The thoroughly revised text of the German Bonds Act (Gesetz über Schuldverschreibungen aus Gesamtemissionen (SchuldVG)) passed by the German Parliament (Bundestag) in early July 2009 modernises its predecessor act, which was passed and has remained virtually unchanged since its entry into force in 1899.

One of the more notable changes relates to the adaptation of creditors' meetings to annual shareholders meetings of German stock corporations in accordance with the German Stock Corporation Act (Aktiengesetz).

If provided for in the terms and conditions of the bond, the regime of the SchuldVG now allows for creditors' meetings to be summoned even if the debtor is not (already) on the brink of insolvency, allowing bond holders to vote on a number of issues which, if specific majority requirements are satisfied, can result in a (collective) amendment of the terms and conditions of the German bond.

However, it remains to be seen whether or not the terms and conditions of newly issued German bonds will indeed provide for these extended rights for bond holders, or if they will be silent on this point. If silent, this right to convene creditors' meetings and so act collectively will remain limited to crisis situations.

The measures that are eligible for collective action have been expanded considerably. Before the SchuldVG, bond holders could not (by collective action) effectively:

Any such collective actions were only possible for a very limited time and only to avert imminent insolvency proceedings against the issuer.

The SchuldVG now permits these and other measures that are aimed at stabilising the issuer, including subordination of the bond in insolvency proceedings and the exchange of the issuer.

Unless the terms and conditions provide for different procedural rules, the summoning of creditors' meetings will follow the rules set out in the Stock Corporation Act in respect of the convening of shareholders' meetings. Although the current rules under the Stock Corporation Act are somewhat restrictive and outdated, the SchuldVG already envisages upcoming changes in the Stock Corporation Act which are likely to enter into force almost simultaneously with the new SchuldVG and which will allow for electronic attendance and voting in shareholders' meetings.

The new SchuldVG therefore already provides for processes that allow creditors' decisions to be taken without the need for a physical meeting. This procedure is particularly useful where a quick decision is necessary and bond holders do not require additional information or discussions that could only be obtained in a meeting.

To allow flexible structures, the new SchuldVG leaves the details of bond holders' decision-making to the terms and conditions of the individual bond. Therefore, bondholders could arrange for rather informal procedures by allowing for written decisions or even electronic voting.