In four judgments of 26 June 2012, case refs.: XI ZR 259 / 11, XI ZR 316 / 11, XI ZR 355 / 10 and XI ZR 356 / 10, the Federal Court of Justice (BGH) has again stated its position on the question of when there is a duty to disclose commission. In all four cases the investors purchased certificates from the same defendant bank to invest different amounts and these certificates turned out to be largely worthless following the insolvency of the issuer (Lehman Brothers Treasury Co. B.V.) and the guarantor (Lehman Brothers Holdings Inc.) in September 2008.

In two recent judgments, the Federal Court of Justice (BGH) dealt with the resistance to insolvency of the statutory claim for deletion of a land charge and the resistance to insolvency of the claim for restitution of higher or equal ranking land charges which has been assigned for security purposes. Abandoning its existing case law, the BGH answered the question of resistance to insolvency of the statutory claim for deletion from the register as per section 1179a of the German Civil Code in the affirmative in its judgment dated 27 April 2012 (BGH, judgment of 27.04.2012 – V ZR 270 / 10).

The claimant had acquired certificates of a subsidiary of Lehman Brothers Inc., New York, in March 2008.

The German Insolvency Code requires the management of German limited liability companies (GmbH), stock corporations (AG) and other entities without personal liability to file for the commencement of insolvency proceedings no later than three weeks after the entity has become illiquid (zahlungsunfähig) or overindebted (überschuldet).  

HansOLG Hamburg, decision of February 3, 2012 - 8 U 39/11

In insolvency proceedings, claims for repayment of shareholder loans – particularly if granted to a company limited by shares or a limited commercial partnership – are generally subordinate. In its judgment of 15 November 2011 (II ZR 6/11), the Federal Court of Justice (Bundesgerichtshof, BGH) addressed whether and for what period this also applied to corresponding claims by former shareholders.

The Federal Court of Justice (Bundesgerichtshof, BGH) pronounced on double securities in its eagerly anticipated judgment of 1 December 2011 (IX ZR 11/11). The practice was controversial even before the Act for the Modernisation of Limited Liability Company Law and for the Prevention of Abuse (Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen, MoMiG) came into force. “Double security” arises where security is provided over a creditor‘s claim both by the company itself and by its shareholders.

On 27 October 2011, the German parliament adopted the Law for Further Facilitation of the Restructuring of Businesses (Gesetz zur Erleichterung der Sanierung von Unternehmen, ESUG), which entered into force on 1 March 2012. In particular, legislators have increased the importance of debtequity swaps as part of this reform. Significant practical obstacles that previously often caused debt-equity transactions to fail have now been removed.

Previous legal framework

German insolvency law is governed by a comprehensive Insolvency Code which entered into force on January 1, 1999 and has been amended from time to time, the last major reform being the Act for the Further Facilitation of the Restructuring of Companies (ESUG) which largely came into force as of 1 March 2012. There is only one primary uniform insolvency procedure which applies to both individuals and companies. In the following, we focus on companies.

Restructurings have become an integral part of the reality of the German debt and equity markets.