Selling a Company under StaRUG - Step-by-Step Guide

The StaRUG procedure offers companies in crisis an alternative to insolvency—and at the same time opens up new opportunities for a structured sale. But under what conditions is a sale possible within the stabilization process? And how does the process work in practice?

This step-by-step guide shows you when and how you can sell your company under the StaRUG procedure—from preparation to successful completion.

What is the StaRUG Procedure?

The Corporate Stabilization and Restructuring Act (StaRUG) has been in effect since January 1, 2021, and provides companies with the opportunity to restructure outside of insolvency proceedings. It is a preventive instrument that can be used before insolvency becomes imminent.

When Can the StaRUG Procedure Be Applied?

StaRUG applies in cases of imminent illiquidity or imminent over-indebtedness. The key point is: the company must not yet be insolvent, but the crisis must be foreseeable. Management must be able to forecast that without restructuring measures, insolvency will threaten within the next 24 months.

What Advantages Does StaRUG Offer Compared to Insolvency?

Avoidance of Insolvency: The procedure enables restructuring without the negative consequences of insolvency, such as reputational damage or automatic termination of contracts.

Retention of Management: Unlike insolvency, management retains full control over the company.

Flexible Structuring: The restructuring plan can be tailored individually to the company's needs.

Creditor Protection with Majority Principle: Even dissenting creditors can be overruled by a majority decision.

Is a Sale Possible Within the StaRUG Procedure?

Under What Conditions Can a Sale Take Place?

A sale within the StaRUG procedure is fundamentally possible and explicitly provided for. The law allows the sale of the company or significant parts of it to be included as a restructuring measure in the restructuring plan.

Sale as a Restructuring Strategy: The sale must be presented as part of a coherent restructuring strategy. It is not sufficient to simply want to get rid of the company.

Consideration of Creditor Interests: The sale must serve the interests of the creditors and lead to better satisfaction than would be expected without restructuring.

Transparency and Fairness: All parties involved must be informed about the planned sale, and the sales process must be conducted fairly and transparently.

What Types of Sales Are Possible Under StaRUG?

Share Deal: The sale of company shares is possible if the old debts are addressed through the restructuring plan.

Asset Deal: The sale of individual assets or business units can be part of the restructuring strategy.

Investor Entry: Instead of a complete sale, an investor can also enter and inject fresh capital.

Management Buy-Out: The existing management can take over the company within the framework of the StaRUG procedure.

How Does the Sale Process Work Under StaRUG?

Step 1: Is the StaRUG Procedure the Right Path?

Conduct a Crisis Analysis: Verify whether there is indeed imminent illiquidity or over-indebtedness, but no acute insolvency yet.

Evaluate Alternative Restructuring Options: Can the company be saved by other measures, or is a sale the best option?

Seek Legal Advice: An experienced restructuring lawyer should assess the situation and evaluate the prospects of success for a StaRUG procedure.

Consider the Timing: The earlier you act, the more options you have. Do not wait until insolvency is imminent.

Step 2: How Do You Prepare the Restructuring Plan?

Comprehensive Company Analysis: Prepare a detailed overview of the current financial situation, including all liabilities, assets, and cash flow forecasts.

Develop a Restructuring Strategy: Clearly define why a sale is the best solution and how it will contribute to restructuring.

Identify Creditor Groups: Determine all affected creditor groups and their respective claims.

Define the Sales Strategy: Decide what will be sold (shares, assets, business units) and under what conditions.

Step 3: How Do You Find the Right Buyer?

Define the Buyer Pool: Identify potential strategic buyers, financial investors, or management teams.

Sign Confidentiality Agreements: Protect sensitive company information during the buyer search.

Prepare Due Diligence: Compile all relevant documents that potential buyers will need for their review.

Develop a Negotiation Strategy: Prepare for price negotiations and define your minimum requirements.

Step 4: How Do You Structure the Restructuring Plan?

Sale as a Core Measure: Describe in detail how the sale will contribute to restructuring and what benefits it will bring to all parties involved.

Regulate Creditor Treatment: Specify how the proceeds from the sale will be used to satisfy creditors.

Define a Timeline: Create a realistic schedule for implementing the sale.

Present Alternative Scenarios: Describe what will happen if the plan is not implemented.

Step 5: How Do You Win Over the Creditors for Your Plan?

Early Communication: Inform key creditors about your intentions before the formal plan submission.

Highlight Benefits: Clearly explain why the sale is more advantageous for creditors than insolvency.

Show Willingness to Compromise: Be open to adjustments to the plan if this increases approval.

Professional Moderation: Use experienced restructuring consultants for creditor meetings and negotiations.

Step 6: How Does the Court Procedure Work?

Submit the Plan to the Court: File the restructuring plan with the competent local court.

Judicial Review: The court examines the formal requirements and feasibility of the plan.

Creditor Hearing: All affected creditors have the opportunity to comment on the plan.

Organize Voting: Depending on the plan, a formal creditor vote may be required.

Step 7: How Do You Implement the Sale?

Finalize Contract Negotiations: Complete purchase negotiations once the plan is confirmed.

Complete Due Diligence: Allow the buyer to conduct a final examination of the company.

Fulfill Closing Conditions: Ensure all conditions agreed upon in the purchase contract are met.

Distribute Proceeds: Allocate the sale proceeds according to the confirmed restructuring plan.

What Challenges Can Arise?

How Do You Handle Resistance?

Creditor Protests: Individual creditors may reject the sale because they feel disadvantaged. Transparent communication and presenting alternatives often help here.

Time Pressure: The financial situation may deteriorate during negotiations. Always have a Plan B ready.

Buyer Withdrawal: Potential buyers may drop out during the process. Negotiate with several interested parties in parallel if possible.

What Legal Risks Exist?

Challenge of the Plan: Creditors may attempt to challenge the plan if they feel unfairly treated.

Liability Risks: Even under StaRUG, managing directors can be personally liable if they breach their duties.

Enforcement Protection: Protection against enforcement measures is limited in time and cannot be extended indefinitely.

What Costs Are Incurred in a StaRUG Sale?

What Procedural Costs Should You Expect?

Court Costs: The costs for the court procedure depend on the company’s value and can amount to several thousand dollars.

Advisory Fees: Lawyers, restructuring consultants, and M&A specialists incur significant costs, which are usually necessary.

Expert Fees: External expert opinions on company valuation or restructuring feasibility are often required.

Communication Costs: Informing and coordinating creditors can be complex and costly.

How Can You Minimize Costs?

Early Planning: The better prepared you are, the more efficient the procedure runs.

Experienced Advisors: Specialized consultants work more efficiently than generalists.

Clear Communication: Transparency from the outset reduces inquiries and resistance.

What Alternatives Exist to a StaRUG Sale?

When Is an Out-of-Court Agreement Better?

If only a few creditors are involved and they are cooperative, an out-of-court restructuring can be faster and more cost-effective. Forgoing the formal StaRUG procedure saves time and money.

When Should You Opt for Insolvency Instead?

If the crisis is already too advanced or the majority of creditors are uncooperative, insolvency with transfer restructuring may be the better option. Here, the insolvency administrator takes over negotiations with creditors.

What Role Does the Protective Shield Procedure Play?

The protective shield procedure is a hybrid between StaRUG and insolvency. It offers more protection against creditor claims but already requires filing for insolvency.

Success Stories: When Does a StaRUG Sale Work?

Which Industries Benefit Most?

Technology Companies: High intangible assets and few tangible assets make the sale attractive.

Service Companies: Customer base and know-how can remain valuable even in crisis.

Family Businesses: There is often strong interest in keeping the company within the family or among employees.

What Are Typical Success Factors?

Timely Action: The earlier the procedure is initiated, the more options are available.

Professional Support: Experienced advisors significantly increase the likelihood of success.

Realistic Valuation: Overly ambitious price expectations lead to failure.

Creditor Cooperation: Constructive collaboration with main creditors is usually decisive.

Conclusion: StaRUG Sale as an Opportunity in Crisis

Selling a company under the StaRUG procedure offers a structured alternative to insolvency. The procedure enables achieving a fair sale price even in crisis and considers the interests of all parties involved.

Timing is crucial: The StaRUG procedure can only be initiated as long as there is no acute insolvency. Those who wait too long lose this option.

Professional support is indispensable: The complexity of the procedure and legal risks require experienced advisors. Investing in good advice usually pays off.

Transparency builds trust: Open communication with creditors and potential buyers significantly increases the chances of success.

For companies in crisis, a StaRUG sale can be a real opportunity—provided it is professionally prepared and executed. The alternative is often insolvency with an uncertain outcome.