Under section 64 of the German Companies Act (GmbHG), the managing director of a company is obliged to reimburse payments which have been made after the company becomes illiquid or over-indebted but not when the payments are made with the diligence of a prudent businessman. Such permitted payments include those that are necessary for production, internal operation, and the maintenance of the business concern.
Background
According to German law, managing directors of limited liability companies are personally liable for payments that have been made despite insolvency. This can lead to widespread liability.
Etihad, die staatliche Fluggesellschaft der Vereinigten Arabischen Emirate, war Hauptaktionärin der Air Berlin. Etihad stellte Air Berlin seit 2011 Liquidität zur Verfügung. Als sie die finanzielle Unterstützung im August 2017 beendete, stellte Air Berlin wenige Tage später beim Amtsgericht Charlottenburg einen Antrag auf Eröffnung des Insolvenzverfahrens. Die rechtlichen Folgen dieser Insolvenz sind immer noch nicht ganz abgearbeitet. Ein wirtschaftlich bedeutender Aspekt beschäftigte zuletzt die deutschen und englischen Gerichte.
Sachverhalt
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 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.
The German Code for Restructuring and Insolvency Law Development (SanInsFoG) came into force in early 2021, resulting in significant changes to the Insolvency Code. The changes impact both self-administration proceedings (where the debtor retains possession and control of its assets in insolvency proceedings, usually to implement a restructuring) and protective shield proceedings (where the debtor develops an insolvency plan). The requirements for self-administration proceedings have become stricter.
Liquidity forecast
The COVID-19 crisis has pushed intellectual property holders and implementers into a distressed situation. In this webinar, we explore what happens if a party to an IP licence becomes insolvent, and discuss practical tips for the non-insolvent party to protect its position.
Regulations
On 21 April 2018, new rules regarding the handling of "group" insolvency proceedings of companies in Germany became effective.
The regulations aimed at better coordination between separate insolvency proceedings, which must be implemented for every company within a group under German insolvency rulings. Prior to the regulations becoming effective, coordination was quite difficult, due to the separate responsibilities of different courts and insolvency administrators.
Amendments to the German Insolvency Act
The German Federal Court of Justice (Bundesgerichtshof) recently changed its interpretation of the law regarding clawback claims, Vorsatzanfechtung (case of actio pauliana). Here, we outline how the Court's position on clawback claims has changed and what this could mean for future claims.
What are the existing legal provisions?
The economic fallout from the COVID-19 pandemic has hit all industries in Germany. To mitigate the negative impacts of the pandemic, the government has implemented loan programs and introduced various emergency measures via the COVID-19 Insolvency Suspension Act (COVInsAG), such as temporarily suspending the obligation to file for insolvency and limiting the personal liabilities of the managing directors. As a result, the number of insolvency proceedings in Germany is decreasing significantly.