Open Access

Annika Wolf, David Christoph Ehmke

• The treatment of executory contracts is often decisive for the success of a substantial business reorganization. Ipso facto clauses can effectively be the end of a debtor’s chance to continue trading while liabilities arising from the future commitment to perform executory contracts can similarly be an unbearable burden for the debtor’s business and a successful restructuring. The German insolvency law (InsO), therefore, gives the debtor in distress or the appointed insolvency administrator a choice on performance or non-performance of executory contracts. To avoid that such decision is already taken by the counterparty based on an ipso facto clause such clauses are regularly held to be void by German courts. The new German restructuring (StaRUG) procedure offers explicit protection against ipso facto clauses but does not allow the debtor to terminate executory contracts or restructure future liabilities arising from such contracts. Thus, there are two statutory regimes to deal with a distressed situation, but only one offers the debtor a comprehensive statutory solution to reorganize its business should liabilities from executory contracts be a burden for the debtor’s future success and the counterparty be unwilling to renegotiate the contract.