According to the number of cases, legal violations in the case of delaying insolvency are the main focus of manager liability. In particular, claims for reimbursement of payments after insolvency are attractive from the perspective of the insolvency estate: the law makes the managers liable for all payments made by the company after insolvency; this goes far and imposes, for example, on the managers of trading companies a kind of liability for the ongoing overall operation of the company. High amounts can quickly add up here. According to the case law of the Federal Court of Justice, the claims are regularly covered by D&O insurance.[1]The payments made by the directors and insurers increase the insolvency estate; the fact that the directors or their insurers are allocated the paid claims after payment in the insolvency proceedings, can register them as insolvency creditors, thereby increasing the liabilities side and only increasing the quota of the other creditors to a diluted extent, does not change this. When asserting such claims, a whole series of substantive and procedural hurdles must of course be overcome, which are not only the subject of many court decisions, but also influence settlement negotiations. The legislature consolidated liability for payments after insolvency in Section 15b of the Insolvency Code some time ago.[2], partly revised and, in its application, probably provides fewer relief options compared to the previous legal situation (despite the new Section 15b Paragraph 4 Sentence 2 InsO with less overall creditor damage). At the same time, the number of insolvencies is currently increasing again. All of this means that more disputes of this kind can be expected. Therefore, our blog will from time to time take a look at practical aspects of Section 15b InsO that may be of importance in court and in settlement negotiations. The following article is the first of these forays.
- § 15b InsO: Starting points
- Duties of the Board
- § 15b InsO: Starting points
If a company becomes insolvent or over-indebted (insolvency), the managing director or board of directors (“managing director”) must not only file for insolvency within certain time periods;[3]he may also no longer make any payments from the company's assets. This is intended to secure the assets of the insolvent debtor in advance of the opening of insolvency proceedings in order to ensure that creditors are equally satisfied in the upcoming insolvency proceedings.[4]In practice, insolvency is more important than over-indebtedness. According to Section 17 Paragraph 2 Sentence 1 InsO, insolvency occurs when a debtor is unable to meet his or her payment obligations. In the event of violations of these payment prohibitions, the company's directors are liable for damages, Section 15b Paragraph 4 Sentence 1 InsO.
The only payments exempted from the payment ban are those that are compatible with the care of a prudent and conscientious manager even after this point in time (Section 15b Paragraph 1 Sentence 2 InsO). Section 15b Paragraphs 2 and 3 InsO distinguishes between the application period (Section 15a InsO: three or six weeks) and the period thereafter.[5]
If several managing directors are appointed, each of them is fundamentally obliged to work towards preventing further payments once insolvency occurs. This also applies if the business transactions in question do not fall within the internal responsibility of the relevant board member.[6]The obligation to pay compensation applies not only to managers when they themselves have initiated a payment, but also when they are responsible for the actions of a third party, such as an employee. Attribution occurs when (i) a payment was made at the instigation of a manager, i.e. at least with his knowledge and consent, or when (ii) managers did not prevent the payment even though they had the opportunity to do so.[7]
A supervisory body (supervisory board or advisory board) may also have obligations in this regard. As far as possible, it must prevent management from committing legal violations.[8]In the event of a company crisis, the supervisory body must, if necessary, ensure that management continually clarifies the situation, counteracts critical developments, hires consultants, does not make payments contrary to Section 15b of the Insolvency Code and, if necessary, files for insolvency.[9]From a practical point of view, claims that are the responsibility of an insolvency administrator are particularly critical for supervisory bodies: other liability claims must be pursued by management, but in many cases they will be reluctant to take action against their supervisory body. This is not only true because the supervisory body appoints the management in many cases and determines their remuneration. Where breaches of duty by the supervisory body are related to actions by the management, accusations against the supervisory body can also cast a shadow on the management.[10]There are similar connections with the liability of the managing director: From the point of view of the supervisory body, the manager's duty of care can be the first "defence line" for the supervisory body. The insolvency administrator does not need to take such considerations into account; on the contrary: According to Section 60 of the Insolvency Code, he is obliged to pursue promising claims in order to increase the assets.
- Insolvency
According to Section 17 Paragraph 2 of the Insolvency Code, a debtor is insolvent if he is unable to meet his payment obligations when they are due. Insolvency is therefore the debtor's inability to settle his payment obligations when they are due due to a lack of funds.[11]
According to the BGH, insolvency must be distinguished from mere payment stagnation, i.e. a temporary inability to pay off the debts due in full. According to the case law of the BGH, insolvency and not just a mere payment stagnation generally exists when the debtor is unable to pay off his due payment obligations within a foreseeable period of time. The BGH generally considers a period of three weeks to be sufficient for this.[12]The questions that arise in litigation practice in connection with these complex facts will be addressed in a later article.
- Payments according to Section 15b InsO
- Payment term
- Payments according to Section 15b InsO
In accordance with its purpose, the payment ban and the associated liability covers all measures taken by the managing director after insolvency which, while favouring individual creditors, lead to a reduction in the company's assets and thus in the insolvency estate and thus in the community of creditors.[13] Payments are therefore possible in two ways: Either payments are made to creditors (namely suppliers), be it by transfer, debit by direct debit following a direct debit order or direct debit authorization.[14]However, the receipt of payments (namely from customers) into a debit bank account is also considered a “payment”; the latter are “payments” according to case law because the incoming payments reduce the debit balance and the bank as creditor is satisfied in advance.[15]By offsetting the incoming payments against the loan from the bank in question, the enforcement base available to the other creditors is reduced, as in the case of a payout.[16]It is irrelevant whether the payments were made by transfer or by other means, such as direct debit.[17]The courts tend to broaden the definition of payment.[18]
- Requirements for the presentation by the insolvency administrator
The burden of proof for the fact that and to whom a payment was made lies with the insolvency administrator who filed the suit. In order to properly defend the case, the administrator must provide at least information on the payments claimed,[19]in particular the recipient of the payment (frequent problem: collective transfers), the specific account balance for each individual payment, account statements, the specific designation of the internal transfers to be deducted and possibly deducted within the group and the designation of the payments already reclaimed by contestation, which must be deducted. This presentation program is quite demanding. Failure to comply can have drastic substantive and procedural consequences. This is why there are often disputes about this.
- Causal damage / comparison with claims under Section 823 Para. 2 BGB, Section 15a InsO
Damage within the meaning of Section 15b InsO is, as already mentioned, the outflow of funds from the company's assets.[20]Despite all the difficulties, this makes legal proceedings much easier for the insolvency administrator compared to claims under Section 823 Para. 2 BGB, Section 15a InsO (late filing of the application). In the case of the latter claims, the amount of payments made before the application for insolvency was filed, but after insolvency, cannot be "simply" claimed. Damage within the meaning of Section 823 Para. 2 BGB, Section 15a InsO is, on the one hand, the damage suffered by the individual old creditor, which consists in the fact that the insolvency estate is reduced and the quota attributable to his registered claim is reduced as a result of the late filing of the application for insolvency (quota damage), and, on the other hand, the loss of trust suffered by the new creditor, who can demand to be placed in the same position as he would have been in when the application for insolvency was filed: in this case, he would not have concluded the contract, would not have made the delivery, etc. (negative interest). Therefore, in accordance with Section 823 Para. 2 of the German Civil Code and Section 15a of the Insolvency Code, the calculation of damages (1) must be based on the financial situation of all the old creditors, or in calculating damages (2) on the financial situation of the individual new creditors when pursuing their breach of trust. Since damages (1) and (2) depend on the position of the creditors concerned and, unlike Section 15b of the Insolvency Code, not on the mass, both types of damage cannot be justified independently of the occurrence of damage to the creditors concerned.[21]The relevant claims for compensation under Section 823 Para. 2 of the German Civil Code and Section 15a of the Insolvency Code also differ in terms of procedural law: Damage (1), the so-called quota reduction damage, is a total damage within the meaning of Section 92 of the Insolvency Code, which the injured party cannot assert against the managing director himself, but only the insolvency administrator.[22]In contrast, the insolvency administrator cannot claim damages (2) because these damages are not damages for all creditors. The negative interest of the new creditors is not to be determined uniformly, but individually, and the new creditors have standing to sue for these individual damages.[23]
The presentation of damages is accordingly demanding in accordance with Section 823 Para. 2 BGB and Section 15a InsO:[24]
To calculate the loss of the old creditors due to the reduction in the quota, the fictitious quota must be determined from the ratio of assets to liabilities at the time of insolvency. Rights of separation and segregation must be deducted from the assets; preferential or secured claims must be deducted from the liabilities. This quota must be multiplied by the actual insolvency claims of the old creditors still present in the insolvency. To the extent that the resulting amount exceeds the share of the assets attributable to the old creditors that arises in the proceedings, this is the loss.[25]The earlier the point in time at which insolvency occurs as a result of insolvency, the more creditors from the group of later insolvency creditors are to be regarded as new creditors whose compensation claims are to be calculated not as damages due to a reduction in the quota but as damages to the individual creditor's trust and are not subject to the insolvency administrator's active legitimacy under Section 93 of the Insolvency Code. Unlike in cases under Section 15b of the Insolvency Code, in a lawsuit brought by the insolvency administrator, this can lead to the defendant directors arguing that insolvency occurred earlier than the plaintiff had claimed.[26]
The burden of explanation and proof also for the point in time at which insolvency occurs rests with the plaintiff. For example, the plaintiff must explain the hypothetical assets that could be achieved, taking into account the knowledge that has since been obtained.[27]The creditor benefits from easier proof and circumstantial evidence.[28]
sequel follows
***
[1] BGH, judgment of 18.11. 2020 - IV ZR 217/19.
[2] Transitional provisions: Art. 103m EGInsO, Art. 36 MoPeG.
[3] Overview in Thümmel, Personal Liability of Managers and Supervisory Board Members, 6th edition 2024, p. 72 f.
[4] BGH, judgment of March 16, 2009 – II ZR 32/08, para. 12; OLG Düsseldorf, decision of June 27, 2022, 12 W 4/22, para. 11, GmbHR 2024, 32.
[5] Nearer Gehrlein,New regulation and concentration of payment prohibitions in Section 15b-E InsO, DB 2020, 2393, 2397; Bitter, Asset protection after insolvency – The new Section 15b InsO, GmbHR 2022, 57, 58.
[6] BeckOK GmbHG/Mätzig, 41st Ed. 01.05.2019, § 64 Rn. 44.
[7] BGH NJW 2009, 1598, 1599.
[8] Thümmel, Personal Liability of Managers and Supervisory Boards, 6th edition 2024, pp. 162, 164, according to which the control of legality is one of the main tasks of the supervisory board.
[9] BGH NZG 2009, 550; BGH NZI 2010, 913, 914 Rn. 12 f. Roth/Altmeppen/Altmeppen, GmbHG, 9th ed., § 64 Rn. 38.
[10] Applicable Lange, D&O Insurance and Manager Liability, 2nd edition 2022, § 2,Paragraph 1095.
[11] Standard S 11 of the Institute of Public Auditors “Assessment of the existence of grounds for opening insolvency proceedings”, new version of 20 May 2024 (“IDW S11“), para. 13. This IDW standard replaces the IDW auditing standard: Recommendations for the audit of existing or impending insolvency of companies (IDW PS 800) as amended on 6 March 2009 and the IDW statement of the Legal Committee 1/1996: Recommendations for the audit of over-indebtedness of companies (IDW St/FAR 1/1996).
[12] BGH, judgment of 24 May 2005 - IX ZR 123/04, BGHZ 163, 134, 138 ff.; judgment of 21 June 2007 - IX ZR 231/04, ZIP 2007, 1469, para. 37; judgment of 19 December 2017 - II ZR 88/16, para. 32 f.; IDW S 11 para. 14, 15.
[13] BGH, judgment of March 16, 2009 – II ZR 32/08, para. 12; OLG Düsseldorf, decision of June 27, 2022, 12 W 4/22, para. 11, GmbHR 2024, 32; overview in Thümmel, Personal Liability of Managers and Supervisory Boards, 6th edition 2024, p. 74.
[14] BGH, judgment of March 16, 2009, aaO; OLG Düsseldorf, decision of June 27, 2022, 12 W 4/22, para. 12, GmbHR 2024, 32.
[15] Sestablished case law, cf. BGH NZG 2007, 462, 463.
[16] BGH NZG 2015, 998, para. 11; BGH NZG 2016, 658, 661; Baumbach/Hueck/Haas, GmbHG, 22nd ed., § 64, marginal no. 65, 78 with further references
[17] BGH NJW 2008, 63, 64.
[18] Thümmel, Personal Liability of Managers and Supervisory Board Members, 6th edition 2024, p. 75 f.
[19] e.g.Haas in: Baumbach/Hueck, 22nd edition 2019, Section 64 GmbHG Rn. 119.
[20] BGH NZG 2007, 678, 679; Hüffer/Koch, AktG, 13th edition, § 93 marginal no. 71 (on § 93 para. 2, para. 3 no. 6 AktG).
[21] e.g.BGHZ 29, 100, juris Rn. 14; BGHZ 126, 181, juris Rn 22; BGHZ 175, 58, juris Rn. 10; OLG Brandenburg, judgment of February 2, 2024, 7 U 175/19, under No. 1.3 of the reasons for the decision, BeckRS 2024, 2662.
[22] BGHZ 175, 58, juris para. 10; OLG Brandenburg, judgment of February 2, 2024, 7 U 175/19, under no. 1.4 of the reasons for the decision, BeckRS 2024, 2662.
[23] BGHZ 175, 58, juris para. 10; BGHZ 171, 46, para. 12; BGHZ 138, 211; BGHZ 138, 211; BGHZ 175, 58.
[24] See OLG Brandenburg, judgment of 02.02.2024, 7 U 175/19, under point 1.4 of the reasons for the decision, BeckRS 2024, 2662
[25] OLG Brandenburg, judgment of 02.02.2024, 7 U 175/19, under point 1.4 of the reasons for the decision, BeckRS 2024, 2662; BGHZ 138, 211,juris para. 25.
[26] So in the case of the OLG Brandenburg, judgment of 02.02.2024, 7 U 175/19, under point 1.5 of the reasons for the decision, BeckRS 2024, 2662; BGHZ 138, 211,juris para. 25
[27] OLG Brandenburg, judgment of 02.02.2024, 7 U 175/19, under no. 1.11 of the reasons for the decision, BeckRS 2024, 2662; BGHZ 138, 211,juris para. 25.
[28] OLG Brandenburg, judgment of 02.02.2024, 7 U 175/19, under point 1.5 of the reasons for the decision, BeckRS 2024, 2662; BGHZ 138, 211,juris paragraph 25; BGH, judgment of 01/24/2012 - II ZR 119/10, ZIP 2012, 723 Rn. 15; Judgment of March 15, 2011 - II ZR 204/09, ZIP 2011, 1007; BGH; Judgment of April 27, 2009 - II ZR 253/07, ZIP 2009, 1220 Rn 9.
