News
StaRUG proceeding of VARTA AG
Further to our WHOA specials (see the links below), we would like to draw your attention to a recent and interesting StaRUG proceeding in Germany.
VARTA AG, a German manufacturer of lithium-ion batteries operating worldwide, filed a start-of-procedure declaration regarding a StaRUG proceeding with the Stuttgart District Court on 21 July 2024. The company is in a state of financial distress and the restructuring of its debts is necessary to avoid an insolvency proceeding.
On 25 November 2024, VARTA AG presented the restructuring plan to its creditors and shareholders and it was put to a vote at the Stuttgart District Court (court order of 31 October 2024, ref. 6 RES 1243/24). Among other things, the plan provides for a capital reduction to zero, which leads to the delisting of the company and cuts out the minority shareholders of VARTA AG without compensation. The minority shareholders will lose the ownership of their shares while new shares will be issued to new investors for the purpose of refinancing.
In Germany, a restructuring plan can be confirmed by the court if within their respective classes 75% of the affected creditors and shareholders vote in favour of the plan and this majority is obtained in all classes. If this majority is not obtained in a certain class, such class is still deemed to have voted in favour of the plan if certain conditions are met, specifically if the majority of the other classes votes in favour of the plan (cross-class cram down). This was the case with VARTA AG. Although the minority shareholders voted against the restructuring plan, the plan can nevertheless be confirmed on account of the cross-class cram-down principle, as the class of minority shareholders is deemed to have voted in favour of the plan. For this reason, it is expected that the restructuring plan will be confirmed by the court in the near future.
Unlike in Germany, there is no court-supervised voting proceeding in the Netherlands. Whether the voting process was conducted properly is only determined in the confirmation proceeding. Also, the threshold for the confirmation of the plan is lower in the Netherlands than in Germany: in the WHOA proceedings, a majority of 66.7% within a class of creditors or shareholders is required and the plan can already be confirmed by the court if at least the ‘in the money’ class has voted in favour of the plan.
Both in the Netherlands and in Germany, the restructuring plan can include changes to shareholders' rights. The shareholders of the Dutch football club ADO Den Haag faced a similar situation in the WHOA proceeding. In that case, all outstanding shares were cancelled and new shares were issued to a new investor in order to refinance ADO Den Haag.
In the end, if the restructuring plan is confirmed by the court at the end of the WHOA or the StaRUG proceeding, it will also be effective against those creditors and shareholders who have voted against it. However, the ‘best interest of creditors’ principle applies in both countries. Both procedures ensure that the creditors and shareholders affected by the plan are not worse off as a result of the restructuring plan than they would have been without the plan or in case of insolvency proceedings.
Please find our WHOA specials below:
WHOA SPECIAL I – Überblick über das niederländische WHOA-Verfahren