New German regulations for insolvency proceedings of group companies (Konzerninsolvenzrecht)

On 21 April 2018, new rules regarding the handling of “group” insolvency proceedings of companies in Germany become effective.

The regulations aim at better coordination between separate insolvency proceedings which must be implemented for every company within a group under German insolvency rulings. Up to now, coordination was quite difficult, due to separate responsibilities of different courts and insolvency administrators.

New Sec. 3a of the German Insolvency Act (Insolvenzordnung (”InsO“)) allows consolidation of insolvency proceedings of the individual companies of the group in one competent central court (“Koordinationsgericht”). To achieve the objective of improving the coordination between the individual proceedings, Sec. 56b InsO creates the opportunity to have just one administrator.

Otherwise the administrators, in relation to the assets of group entities, are required to cooperate with each other, Sec. 269a InsO. The same also applies for the committees of creditors (Gläubigerausschuss), Sec. 269c InsO. To ensure efficient coordination, the central court can appoint a proceedings-coordinator (”Verfahrenskoordinator”), Sec. 269d et seq. InsO.

The new regulations are similar to those of the European Union (Regulation on insolvency proceedings (EU) 2015/848) which set rules for better coordination in European group insolvency proceedings.

Overall, the new regulations do not offer the opportunity to conduct only one insolvency proceeding for the whole group. However, there are some new tools that could represent the beginning of a genuine merger of insolvency proceedings of companies within one group. With a view to the new position of a proceedings-coordinator, also a new potential business area could emerge.

Leave a Reply