Vol 5 (2008) - Issue 6

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PIN Group: German Courts Take a Practical Approach to the Insolvency of a Group of German Companies with a Luxembourg Parent

For an insolvency professional, the insolvency of a cross-border group of companies presents the challenge of coordinating the individual insolvencies of the group companies in order to achieve the best possible restructuring of the group as a whole. This task may be complicated by the involvement of several insolvency officers and the insolvency courts of multiple countries.

Recently, in the insolvencies of companies of the PIN Group, a mail delivery service provider, the Cologne Insolvency Court made some practical and pragmatic, albeit controversial, decisions regarding the question of which German insolvency court should have jurisdiction to open insolvency proceedings in respect of the German subsidiaries within the group.

The ultimate parent company of the PIN group of companies was PIN Group AG S.A. (‘Parent’), a company incorporated in Luxembourg, which directly or indirectly owned more than 100 German subsidiaries (the ‘Subsidiaries’). The first PIN Group members started to become insolvent towards the end of December 2007. Within a month, by deliberately implementing measures to effect the movement of the Parent’s centre of main interests (‘COMI’) to Cologne, and similar steps to move the centres of independent business activities (‘COIBA’) of the German Subsidiaries to Cologne, it was possible to establish that the Cologne Insolvency Court had jurisdiction to place the entire PIN Group into insolvency proceedings.

Establishing German COMI for companies incorporated outside Germany

Article 3(1) EC Regulation on Insolvency Proceedings (EC 1346/200) (the ‘EC Regulation’) provides that the court of the member state within the territory of which a debtor’s COMI is situated shall have jurisdiction to open main insolvency proceedings which are automatically recognised across the EU (except Denmark, which is not subject to the EC Regulation). If the debtor is a company, its COMI is rebuttably presumed to be situated where the company has its registered office, although there is some uncertainty as to how easily the presumption may be rebutted and what is required to rebut it.

Parent filed an insolvency petition at the Cologne Insolvency Court on 25 January 2008. An expert (who was later appointed as insolvency administrator) was instructed by the court to examine the question where the Parent’s COMI was located. Based on the findings of the expert, the Cologne Insolvency Court found that the Parent’s COMI was in Cologne, Germany and made an order opening preliminary insolvency proceedings (‘vorläufiges Insolvenzerfahren’) and appointing a preliminary insolvency administrator.

Following the decision of the ECJ in Susanne Staubitz- Schreiber the Cologne Insolvency Court held that in determining COMI, only the circumstances of the debtor before and at the time of filing the insolvency petition are relevant, while any change in the circumstances of the debtor in the period between the petition being filed and the court making an initial decision as to whether to grant the insolvency petition is not relevant to the determination of the debtor’s COMI.