A recent decision of the German Federal Court of Justice (Bundesgerichtshof) has extended the liability of legal advisors in crisis situations.

Background

Under German law, a lawyer may be liable not only to his client, but also to a third party, if the third party has a special interest in the lawyer's performance. The Bundesgerichtshof has clarified that managing directors and even shadow directors may have such a special interest and may claim damages from their company’s legal advisor for breach of duty (Pflichtverletzung).

Under German law, company directors have a statutory duty to file for insolvency once the company has become insolvent or over-indebted. Company directors can be held personally liable for any payments they make after that point of time unless they prove that they exercised reasonable care, skill and diligence. After the German Federal Court of Justice (Bundesgerichtshof) clarified that standard terms and conditions of German D&O insurance contracts cover this directors’ liability, many D&O insurers have tried to find new ways to avoid their coverage.

In a ruling issued on 3 March 2022 (IX ZR 78/20) the German Federal Court (BGH) has again raised the requirements for proving that a debtor, when making a payment, intended to disadvantage their creditors.

Background

In a recent judgment on directors’ liability, the Higher Regional Court of Düsseldorf (Oberlandesgericht Düsseldorf) held that startup companies are not deemed to be overindebted if they are receiving adequate finance from their shareholders or third parties.

Background

In a recent judgment on directors’ liability (Bundesgerichtshof, 18 November 2020, IV ZR 217/19), the German Federal Court of Justice (Bundesgerichtshof) has clarified the scope of D&O insurance coverage, holding that company directors are entitled to its protection.

Background

The German Federal Court of Justice (Bundesgerichtshof) recently decided that an insolvency administrator must not rely on the business judgment rule laid down in section 93(1) of the German Companies Act. Section 93(1) provides that a director is not liable to the company if the director reasonably believes that he is well-informed and is acting in the best interests of the company.

The High Court decision in Re All Star Leisure (Group) Limited (2019), which confirmed the validity of an administration appointment by a qualified floating charge holder (QFCH) out of court hours by CE-Filing, will be welcomed.

The decision accepted that the rules did not currently provide for such an out of hours appointment to take place but it confirmed it was a defect capable of being cured and, perhaps more importantly, the court also stressed the need for an urgent review of the rules so that there is no doubt such an appointment could be made.

In certain circumstances, if a claim is proven, the defendant will be able to offset monies that are due to it from the claimant - this is known as set off.

Here, we cover the basics of set off, including the different types of set off and key points you need to know.

What is set off?

Where the right of set off arises, it can act as a defence to part or the whole of a claim.

The German Federal Court of Justice (Bundesgerichtshof) gave a decision on international jurisdiction that sheds light on the importance of the new presumptions in article 3 of (recast) Regulation (EU) 2015/848.

On 14 November 2018, the Court of Justice of the European Union issued a judgment on jurisdiction for avoidance actions under the previous Insolvency Regulation.

In its decision of 12 February 2009, the Court had already established that the courts of the Member State with jurisdiction to open insolvency proceedings are competent for all the actions directly related to the insolvency.