The Federal Labour Court has ruled on the fundamental issue of who will be entitled to the rights under a life insurance policy concluded by the employer in the employee’s favour in the event that an employment relationship comes to an end in the course of the employer’s insolvency proceeding.
On 13 July 2010 Germany's Federal Ministry of Justice and Finance published a discussion draft of an Act for the Restructuring and Orderly Liquidation of Credit Institutions, for the Establishment of a Restructuring Fund for Credit Institutions and for the Extension of the Limitation (Restructuring Act).
As part of an intended comprehensive amendment of German insolvency law, the German Federal Ministry of Justice has prepared a draft of a new law to facilitate the reorganization of enterprises (“Reorganization Facilitation Act”). The new law will curtail the rights of shareholders of insolvent companies and allow capital measures and other corporate measures to be taken in the insolvency of a company without the participation of the shareholders. The new regulation is of interest to investors because it will significantly simplify the purchase of the shares of an insolvent company.
The German parliament (Deutscher Bundestag) has recently passed a law on the restructuring and dissolution of distressed financial institutions, establishing a sector-wide restructuring fund and extending the statute of limitations for the liability board members (Restructuring Act).
On 14 December 2010 the English Court sanctioned four connected schemes of arrangement for German companies in the Tele Columbus group.
The EU Decision
The EU Commission has held on January 26, 2011 that the so called restructuring privilege offered by German corporate tax law, which allows corporations in a distressed financial situation to continue to set off tax loss carry forwards against future profits even if their shareholder structure has substantially changed, is incompatible with EU State Aid provisions.
The recipients, which have applied the restructuring privilege, are now threatened with the reclaim of the tax benefits.
The German Government has introduced a reform of the German Insolvency Code (Insolvenzordnung– InsO) in order to further facilitate business restructurings in Germany.
In Germany, the restructuring of companies or groups in financial crisis is subject to significant tax risks.
The German Federal Civil Court (BGH) in its decision of 15 April 2010 (IX ZR 188/09) clarified the legal position of holders of preferred stock in insolvency plan proceedings.
As part of the German government’s costs savings package, a change in the German Insolvency Code may be implemented which will grant to the German fiscal authorities a preferred creditor status.