06. Oct 15

Recovery if there is awareness of insolvency

If a creditor knew that a company was materially or factually insolvent and nevertheless accepted money, it can be ordered to repay this pursuant to insolvency law.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: Creditors of a company that is in dire economic straits need to take care when pressing for payment of outstanding claims, as German insolvency law provides that the money has to be paid back if the creditor was already aware that the company was materially or factually insolvent.

If insolvency occurs, the insolvency administrator has the possibility to reclaim these funds. This can place significant financial burdens on those companies which are affected. One of the most spectacular cases in Germany concerned the bankruptcy of the low-cost electricity provider Teldafax in 2011. Around 700,000 creditors emerged from this and the insolvency administrator is trying to recover money again. The tax authorities have already had to repay approximately 100 million in collected electricity taxes. One German Bundesliga club was asked to pay up and the insolvency administrator is reclaiming a total of about 200 million euros from various electricity and gas grid operators. The justification is essentially always the same: the companies are said to have accepted money after already having become aware of the insolvency.

However, it is not only these companies that now find themselves faced with claims. The former managers of the electricity provider also have to answer, among other things, to accusations that they failed to file for insolvency in due time. This of course particularly affects former clients that made advance payments and now have to hope that they have not lost their money.

Insolvency gives rise to losers on all sides as well as legal uncertainty, which is why the legislature is planning to reform the rules dealing with challenges to insolvency proceedings. These involve, inter alia, plans to cut the deadline for challenging proceedings from ten to four years and to make it more difficult to contest a payment brought about by an order for compulsory execution. It is unclear at this time whether and when reforms will be implemented.

Due to the large number of persons and companies affected and the legal uncertainty that arises from insolvency, both debtors and creditors can turn to lawyers who are competent in the field of insolvency law.

For more informations: http://www.grprainer.com/en/legal-advice/company-law/insolvency-law.html

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