In a previous update on the German law perspective regarding bunker supplies, some significant problems associated with bunker supplies under German law were highlighted (for further details please see "Bunker supplies – maritime lien and risk of vessel arrest").

Key point

The restructuring of the AVK Group shows what chances the “Law for Further Facilitating the Restructuring of Companies” provides regarding the restructuring of group entities in the group structure and incorporating them back into the group.

Background

Report contents:

German Federal Court of Justice decision paves the way for bond restructurings under 2009 Bonds Act.

This post addresses the question of how retention of title (“ROT”) provisions are effectively agreed to as part of the contractual relationship between a supplier and its German customer under German law.

German insolvency case law on intellectual property rights has experienced rapid development in recent years, while attempts by the German legislature to regulate this subject with precision have repeatedly failed. The multitude of stakeholders involved (among them insolvency administrators, licensors, sub-licensees and creditors that have liens on IP rights) could not agree on a resolution acceptable to all.

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 German Federal Constitutional Court (BVerfG) will soon issue a decision on the constitutionality of Sec. 56 of the German Insolvency Statute. According to Sec. 56, only independent natural persons can be appointed as insolvency administrators. Thus, accounting firms, law firms, and tax consulting firms cannot act as insolvency administrators. In 2013, a German law firm lodged a constitutional complaint asserting that this provision infringed its right of equality before law as well as its right of occupational freedom.

With a recent draft act to amend the German Insolvency Code (Insolvenzordnung – InsO), the German Federal Ministry of Justice and Consumer Protection intends to reduce uncertainty regarding insolvency claw-back, in particular regarding Sec. 133 InsO. The result may be that restructuring opinions that are now market standard when (re)financing financially troubled companies in Germany become redundant.

Current legal status

Germany’s Frankfurt District Court recently dealt with the question of whether a debtor’s lawyers’ fees arising from restructuring advice prior to insolvency could be challenged and claimed back in insolvency. The court held in the first instance (07.05.2015, Az. 2-32 O 102/13) that the lawyers of an insolvent German company in the solar industry had to repay €4.5 million after the out-of-court restructuring failed.