GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Beatrice Zobel, Freshfields
in the first bondholders’ meeting, and, if the quorum is not met, 25% by value in a second bondholders’ meeting. No quorum is required for other decisions in a second bondholders’ meeting. The majorities that must be obtained to approve the resolution for major decisions are 75% of bondhold - ers by value present and voting in the bondholders’ meeting and more than 50% for any other decisions (such as the appointment of a joint representative). The bondholders’ resolution is subject to appeal within one month. A successful appeal will nullify the resolution. 7.5 Risk Areas for Lenders Insolvency Claw-Back Certain transactions that have directly or indirectly disadvantaged the debtor’s creditors carried out prior to the formal opening of insolvency proceedings are subject to insolvency claw-back actions by the insol - vency officeholder. Generally speaking, the closer the relevant transaction was carried out prior to the filing for insolvency proceedings, the higher the claw-back risk. Insolvency claw-back periods extend to four years, in some circumstances up to ten years looking back from the filing for insolvency proceedings. Lender Liability If a lender refuses to grant a (new) loan to the dis - tressed company, accelerates its (existing) loans or refuses to (partially) waive its claims, thereby causing the company’s insolvency, the lender generally cannot be held liable, as it has no legal obligation to partici - pate in the restructuring or remediation measures of the company. Nonetheless, lenders need to carefully consider the legal implications of their actions for the borrower’s directors, given the relatively strict per - sonal/criminal insolvency liability regime for directors. Conversely, however, a liability can under certain cir - cumstances be triggered by granting, as an existing lender, new loans – or by extending existing loans – if such financing was insufficient to achieve a turna - round of the debtor and ultimately only delayed an inevitable insolvency filing, thereby harming existing or new creditors of the debtor. When granting new loans or extending maturities of existing loans to borrowers in distress, lenders as a defence against
any possible future liability therefore typically request the issuance of a restructuring opinion prepared by independent experts that confirms that, based on the expected economic development of the debtor and the financial and operational measures projected, the debtor can be restructured. 7.6 Transactions Voidable Upon Insolvency For claw-back of certain transactions prior to the commencement of insolvency proceedings, please see 7.5 Risk Areas for Lenders . In addition, the following general aspects are relevant for creditors in insolvency proceedings: All rights in relation to the insolvent estate and the debtor’s business affairs become vested with the insolvency administrator who becomes the sole representative of the insolvent estate and who is exclusively entitled to dispose of assets of the estate; dispositions made without the officeholder’s consent are null and void. Further, pending litigations are stayed. Creditors may only enforce their rights and claim payment in accord - ance with the rules set out in the InsO. Moreover, any kind of foreclosure action by a creditor against the estate is stayed and such actions made within the last month before the opening of insolvency proceedings become null and void. In debtor-in-possession pro - ceedings, management may only enter into material transactions with the consent of the court-appointed custodian. 7.7 Set-Off Rights The right to set-off claims in insolvency proceedings is subject to certain conditions. A creditor’s set-off- right remains in force, if set-off was possible (con - tractually or by law) prior to the commencement of insolvency proceedings and effectively prior to the fil - ing of insolvency proceedings. If the creditor’s claim becomes due and payable after the commencement of insolvency proceedings, set-off is only possible if (and when) the creditor’s claim is due and payable prior to the estate’s claim becoming due and pay - able. Set-off by creditors is precluded, inter alia, if the creditor owes something to the estate or becomes a creditor only after the commencement of insolvency proceedings, or if the “possibility to set-off” is subject to claw-back.
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