In a situation where the survival of a German company depends on restructuring measures by third parties (mainly lenders) who fear that the shareholders may use their hold-out position in a potential subsequent exit by sale of the shares, it is an option for the lenders to demand from the shareholders that the shares are transferred to a trustee to be held in a “double-sided trust” (doppelnützige Treuhand).
The trust agreement is entered into between the company, its shareholders and a trustee (usually acting through an SPV). The agreement normally comprises the lenders not as parties but as beneficiaries; hence the trust is called “double-sided”. The shareholders transfer their shares to the trustee who is authorised to exercise the shareholder rights according to the restructuring plan. If the restructuring is successful and the loans are repaid, the trustee will return the shares. However, if certain criteria are met (e.g. lapse of restructuring period, vote of the lenders, company value passing a threshold), the trustee may or must sell the shares and distribute the proceeds to the beneficiaries (lenders). While the trust agreement as such does not affect the receivables of the lenders, such receivables can be restructured in this context.
The main advantage of a double-sided trust is that it allows for a smooth and confidential exit by share sale without the consent of the (former) shareholders. By contrast, in Germany it is not possible to prepare a pre-packaged administration for a restructuring over the weekend without asking the company (shareholders).