Introduction:
The Court of Justice of the European Union has ruled that a provision of German law falls within the scope of Article 4 of the EC Regulation on Insolvency Proceedings, thereby paving the way for a German court to require a director of an English incorporated company to make payments under German law where the company has been placed into insolvency proceedings in Germany.
The German Federal Court of Justice (BGH) has made a referral to the European Court of Justice (ECJ) concerning the question of whether a director of an English limited company which predominantly operated its business in Germany and over the assets of which insolvency proceedings have been opened in Germany, pursuant to Art 3 para 1 European Insolvency Regulation, can, like the director of a German GmbH, be held liable for forbidden payments pursuant to German corporate law or insolvency law.
To date, the German Insolvency Code (Insolvenzordnung) does not contain provisions governing group insolvencies. If several entities within a group of companies become insolvent, individual insolvency proceedings are opened and sometimes even individual insolvency administrators are appointed for each entity.
German proposals
Global FDSI Briefing
Welcome to our latest quarterly briefing on legal developments across our global network. I hope you find the articles insightful and thought provoking. Highlights this quarter include recent developments in Italian derivatives case law, an overview of the amendments made to Spain’s insolvency regulation and the UK’s FCA issuing first warning notices against individuals.
If you have any questions or would like further information please do not hesitate to contact me, or one of our global key contacts.
[Matthew Allen]
Matthew Allen
Recent Developments
Does the German restructuring clause of Sec. 8c para. 1a CTA (see our Client Alert of 10 July 2009) conform to European Community law? This will be analyzed by the European Commission which has — by circular of 24 February — announced the initiation of a formal examination procedure (Art. 108 para. 2 TFEU, former Art. 88 para. 2 of the EC Treaty). Already before completion of the formal procedure, corporations with unrestricted and restricted tax liability in Germany may face farreaching consequences.
A. The Restructuring Clause of Sec. 8c para. 1a CTA
Yesterday, the European Commission announced that it was termporarily approving, under E.U.
The German Government is required by the European Commission ("Commission") to seek repayment of €5.2 million in aid from the bicycle group, Biria. The aid comprised two guarantees and “silent participation” (investor received remuneration but no shares) by a public investment company and the German Land of Saxony to subsidiaries within the Biria group. Although Germany argued that the “silent participation” was provided upon market conditions, the Commission did not accept that it met the private market investor test.
When executing public M&A transactions, dealmakers need to understand local market practice as well as the local regulatory environment.
In light of the UK’s cram down and director-friendly processes, in particular its scheme of arrangement model, major European economies such as France, Germany and Italy have worked hard to develop regimes that give greater emphasis to pre-insolvency alternatives. These new regimes create cram down mechanisms and encourage debtor-in-possession (DIP) financings, ultimately aiming to make restructuring plans more accessible, more efficient, and crucially more reliable; essentially more in tune with the Anglo-American approach to insolvency and restructuring.