A study by a major German credit insurer has shown an increasing number of large firms filing for insolvency could have a domino effect on the entire German economy. The European Directive on preventive restructuring frameworks aims at promoting crisis management at an early stage, before insolvency occurs. Therefore, the process depends on the specifics of the given case and the respective arrangements between the various stakeholders. On the contrary, in the first half of 2020 the number of corporate insolvencies fell by 8.2% year-on-year to 8,900 cases (H1 2019: 9,690), the main reason for this likely being the government contingency support measures, whether in the form of financial assistance or the suspension of the obligation to file for insolvency. An in-court restructuring option is the insolvency plan. The implementation of provisions regarding out-of-court restructuring proceedings in German law (see 2.1 Overview of Laws and Statutory Regimes) will most likely increase the efforts of the stakeholders to agree on out-of-court restructuring proceedings. A comprehensive change to German insolvency and restructuring law has become effective starting 1 January 2021. If during the last month preceding the filing for insolvency, or after such application, an insolvency creditor acquires a security attaching to the debtor's property forming part of the insolvency estate by enforcement, such security shall become legally invalid when the insolvency proceedings are opened. A Bremen court has found it lacks jurisdiction to oversee the insolvency of a German property investment group that targeted foreign pensioners, after the group’s founder challenged its relocation from Hanover and accused its Bremen administrator of sneaking onto the case. The payments company filed for insolvency at a Munich court saying that, with 1.3 billion euros ($1.5 billion) of loans due within a week, its survival as a going concern was “not assured”. Unless insolvency proceedings lead to an insolvency plan, the debtor will be liquidated. The insolvency allowance is provided for monthly wages that do not exceed €6,900 in Western Germany and €6,450 in Eastern Germany (as of November 2020). The second part of the plan - the constructive part - explains the alterations of the stakeholders’ legal positions resulting from the plan. Some big names in 2019 included wind turbine manufacturer Senvion, industrial parts company Eisenmann, airline Germania, sports equipment manufacturer Kettler, and retailers Gerry Weber and Beate Uhse. 6. German insolvency law is governed by a comprehensive Insolvency Code which entered into force on January 1, 1999 and has been amended from … Imminent Illiquidity (Section 18 German Insolvency Code). Insolvency Proceedings by Court - Paderborn Order Information like a Book or DVD. "Almost all companies in Germany are dealing with a massive structural shift with digital transformation and sustainability policies.". Abstractly, it has to be a person with business knowledge, independent of the creditors and the debtor, whose abilities correspond both legally and economically to the respective tasks. The purpose of the descriptive part is to enable the creditors affected by the insolvency plan to evaluate the legal consequences of the plan. With § 1 COVInsAG (the Coronavirus Act), the legislator has suspended the obligation of corporate bodies with limited liability to file for insolvency pursuant to § 15a InsO and § 42(2) BGB until 30.9.2020 if the insolvency maturity is based on the consequences of the spread of the coronavirus and if there are prospects of eliminating an existing inability to pay. To avoid an illiquidity during the negotiation phase, usually standstill and waiver agreements are concluded to avoid relevant repayment obligations of the debtor. Beyond this, there is no distinction between foreign and domestic creditors. is a leading international law firm with more than 1,200 lawyers. no creditor to be satisfied on an equal footing with the creditors forming its group without a plan receives an advantage compared to such creditors. More recently, there has been a move towards the development of a “cross-border” insolvency law. In case of a negative forecast (negative Fortführungsprognose), in the second step, the question whether the company’s assets cover the existing liabilities needs to be verified, based on an over-indebtedness balance sheet. Up to now, in practice one had to make do with informal restructurings outside the formal insolvency framework. If there is no group court and no joint insolvency administrator, the new rules provide for cooperation between insolvency courts, insolvency administrators and creditors' committees as well as for the establishment of a group creditors’ committee. If an insolvency creditor was entitled to set-off a claim on the date the insolvency proceedings were opened, this right shall remain unaffected by the proceedings. Introduction to German Insolvency Law. The plan must be submitted to the vote and approval of both creditors and shareholders that must be divided into separate groups. Instead, the German-British agreement of 20 March 1928 and civil procedural law will apply. Brexit is also likely to have a significant impact on companies that were founded under English law but have their administrative headquarters in Germany. In addition, the German Act on Notes from Entire Issues (Schuldverschreibungsgesetz) provides for regulations on the restructuring of certain bonds. Generally, this is also the case where insolvency proceedings of a non-EU member state are to be recognised in Germany. Both are entitled to participate in German insolvency proceedings in the same way. With proper planning (pre-packed plan) and co-operation of the insolvency court, a time span of six to eight weeks after the opening of the insolvency proceedings is possible. According to the study, the average revenue of the insolvent companies in the first three quarters of 2019 was €339 million — an 81% increase in damage to the economy from 2018. In practice, in order to achieve this goal, insolvency plans pursue further economic and legal objectives such as the debtor’s restructuring, haircuts with the participating stakeholders, payment extensions, waivers, transfers of the business or parts thereof or other capital measures such as reductions or increases of the share capital, or debt equity swaps. Significantly more German companies filed for insolvency in 2019 than in 2018, according to a study by German credit insurer Euler Hermes. To commence insolvency proceedings, the occurrence of an insolvency reason (see 2.3 Obligation to Commence Formal Insolvency Proceedings) is required. With the German Property Group, another company is insolvent, which deals with investment in real estate.On July 23, 2020, the provisional administration of the company’s assets was ordered. Bankruptcy proceedings for consumers - consumer insolvency - personal bankruptcy: Besides regular bankruptcy proceedings for companies and salesmen the bankruptcy court can open/institute bankruptcy proceedings for consumers or salesman "with not too many debts and creditors" (German wording of the Law provisions). In case of a dispute, the insolvency court decides about the claim upon creditor's application. If the creditors' trustee determines circumstances suggesting disadvantages to the creditors under the debtor's continued self-administration, they shall disclose these circumstances to the creditors’ committee and to the insolvency court immediately.
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