A previous post introduced the general concept of ROT provisions as a means to protect suppliers as creditors in the insolvency of their customers. The basic principle of ROT under German law is that the supplier remains the owner of the goods which it has supplied to its customer until the customer has fully paid the purchase price for the goods.

Foreign suppliers are often not familiar with the legal framework applying in an insolvency of their German customers. That lack of familiarity may leave them ill-prepared to deal with distressed customers. In many cases, the foreign suppliers have not taken the measures necessary to protect themselves.

I plan to provide readers throughout the following months, with information that suppliers may find helpful to better protect their position in case of an insolvency of their German customer. Questions and comments are welcome!

On 23 February 2011, the Federal Government (Bundeskabinett) adopted the government draft (Regierungsentwurf) of an act (Entwurf eines Gesetzes zur weiteren Erleichterung der Sanierung von Unternehmen) that proposes material changes to the German Insolvency Act (Insolvenzordnung). The government's aim is to modify the economic terms for the restructuring of distressed companies .

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.