Government bonds were long considered a safe investment that offered the potential for high returns. However, after Argentina announced in 2002 that it would no longer service its bond debt and after Greece restructured its sovereign debt in March and December 2012, the question arises as to what investors can do to avoid the significant losses of capital (up to 70% in case of Argentina and over 80% in case of Greece) which almost always accompany sovereign debt restructurings.

The German Federal Court of Justice (Bundesgerichtshof - BGH) in its decision of 17 February 2011 (IX ZR 131/10) has been dealing with the issue which – since the Act to Modernise the Law Governing Private Limited Companies and to Combat Abuses (Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbrauchen - MoMiG) came into effect – is being controversially discussed as to whether loans by family members (in particular the shareholder’s siblings, spouse and children) in insolvency proceedings will be given subordinate ranking.