is denial.

Management often delays recognising the severity of the situation and loses valuable time. This delay significantly reduces available options.

At the same time, transparency is often lacking. Key stakeholders, particularly banks, are not involved early enough. Combined with hesitation in decision-making, this creates a situation where problems escalate faster than they are addressed.

When External Expertise Becomes Critical

Heinrich

When should an external restructuring expert be involved?

Andreas

As soon as early warning signs appear.

Declining margins, tightening liquidity, or reduced stakeholder confidence are all indicators that action is required. The role of the expert depends on the situation and may range from advisory support to CFO or CRO responsibilities.

What matters most is that the mandate comes from the right level — typically the board or shareholders — to ensure authority and accountability.

Protective Shield Proceedings in Practice

Heinrich

How effective are protective shield proceedings?

Andreas

They are a valuable tool, but timing is critical.

Protective shield proceedings allow companies to restructure under court supervision while management remains in place. They provide transparency and stability, but they must be initiated early enough to be effective.

However, they do not offer the same flexibility as full insolvency proceedings and should therefore be chosen carefully based on the situation.

Employee Protection in Insolvency

Heinrich

What happens to employees during insolvency?

Andreas

Germany provides strong protection for employee wages.

The state covers net salaries for up to three months before insolvency through insolvency benefits. After that period, salaries must be financed through ongoing operations or restructuring arrangements.

Bonuses are generally not protected and are treated as standard insolvency claims.

This system ensures short-term stability for employees while allowing restructuring measures to take effect.

A Defining Experience: Learning from Failure

Heinrich

Which experience shaped your perspective the most?

Andreas

The insolvency of my own start-up.

It showed me how some investors approach distress strategically, using insolvency as a tool to acquire assets at a lower value. Not every stakeholder is focused on long-term recovery. Some are focused on opportunity.

That experience changed how I assess motivations in restructuring situations.

Advice for Foreign Corporations

Heinrich

What should foreign companies with German subsidiaries do in a crisis?

Andreas

Act quickly and transparently.

It is essential to engage local expertise early, as Germany has specific legal, regulatory, and labour frameworks that influence restructuring options.

At the same time, coordination between headquarters and local management must be strong. Understanding whether the issue is temporary or structural requires local insight.

The Growing Role of Private Equity

Heinrich

How active is private equity in restructuring?

Andreas

Private equity plays an increasingly important role, particularly in distressed M&A situations.

While banks and traditional shareholders remain key stakeholders, private equity often brings the capital and operational expertise required to reposition companies.

Leadership in Restructuring

Heinrich

What defines a strong restructuring leader?

Andreas

Resilience, empathy, and decisiveness.

A restructuring leader must be able to make difficult decisions under pressure while maintaining trust across stakeholders. Technical expertise is essential, but leadership and communication are equally critical.

In many cases, the root cause of a crisis is a lack of leadership over time. Strong, visible leadership is therefore essential to rebuild confidence.

Handling the Human Side of Crisis

Heinrich

How do you handle the emotional dimension?

Andreas

By combining clarity with empathy.

Transparent communication is essential, even when the message is difficult. People are more likely to accept change when they understand the situation and feel treated fairly.

In my experience, clarity is a form of respect.

Balancing Short-Term Survival and Long-Term Strategy

Heinrich

How do you balance immediate pressure with long-term success?

Andreas

The first priority is always liquidity and operational stability.

But restructuring cannot stop there. It must also establish a credible long-term strategy that convinces stakeholders of the company’s future viability.

The real challenge is managing both at the same time.