Insight

Self-administration and the insolvency plan

Prerequisites, procedure, the role of the management, and how it differs from standard insolvency proceedings and the StaRUG.

24 July 2026 | Reading time 8 min. | Author: Johannes Egelhof LL.M.

In the case of self-administration, whereby the debtor manages the insolvency procedure themselves, the company is entitled, under section 270 of the Insolvency Code (InsO), to administer the insolvency estate themselves under the supervision of an administrator. Decisions taken by the remaining management team must be geared towards achieving the best possible satisfaction of creditors. This requires an application from the debtor, accompanied by a self-administration plan in accordance with section 270a of the Insolvency Code (InsO). This must include, among other things, a six-month financial plan and a procedural concept. The court may revoke self-administration in the event of breaches of duty or imminent detriment to creditors. The insolvency plan under sections 217 et seq. of the Insolvency Code (InsO) may reduce, defer or convert claims. In this context, the consent of a group of dissenting creditors may be replaced, provided the conditions set out in section 245 of the Insolvency Code are met. While the StaRUG takes effect even before insolvency sets in and can be limited to specific groups of creditors, self-administration makes use of all the tools provided by the Insolvency Code.

What is the key difference compared with standard insolvency proceedings?

In standard insolvency proceedings, the power to administer and dispose of the assets forming part of the insolvency estate passes to the insolvency administrator upon the opening of proceedings in accordance with section 80 of the Insolvency Act (InsO). Under company law, the previous management remains in office but can no longer dispose of the estate independently. The insolvency administrator manages the business, decides on contracts and develops the realisation or restructuring strategy.

In self-administration, this authority remains with the debtor. Instead of an insolvency administrator, the court appoints a trustee. The trustee assesses the financial situation, monitors the management of the business and liquidity trends, and reports to the court and the creditors’ bodies. Certain measures may be subject to prior approval.

The difference therefore primarily concerns the conduct of the proceedings, not the application of insolvency law. The filing of claims, equal treatment of creditors, avoidance actions, labour law instruments and the insolvency plan continue to be governed by the Insolvency Code.

What are the requirements for self-administration?

Self-administration is ordered only at the debtor’s request. Pursuant to section 270a of the Insolvency Code (InsO), the application must be accompanied by a self-administration plan. Among other things, this must include a six-month financial plan with a robust presentation of the sources of funding, a strategy for conducting the proceedings and a summary of the status of negotiations with creditors and other interested parties.

The court assesses whether the plan is complete and comprehensible, and whether there are any known circumstances that would suggest disadvantages for the creditors. Inadequate bookkeeping, inaccurate planning assumptions, unresolved claims for directors’ and officers’ liability, or a failure to prioritise creditors’ interests may militate against self-administration. Remediable deficiencies may be rectified within a short timeframe, subject to the statutory requirements.

In practice, therefore, preparations begin well before the insolvency application is filed. Liquidity planning, integrated business planning, analysis of the causes of the crisis, a restructuring plan, stakeholder mapping and procedural documentation must all be aligned. Self-administration that is improvised only once acute insolvency has set in will quickly lose the trust of the court and creditors.

How does provisional self-administration work?

Between the filing of the insolvency petition and the commencement of proceedings, the court may order provisional self-administration. The management continues to run the business, whilst a provisional administrator monitors the financial position and the course of action. Upon application, the court may authorise the debtor to incur liabilities against the insolvency estate. This is often crucial for supply relationships and the continuation of business operations.

During this phase, liquidity is stabilised, advance funding for insolvency payments is organised, operational measures are prepared and discussions with key creditors are taken forward. At the same time, preparations must be made for the commencement of proceedings. Contracts, security, the workforce structure and potential set-off claims are analysed.

Provisional self-administration is not an automatic interim step. The court may revoke it if the conditions are no longer met, obligations are breached or there is a risk of detriment to creditors. Transparent reporting and reliable figures therefore form the basis of the proceedings.

What is the ‘Schutzschirm’ procedure?

The so-called ‘protective shield’ procedure is a special form of preparation for a self-administered restructuring. It is only an option if the company is not yet insolvent but is facing imminent insolvency or over-indebtedness, and the proposed reorganisation is not manifestly futile. A suitable certificate must confirm that these conditions are met.

The court sets a deadline for the submission of an insolvency plan and may, on the debtor’s proposal, appoint a provisional administrator, provided that the proposed person is not manifestly unsuitable. The ‘protective shield’ is frequently used when an insolvency plan is already at an advanced stage of preparation and the company does not wish to wait for insolvency to occur.

The term can be misunderstood. It does not provide general protection against creditors and is no substitute for financing. The procedure only works if liquidity for the continuation of the business is secured and the plan is ready for approval within a short period of time.

What is the role of the management?

Management remains responsible for day-to-day operations. It must manage liquidity, stabilise business operations, keep staff and customers informed, and implement the restructuring measures. At the same time, it works in collaboration with the administrator, the creditors’ committee, the court and advisers.

Its duties shift. Decisions must be aligned with the interests of the creditors as a whole and documented in a transparent manner. Payments, new commitments, asset realisations and the treatment of affiliated companies require assessment under insolvency law. Old decision-making routines or a one-sided focus on preserving the shareholders’ existing position are no longer tenable.

In many proceedings, the existing management team is supplemented by a CRO or general representative with experience in restructuring. This can fill gaps in expertise and build trust. However, this does not remove the responsibility of the formal board members.

What are the trustee’s responsibilities?

The administrator monitors the debtor’s financial position and the conduct of its business. He checks whether the self-administration is being carried out properly and that the interests of the creditors are being safeguarded. Claims by insolvency creditors are lodged with the administrator in the context of the self-administration proceedings.

The administrator is not merely an adviser to the management. He has an independent supervisory role and must respond to problems. Depending on the court order or the status of the proceedings, individual decisions may require approval. In the event of breaches of duty or a deterioration in the creditors’ position, the self-administration may be revoked.

A constructive relationship requires clear roles. The management team develops and is responsible for the restructuring, whilst the administrator reviews and monitors it. If these functions are conflated, conflicts of interest and trust issues arise.

What role does the creditors’ committee play?

The provisional or final creditors’ committee brings together the various interests of creditors and is involved in key decisions. In particular, major insolvency creditors, creditors entitled to separate satisfaction, small creditors and employees should be represented. In the case of larger companies, a provisional creditors’ committee must, in principle, be established in accordance with the requirements of section 22a of the Insolvency Code (InsO).

The committee may influence the selection of a trustee or insolvency administrator, support or oppose self-administration, and scrutinise particularly significant measures. These include, for example, the sale of the business, substantial financing arrangements or compositions.

For the company, the committee is a key body conferring legitimacy. Those who provide it with information early, comprehensively and clearly can speed up decision-making. Those who disclose significant risks only at a late stage jeopardise the proceedings.

What can an insolvency plan provide for?

Under sections 217 et seq. of the Insolvency Code (InsO), the insolvency plan allows for arrangements that deviate from the statutory liquidation and distribution procedures. It may reduce, defer or convert claims into other rights. Security interests and group-related rights may be included subject to the statutory conditions. Shareholders’ share and membership rights may also be structured.

The plan consists of a descriptive part and a constitutive part. The descriptive part explains the initial situation, the measures to be taken and a comparative calculation. The constitutive part sets out how the rights of the parties involved will change. Those affected are divided into groups and vote within these groups.

If a group rejects the plan, its consent may be substituted subject to the conditions set out in section 245 of the Insolvency Code (InsO). In particular, this requires that the plan is not likely to leave the group in a worse position than it would be without the plan, and that it receives an appropriate share of the plan’s value. This provision prevents individual groups from blocking an economically viable reorganisation without objective grounds.

How does the vote on the insolvency plan take place?

Following a preliminary review by the court, the plan is discussed and put to a vote. In each group, the statutory majorities in terms of both the number of votes and the total value must be achieved. The court then examines whether the plan should be confirmed and whether there are any obstacles relating to minority protection or grounds for rejection.

The vote is merely the visible final step. Successful plans are negotiated in advance with financiers, suppliers, employee representatives, secured creditors and shareholders. The comparative calculation must credibly demonstrate what recovery rate and what prospects the parties involved would have without the plan.

Once the confirmation becomes final, the effects set out in the operative part take effect. The plan may provide for monitoring of compliance. The insolvency proceedings are discontinued once the statutory requirements are met. Financing and operational implementation must already be in place by that point.

How does the insolvency plan differ from the StaRUG?

The StaRUG comes into play before insolvency sets in. It is aimed at companies that are at risk of insolvency and wish to restructure their financial liabilities or security in a targeted manner. The procedure may be limited to specific groups of creditors and does not have to be conducted publicly, as is the case with insolvency proceedings, provided that no application is made for a public restructuring case.

Self-administration, by contrast, is an insolvency procedure. It provides access to the full range of tools under the Insolvency Code, including specific rules on contracts, employment and the setting aside of transactions. In return, it entails greater transparency, judicial oversight and the involvement of all insolvency creditors.

The StaRUG is particularly suitable for early-stage financial restructuring where the operational business is fundamentally viable. Self-administration and an insolvency plan become relevant when more comprehensive reorganisation is required, insolvency law instruments are needed, or insolvency has already occurred. The appropriate choice depends on the stage of the crisis and the extent of the reorganisation required.

When is self-administration not the right solution?

It is effectively ruled out if there is no reliable accounting system, liquidity cannot be secured, or the management has lost the trust of key creditors. Serious breaches of duty, unresolved conflicts of interest or substantial claims against current board members may also argue against continuing under the company’s own management.

A standard insolvency procedure may then offer a more credible fresh start. An independent insolvency practitioner makes decisions free from the influence of past conflicts and can pursue liability or avoidance claims without structural obstacles. Self-administration is also not necessarily the superior option for a company sale.

The decision on the course of action should be taken early on and with an open mind. Self-administration is a tool, not an end in itself. Its value lies in preserving existing operational knowledge and efficiently implementing a well-prepared restructuring plan.

About the author

Johannes Egelhof LL.M.

Partner · M&A & Company Law

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Johannes Egelhof, LL.M., advises companies, directors, shareholders and investors on restructuring, self-administration proceedings and insolvency plans. His work focuses on the integration of restructuring strategy, financing and implementation under company law.

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Frequently asked questions about self-administration and the insolvency plan

Will the managing directors remain in office under self-administration?

Yes. It continues to run the business and administer the insolvency estate, but is subject to the supervision of an insolvency administrator and must base its decisions on the interests of the creditors.

Is a company entitled to self-administration?

Self-administration is ordered upon application if the statutory requirements are met and there are no known circumstances that would suggest a detriment to creditors. A robust self-administration plan is essential.

What does the administrator check?

It monitors the financial situation, the managing director and compliance with obligations under insolvency law. It reports to the court and creditors’ bodies and may intervene in the event of any adverse developments.

What can an insolvency plan achieve?

He can reduce or defer claims, structure security arrangements and shareholders’ rights, bring in new investors and establish the legal framework for the company’s continued operation.

Can a group of creditors who oppose the proposal be outvoted?

Subject to the conditions laid down in the statutory prohibition on obstruction, the court may override the consent of a group that has refused to give its consent. In particular, the group must not be placed in a worse position than it would have been without the plan.

What is the difference between a protective shield and self-administration?

The protective shield is a special preparatory phase for an insolvency plan in the event of imminent insolvency or over-indebtedness, provided that insolvency has not yet occurred. Self-administration is the overarching procedural framework.

When is StaRUG the better option?

The StaRUG may be appropriate if the company is merely at risk of insolvency and, above all, needs to restructure specific financial liabilities. If comprehensive insolvency law instruments are required, there is a stronger case for self-administration and an insolvency plan.