StaRUG: German Restructuring Framework for Auditors

Your client's Geschäftsführer tells you the company is restructuring its bank debt outside of formal insolvency proceedings. They mention something called a Restrukturierungsplan and say the court has granted a stabilisation order blocking enforcement actions. Nobody has filed for insolvency. You've never seen this on a file before, because before 1 January 2021, this procedure didn't exist in German law.

The German Corporate Stabilisation and Restructuring Act (Unternehmensstabilisierungs- und -restrukturierungsgesetz, or StaRUG) is a pre-insolvency restructuring framework that allows companies facing imminent illiquidity to restructure financial liabilities through a court-approved plan, binding dissenting minorities, while management retains control (debtor-in-possession) and no insolvency proceedings are opened.

What StaRUG is and why auditors need to know it

StaRUG implements EU Directive 2019/1023 into German law. It filled a gap that had existed for decades: before 2021, Germany had no statutory pre-insolvency restructuring mechanism comparable to the English scheme of arrangement or the Dutch WHOA. A company facing financial distress had two options: negotiate a fully consensual out-of-court deal (requiring 100% creditor agreement, which rarely held), or file for insolvency under the InsO. StaRUG created a middle path.

The framework applies to any entity that is imminently illiquid (drohende Zahlungsunfähigkeit, defined in § 18 InsO as the inability to meet payment obligations over the next 24 months) but is not yet actually illiquid or over-indebted. The moment actual illiquidity or over-indebtedness exists, management must file for insolvency under § 15a InsO within three weeks (illiquidity) or six weeks (over-indebtedness). StaRUG operates in the narrow window before that trigger is hit.

Management initiates the proceedings by notifying the restructuring court (Restrukturierungsgericht). There is no administrator. The company retains full control of its assets and operations. The court's role is limited: it confirms the restructuring plan, may grant stabilisation orders (blocking enforcement actions by creditors), and can appoint a restructuring officer (Restrukturierungsbeauftragter) in a supervisory role if needed. Creditors vote on the plan in groups. A 75% majority by claim value within each group is sufficient; cross-class cramdown is available if the plan meets a best-interest test.

For the auditor, this matters in two ways. The entity is in financial distress but not in insolvency. The financial statements are still prepared on a going concern basis (unless the plan fails). And a separate set of legal duties now applies to both management and the auditor.

Section 1: the crisis detection obligation that affects every audit

Section 1 StaRUG imposes a continuous obligation on the management of any limited-liability entity (GmbH, AG, GmbH & Co. KG, SE) to monitor developments that could threaten the company's continued existence. This is not triggered by a specific event. It is an ongoing duty that applies in good times and bad.

The obligation has four components:

1. Management must continuously monitor for going-concern threats.
2. When threats are identified, management must take appropriate countermeasures.
3. Management must inform the supervisory board (Aufsichtsrat or Beirat) without delay.
4. The entire process must be documented in a way that demonstrates compliance retrospectively.

Section 1 did not invent crisis monitoring from scratch. The duty extends requirements that already existed for AGs under § 91(2) AktG (the KonTraG obligation) and applies them uniformly across all corporate forms with limited liability. But it formalises them. A GmbH Geschäftsführer who could previously argue that no specific law required a formalised early warning system can no longer make that argument. Since January 2021, Section 1 StaRUG is that specific law.

The IDW responded with draft standard IDW ES 16, which provides guidance on what an adequate crisis detection system looks like. IDW ES 16 defines two critical concepts: developments threatening the entity's continued existence (fortbestandsgefährdende Entwicklungen) and the corporate planning that should identify them. The standard is addressed primarily to management, but its existence means the auditor now has a reference point for evaluating whether management's monitoring processes are adequate.

Section 102: the auditor's own reporting duty

This is the provision most auditors of German entities don't yet know about. § 102 StaRUG imposes a duty on auditors, tax advisers (Steuerberater), certified public accountants, and lawyers to indicate the existence of grounds for insolvency if they identify them during the preparation of annual financial statements.

Read that carefully. This is not an obligation that arises only during the audit. It applies when the auditor is involved in the preparation of the financial statements, which is common for smaller German entities where the WP-Praxis (auditing firm) also prepares the Jahresabschluss. If during that preparation work you identify indicators that the entity is illiquid (§ 17 InsO) or over-indebted (§ 19 InsO), § 102 StaRUG requires you to report this to management.

This sits alongside, not instead of, the auditor's existing obligations under ISA 570. But it adds a German statutory layer. Failure to comply could expose the auditor to liability claims from creditors who argue that the insolvency filing was delayed because the auditor did not flag the indicators.

Going concern under ISA 570 when StaRUG is in play

ISA 570.16 requires the auditor to evaluate whether events or conditions exist that may cast significant doubt on the entity's ability to continue as a going concern. A client that is in StaRUG proceedings, or approaching the imminent illiquidity threshold, triggers this evaluation immediately.

The challenge is that StaRUG proceedings are designed to preserve going concern. The whole point is to restructure financial liabilities so the entity can continue operating. A successful StaRUG plan removes the going concern doubt. But the plan is not guaranteed to succeed, and even during proceedings, the entity sits in a zone between continuation and insolvency.

Your assessment needs to cover four questions:

1. Is the entity currently imminently illiquid (and therefore eligible for StaRUG), or has it crossed into actual illiquidity (requiring insolvency filing under § 15a InsO)?
2. If proceedings are underway, has the restructuring plan been voted on and confirmed?
3. If confirmed, is the plan feasible and are the assumptions underlying it reasonable?
4. If the plan has not yet been confirmed, what is the probability of confirmation based on creditor support?

ISA 570.A2 lists indicators including defaults on loan agreements and inability to pay creditors on due dates. A client in StaRUG proceedings will typically exhibit several of these. The question is not whether going concern doubt exists (it does), but whether the restructuring plan provides sufficient mitigation to resolve it.

If the plan has been confirmed by the court and the assumptions are reasonable, you may conclude that going concern is appropriate with a material uncertainty disclosure under ISA 570.22. If the plan is still being negotiated, or creditor support is uncertain, or the entity's liquidity forecast shows a gap even with the plan, a more severe conclusion may be needed.

IDW S 11 and IDW S 6: the German professional standards

Two IDW standards are directly relevant when StaRUG is on the file. Both are professional pronouncements rather than auditing standards, but they define what the German market treats as adequate evidence.

IDW S 11: assessing insolvency grounds

IDW S 11 (Beurteilung des Vorliegens von Insolvenzeröffnungsgründen) sets the framework for assessing whether grounds for opening insolvency proceedings exist. It covers both illiquidity (§ 17 InsO) and over-indebtedness (§ 19 InsO). The standard defines the 21-day liquidity test: a gap of more than 10% between available liquid resources and due obligations, persisting for more than three weeks, is treated as a strong indicator of illiquidity under established BGH (Federal Court of Justice) case law.

For the auditor, IDW S 11 provides the methodology for determining whether your client has crossed the line from imminent illiquidity (StaRUG-eligible) into actual illiquidity (insolvency filing required).

The 10% threshold is not a bright line in the standard itself. It comes from BGH jurisprudence. But it is the reference point used by every restructuring adviser and insolvency court in Germany. When your client's CFO presents a liquidity forecast, the question is always: does the gap exceed 10% of due obligations, and does it persist beyond three weeks? If yes, the entity is almost certainly illiquid under § 17 InsO, and StaRUG is no longer available. If the gap is projected but not yet actual, the entity sits in the imminent illiquidity zone where StaRUG operates.

IDW S 6: restructuring concepts

IDW S 6 (Anforderungen an Sanierungskonzepte) defines what a viable restructuring concept looks like. Banks, courts, and creditors rely on IDW S 6 opinions when deciding whether to support a restructuring. An IDW S 6 opinion is not required for StaRUG proceedings, but in practice, creditors expect one.

The standard requires a positive going concern prognosis, a plausible business model, an integrated financial projection (profit and loss, balance sheet, cash flow), concrete measures to restore sustainable profitability, and a timeline for implementation. The projection period must be long enough to demonstrate that the entity can survive independently after the restructuring measures take effect.

If your client's management or restructuring adviser hands you an IDW S 6 opinion, you can use it as audit evidence under ISA 500 (using the work of a management's expert), provided you evaluate the expert's competence, objectivity, and the reasonableness of their assumptions. Pay particular attention to the financial projections embedded in the opinion. An IDW S 6 opinion that projects positive cash flow from year two but relies on revenue growth assumptions of 15% per annum in a declining market is not credible evidence of going concern.

If no IDW S 6 opinion exists, you need to assess feasibility yourself, based on management's financial projections, the restructuring plan document, and creditor voting patterns. This is more work, but it is not optional. ISA 570 does not give you a pass just because the entity is in a formal restructuring proceeding.

Worked example: Brinkmann Bau GmbH & Co. KG

Brinkmann Bau GmbH & Co. KG is a German construction company (€47M revenue, fiscal year ending 31 December 2025) based in Düsseldorf. In September 2025, the company's CFO informed you that a major project client defaulted on a €6.2M receivable. The company's 13-week liquidity forecast (prepared under IDW S 11 methodology) shows a 14% gap between available resources and due obligations by week 8. The company is not yet actually illiquid but meets the imminent illiquidity threshold under § 18 InsO. Management has notified the Restrukturierungsgericht and filed a draft restructuring plan proposing a 40% haircut on unsecured financial creditors and a two-year deferral on secured bank debt.

1. Evaluate the entity's status under StaRUG

The 13-week liquidity forecast shows a gap exceeding 10%, but it is projected, not current. Brinkmann is still meeting obligations as they fall due today. Under IDW S 11, this places the entity in imminent illiquidity (drohende Zahlungsunfähigkeit), not actual illiquidity. StaRUG proceedings are available.

2. Assess the restructuring plan

The plan proposes a 40% haircut on €11M of unsecured financial debt (reducing it to €6.6M) and a two-year deferral on €18M of secured bank debt. No operational restructuring is included (StaRUG is designed primarily for financial restructuring; operational changes under German labour law cannot be forced through StaRUG).

3. Going concern conclusion

The plan is in progress. No vote has taken place yet. The audit report date is 15 April 2026. You cannot conclude that the going concern basis is secure because the plan's success depends on creditor approval, which has not occurred.

ISA 570.22 applies: a material uncertainty exists relating to events or conditions that may cast significant doubt on the entity's ability to continue as a going concern. The financial statements should include adequate disclosure. Your audit report includes an Emphasis of Matter paragraph (or a separate section under ISA 570.22) drawing attention to the disclosure.

4. Section 102 StaRUG compliance

During preparation of the Jahresabschluss, you identified the receivable default and the liquidity gap. Under § 102 StaRUG, you have a duty to indicate the existence of potential insolvency grounds to management. In this case, management already knows (they filed for StaRUG). But document that you discharged the § 102 obligation by confirming with management in writing that the indicators were known and being addressed.

Practical checklist

1. At planning, ask management of every German limited-liability entity whether they have a formalised early crisis detection system under Section 1 StaRUG. Document the answer in your risk assessment working papers.
2. If the client shows any going concern indicators, obtain the most recent liquidity forecast and evaluate it against the IDW S 11 three-week / 10% threshold. This determines whether the entity is in imminent illiquidity territory.
3. If StaRUG proceedings are underway or contemplated, obtain the restructuring plan and evaluate creditor group classifications, proposed terms, and voting timelines.
4. Check whether an IDW S 6 restructuring opinion exists. If it does, evaluate it as management's expert evidence under ISA 500. If it does not, build your going concern assessment from the underlying projections.
5. Comply with § 102 StaRUG: if you identify indicators of illiquidity or over-indebtedness during preparation of the financial statements, notify management in writing and retain the notification in your file.
6. Time your going concern assessment relative to the StaRUG timeline. If the restructuring plan vote occurs before your report date, your assessment can reflect the outcome. If not, document the uncertainty and consider ISA 570.22 disclosure.

Common mistakes

• Treating a StaRUG proceeding as equivalent to insolvency and concluding that the going concern basis is inappropriate. StaRUG is designed to preserve going concern. The filing itself does not mean the entity is insolvent.
• Failing to evaluate whether the entity has crossed from imminent illiquidity into actual illiquidity during the course of the engagement. The BaFin and WPK have both emphasised that auditors must monitor the client's liquidity position throughout fieldwork, not only at planning.
• Not documenting § 102 StaRUG compliance. Even when management is already aware of the indicators, the auditor's duty to report exists independently. A one-line file note is insufficient. Retain a written notification with management's acknowledgement.

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Frequently asked questions

Further reading and source references

• StaRUG (Unternehmensstabilisierungs- und -restrukturierungsgesetz): the full legislative text of Germany's pre-insolvency restructuring framework.
• InsO (Insolvenzordnung): the German Insolvency Code, including § 15a (filing obligation), § 17 (illiquidity), § 18 (imminent illiquidity), and § 19 (over-indebtedness).
• IDW S 11, Beurteilung des Vorliegens von Insolvenzeröffnungsgründen: the professional standard for assessing insolvency grounds.
• IDW S 6, Anforderungen an Sanierungskonzepte: the professional standard for viable restructuring concepts.
• IDW ES 16 (draft): guidance on Section 1 StaRUG crisis detection compliance.
• ISA 570 (Revised), Going Concern: the international auditing standard for going concern assessment.
• EU Directive 2019/1023: the preventive restructuring directive that StaRUG implements.