Building on measures already introduced in the Coronavirus Act – such as the moratorium on lease termination for non-payment of rent until 30 June 2020 – the Government announced that further emergency measures will be introduced.

Statutory demands and winding up petitions issued to commercial tenants to be temporarily voided

The forthcoming Corporate Insolvency and Governance Bill will include restrictions on the use of statutory demands and winding up petitions to recover sums owed by tenants.

Einleitung

Introduction

Within German contract law, the principle of being bound by a contract (pacta sunt servanda), i.e. the obligation to fulfill agreements, applies. In case of the insolvency of one of the contractual parties, however, exceptions are made. Upon the opening of the insolvency proceedings, the principle of being bound by a contract is modified. 

Im deutschen Vertragsrecht gilt das Prinzip der Vertragstreue (pacta sunt servanda), welches die Verpflichtung zur Erfüllung von Verträgen zum Gegenstand hat. Hiervon werden im Falle der Insolvenz einer Vertragspartei Ausnahmen gemacht. Mit Eröffnung des Insolvenzverfahrens wird das Prinzip der Vertragstreue modifiziert. 

Key Points

• A binding contract by exchange of email did not arise where parties were simply exploring a potential deal.

• Sale by auction is often appropriate where an asset is difficult to value.

• Where no differential treatment of creditors, unfair harm requires that a decision does not withstand logical analysis.

The Facts

Investors may, for reasons outside of their control, find themselves with a financially distressed company in their portfolio and possibly in unfamiliar territory. Consequently, it is not just those investors who actively seek out opportunities within the distressed space who should be mindful of the implications of insolvency processes (most commonly administration which can often also be used as part of a wider restructuring).

Key points

• Failure to comply with sections 333 and 363 of the Insolvency Act constitutes contempt of court for which a committal order may be obtained.

• A trustee in bankruptcy should not usually require permission to apply for a committal order.

• Correct procedure for application confirmed by the court.

Key points

• Information obtained by compulsion can be shared between officeholders of connected estates (parent/subsidiary)

• There must, however, be a possibility that there will be a surplus in the subsidiary estate

• The prospect must be real as opposed to fanciful

The facts

Key points

• Court reiterated circumstances in which it will sanction a proposed course of action by administrators

• Requirement that the course of action be “particularly momentous”

• Court sanctioned proposed settlement in the circumstances

The Facts