Vol 14 (2017) - Issue 4

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New Insolvency Law for Groups of Companies in Germany

Introduction
With the law for the facilitation and management of the insolvencies of groups of companies (Gesetz zur Erleichterung der Bewältigung von Konzerninsolvenzen) – finalised on 13 April 2017 and announced on 21 April 20171 – Germany has created new insolvency law for groups of companies. The new law will come into force on 21 April 2018 and will be integrated into the existing German Insolvency Code ('InsO'). Contrary to certain voices and requests within German legal literature, the new law does not place emphasis on a consolidation of the insolvency estates of the various group companies; instead it firmly sticks to the principle of ‘one company – one insolvency proceedings’. Thus, an insolvency of a group of companies will still lead to multiple individual insolvency proceedings. The new law, however, aims to achieve better interaction between the various insolvency proceedings by setting out specific coordination obligations for the main players in these proceedings, namely the insolvency courts and insolvency administrators.

A single court for the group
An important step towards the achievement of the goal of better interaction is the establishment of a single local insolvency court jurisdiction (Gruppen-Gerichtsstand) for all group companies in order to avoid disputes between differing local insolvency courts (sec. 3a para. 1 InsO). A group of companies is defined as a conglomerate of individual companies, which have their centre of main interest (Mittelpunkt ihrer hauptsächlichen Interessen) in Germany and are directly or indirectly connected with each other through (i) the possibility to exercise pervasive influence or (ii) the existence of a unified control.
Thus, upon application by any of the group companies, insolvency proceedings, centralised in just one local insolvency court and with just one insolvency judge (sec. 3c para. 1 InsO), can take place (the ‘Group Court’). Creditors do not, however, have the right to
apply for the establishment of a single local insolvency court jurisdiction for the group companies. In case the group’s member companies apply independently of one another to different insolvency courts for the establishment of a single court for the group, the first application takes priority (Prioritätsprinzip). It is, however, required that the applying company is not inferior in relation to its significance (nicht von untergeordneter Bedeutung) within the group of companies – as measured by the number of employees, its balance sheet, and respectively its sales revenue. Furthermore, the establishment of a single local insolvency court jurisdiction for the group of companies must be in the creditors’ common interest. Should any doubts arise in this regard, the called court is entitled to refuse the application (sec. 3a para. 2 InsO).
Further, if a Group Court has assumed local jurisdiction for the group of companies in accordance with sec. 3a InsO, any other insolvency court at which a petition to open insolvency proceedings over the assets of a group member has been filed, may refer the petition to the Group Court (sec. 3d para. 1 sentence 1 InsO). The called court has to refer the petition to the other court, if (i) it was a creditor of the group member company that filed the petition and (ii) the group member company immediately files a petition to open insolvency proceedings with the Group Court (sec. 3d para. 1 sentence 1 InsO). The Group Court is entitled to dismiss any insolvency administrator that was appointed in the proceedings that is referred to it (sec. 3d para. 2 InsO).
Finally, if the establishment of a single local insolvency court jurisdiction for all group companies cannot be achieved, the new law establishes information and cooperation obligations between the various insolvency courts (sec. 269b InsO).