Law360, New York ( June 8, 2015, 10:28 AM EDT) -- Portfolio companies increasingly take recourse to debt capital provided directly by their equity sponsors, whether to address working capital concerns or in the context of a restructuring. In Germany, shareholder debt, even though automatically subordinated in any later insolvency proceeding filed by the portfolio company (subject to certain exceptions),[1] registers as a liability on the company's balance sheet, including for purposes of determining whether the company is "overindebted" — balance sheet-insolvent — under German insolvency law. Occurrence of balance sheet insolvency, in turn, triggers a 21-day clock within which (and in any event, as soon as possible) a German company's directors must discontinue all other than necessary trading and file the company for insolvency or face civil and criminal fines and sanctions and potentially incarceration.[2]...