The German Insolvency Act (the Act) states that certain company "cash transactions" may be contested in insolvency proceedings only in limited circumstances. Earlier this year, the German Federal Court of Justice clarified that this "cash transaction privilege" does not apply to securities granted by a debtor company for shareholder loans.

The German Act on the Stabilisation and Restructuring Framework for Business (StaRUG) came into force on 1 January 2021, incorporating the EU Restructuring Directive into German law. It provides the first pre-insolvency restructuring framework for the reorganisation of companies facing "imminent illiquidity" and the possibility of involving dissenting creditors. The restructuring plan – which is very similar to the English Scheme of Arrangement and the German insolvency plan – is the central instrument.

Section 1 StaRUG

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.

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When the reforms come into force, they will supplement and complement the Recast European Union Insolvency Regulation that became effective on June 26, 2017.

New EU Regulation on Cross-Border Preservation of Accounts Potentially Useful Tool to Secure Assets in EU Member States