Clifford Chance Deutschland LLP updates

Restructuring Order applies only where binding ruling exists
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • December 15 2017

On February 9 2017 the Great Senate of the Federal Fiscal Court published a decision stating that the Restructuring Order was illegal. On June 27 2017 the legislature introduced new legislation which provides that the tax authorities may waive taxes or assess taxes at a lower level. However, the new legislation can be applied only where creditors have waived their claims after February 8 2017.

Liability claims against managing directors
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • October 06 2017

In order to maintain an insolvency estate and achieve the utmost satisfaction of all creditors, German legislation has ratified various liability claims against managing directors for payments made after their company has become illiquid or been deemed to be overindebted. However, according to recent case law, one thing that all of these claims have in common is that managing directors cannot be held liable for payments made that result in an equivalent compensation for the company.

Federal Ministry of Finance Restructuring Order violates tax law – what next?
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • May 26 2017

According to the Federal Ministry of Finance's Restructuring Order, a tax deferral or exemption for restructuring profits is possible if the restructuring needs of the company are clear, a complete or partial waiver of the debts takes place, the creditor's intention to restructure is apparent and the tax deferral or exemption is linked to the restructuring and necessary for its successful implementation. However, the Great Senate of the Federal Fiscal Court recently held that the Restructuring Order is illegal.

New insolvency law for groups of companies finalised
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • May 19 2017

The Law for the Facilitation and Management of the Insolvencies of Groups of Companies will enter into force in April 2018. The new law places no emphasis on a consolidation of the insolvency estates of certain group companies. Instead, it firmly sticks to the principle of 'one company, one insolvency proceeding'. Consequently, an insolvency of a group of companies will still lead to multiple individual insolvency proceedings.

New insolvency clawback rules coming soon
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • March 17 2017

Parliament recently concluded the reform of the insolvency clawback rules introduced by the federal government at the end of 2015. The reform is expected to come into force in the first half of 2017. Its declared objective is to create greater legal certainty and transparency regarding clawback practice for all kinds of market participant. But can the reform live up to its promise?

Federal Ministry of Finance Restructuring Order violates tax law
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • March 03 2017

According to the Federal Ministry of Finance's Restructuring Order, a tax deferral or exemption for restructuring profits is possible if the restructuring needs of the company are clear, a complete or partial waiver of the debts takes place, the creditor's intention to restructure is apparent and the tax abatement is linked to the restructuring and necessary for its successful implementation. However, the Great Senate of the Federal Fiscal Court has held that the Restructuring Order is illegal.

Federal Court of Justice clarifies calculation of compensation payment
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • January 27 2017

In a recent decision, the Federal Court of Justice clarified that no provision in the Insolvency Code clarifies how a compensation payment for deterioration is to be calculated. The court held that it is within the discretion of the court to calculate the amount of the compensation payment based on both the official tables for the depreciation of fixed assets and the actual deterioration of the assets.

Berlin Higher Regional Court takes position on maximum term for bridging finance
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • November 11 2016

A German court recently limited the permissible term allowed for bridging finance loans and declared a loan defined as 'bridging finance' to be void for not meeting the permissible term requirements. The court justified its decision by stating that the loan was not aimed solely at bridging a liquidity gap to facilitate the possibility of effectively restructuring the distressed business, but also at ensuring the survival of the business.

Guidelines for creditors participating in financial restructurings
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • September 09 2016

Case law has consistently set out the terms on which the refinancing or financial restructuring of a distressed company can take place in order to avoid lender liability and prevent the clawback of payments made under the finance agreements. The Federal Court of Justice has now outlined certain guidelines and rules of conduct which creditors should observe in the context of financial restructurings.

Refinancing debt in Germany – how secure is security?
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • July 01 2016

The Dusseldorf Higher Regional Court recently dealt with a challenge to security under a new loan provided by a bank for the purpose of repaying outstanding claims. The court found no direct proof of either the debtor's intention to disadvantage its creditors or the bank's awareness thereof. The court had to ascertain whether the insolvency administrator's burden of proof was reduced due to the fact that the security assignment constituted an unusual transaction.

Last-minute actions to avoid claw-back risks
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • May 20 2016

The Federal Court of Justice recently clarified the conditions applicable to an 'unusual' transaction that may later qualify it as an 'ordinary course' transaction. The judgment is particularly important in the construction industry, where this type of arrangement – allowing a subcontractor to step in where the main contractor is in distress – is useful, as subcontractors can effectively protect themselves against a general contractor's crises or insolvency.

Reform Act on Insolvency Avoidance Rules
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • March 11 2016

The federal government recently introduced a reform act which aims to improve legal certainty in connection with the existing avoidance rules under the Insolvency Code. The government has indicated that the act is intended to be a "selective readjustment" of avoidance rules. Measures proposed in the act appear unlikely to resolve all the issues that arise under avoidance provisions, but they are a step in the right direction.

A lot can change in a year
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • January 22 2016

The Federal Court of Justice recently dealt with a clawback claim brought by an insolvency administrator against a shareholder of a debtor in insolvency proceedings. The court found that the transfer of the shareholder position before payment of the last instalment was irrelevant and that the insolvency administrator's ensuing clawback rights would persist as long as insolvency proceedings were opened within one year after the shareholding had been disposed of.

IDW S 6 Standards within scope of insolvency challenge rights
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • December 04 2015

Insolvency law provides for a clawback right in respect of transactions negatively affecting the insolvency estate and made within certain hardening periods before filing for insolvency. The Munich Higher Regional Court recently decided on whether the formal requirements of the Institute of Public Auditors S 6 Standards must be met in order to accept a restructuring plan as the basis of a serious restructuring attempt.

Equitable subordination of leased assets – the end of the story?
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • October 02 2015

The Federal Court of Justice recently stated that the lease of assets by shareholders to their subsidiaries no longer falls under the principle of equitable subordination. The court stated that shareholders are no longer considered subordinated creditors in this respect. Thus, rental payments made in the year preceding the opening of insolvency proceedings cannot be clawed back on the basis of the rules applying to the repayment of a shareholder loan.

Groundbreaking decision on requirements for subordination agreements
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • July 31 2015

A recent Federal Court of Justice ruling sets out the requirements for subordination agreements designed to avoid insolvency. The court used the opportunity to clarify a number of basic and previously disputed questions concerning the nature and requirements of such agreements, which are a typical restructuring tool for stabilising a company in a crisis.

Self-administration proceedings: creditor support determines success
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • June 19 2015

There is some uncertainty in self-administration proceedings as to the scope and content of a 'substantial impairment of interests', which will lead the court to refuse an application for self-administration and, where alleged by creditors, will trigger severe consequences for the restructuring process. A recent Cologne District Court decision has further clarified the definition of a 'substantial impairment of interests'.

How market-value considerations could relieve directors from personal liability
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • February 27 2015

In a decision which is expected to bring major changes to the regime of directors' liability, the Federal Court of Justice recently changed its previous jurisprudence on payments made after the occurrence of mandatory insolvency reasons. The court clarified that directors must reimburse payments after the occurrence of illiquidity or overindebtedness only if those payments were not compensated.

Insolvency plan proceedings – it ain't over 'til it's over
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • January 16 2015

German insolvency law offers insolvency plans as a means to restructure a company in insolvency proceedings. An insolvency plan can include solutions that are almost as flexible as an out-of-court restructuring agreement. Recent amendments to insolvency law have extended the array of restructuring options and consequently insolvency plans are gaining in popularity.

Insolvency avoidance rules re-loaded?
Clifford Chance Deutschland LLP
  • Insolvency & Restructuring
  • Germany
  • November 28 2014

The Federal Court of Justice recently ruled that the presumption of an intentionally disadvantageous transaction based on awareness of impending illiquidity can be rebutted if the debtor has made a congruent payment against a fair and immediate consideration which was essential for the continuation of the business and beneficial to the creditors.

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