German insolvency proceedings expose company directors to high risks of personal liability. Claims brought on the basis of sec. 92(2), 93(3) German Companies Act (Aktiengesetz, AktG) and sec. 64 German Limited Liability Companies Act can have disastrous financial consequences. Damages can be in the millions. Therefore many company directors purchase directors’ and officers’ liability insurances (D&O insurance) to protect their personal assets.

According to a ruling by the German Federal Court of Justice (BGH) on 5 May 2022, a passenger's claim for reimbursement due to a flight cancellation in insolvency needs to be established in the schedule of creditors, otherwise it remains a claim for air transport that cannot be enforced in insolvency proceedings if the flight was booked and paid for before the insolvency proceedings.

Background

Under German insolvency law, employees are generally protected from claw-back claims. The payment of wages is considered a "cash transaction" if the employer pays the salary within three months of the work being performed. A “cash transaction” can only be contested in limited circumstances. Where a third party pays the salary, the cash transaction privilege remains if it is not clear to the employee that a third party made the payment (s.142(2) and s.3 InsO).

A recent German Federal Court of Justice ruling shows that this protection has limits.