Current Developments in Corporate Law and M&A

Proposed Improvements for Insolvencies of Company Groups – German Federal Cabinet Resolves Proposal for Bill

On 28 August 2013, the German Federal Cabinet resolved the proposal for a bill regarding the facilitation of insolvency procedures involving company groups. Main features are the joint venue for the insolvency procedures, the possibility to appoint a joint administrator for all affiliated companies or, in other cases, a coordinating administrator, a coordination plan and the possible establishment of a group creditors assembly.

The proposal does not interfere with the separation of the estates and the legal independence of the group companies but intends to coordinate the separate insolvency procedures with the goal of maximizing the return for the creditors of each company. Any distribution of returns between the creditors of the different companies shall therefore be prevented.

As practitioners, we appreciate this approach since it will improve the coordination of the separate insolvency procedures in a company group and will therefore facilitate the restructuring of the group and the increase of the potential return for the creditors. It remains to be seen whether this will result in earlier insolvency applications, in particular since the first involved insolvency court remains competent for the following procedures.

However, we concur with the critical comments of the German Association of Insolvency Adminsitrators (VID) that the proposed coordination procedure is very complex while insolvency procedures are usually time critical. Also, the problem of the joint liability of group companies for taxes in case of tax consolidation agreements has not been addressed by the proposed bill.

Therefore the proposal does not offer a consolidation of the procedures. This is consequent considering the approach of the applicable law regarding company groups which presumes the independence of each company. To circumvent this principle in insolvency procedures would contradict the expectations of the creditors.

Please contact us for further information 

Dr. Andreas Driver, LL.M.

T +49 89 286 40-243
F +49 89 280 94-32


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