GERMANY Law and Practice Contributed by: Michael Josenhans, Lucas Lengersdorf and Karl Kuhn, Freshfields
7.5 Risk Areas for Lenders Insolvency Claw-Back
on a restructuring opinion ( Sanierungsgutachten ) to reduce risks (see 7.5 Risk Areas for Lenders ). If required, the debtor may choose to apply for a moratorium applying a stay on enforcement measures by creditors. SchVG The German Bond Act 2009 (SchVG) provides for an out-of-court restructuring procedure in relation to bonds governed by German law. Provided and to the extent that the terms and conditions of the bond provide for the possibil - ity to amend these by way of a bondholders’ resolution, the SchVG allows for a wide range of restructuring measures. These include: • a waiver of principal and/or interest; • deferrals; • a debt-for-equity swap; and • modifications of the terms and conditions of German bonds. For major decisions (such as waivers or debt- for-equity swaps), the resolution of bondholders generally requires a quorum of 50% by value of the bonds 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 bond - holders’ meeting. The majorities that must be obtained to approve the resolution for major decisions are 75% of bondholders 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’ resolu - tion is subject to appeal within one month. A successful appeal will nullify the resolution.
Certain transactions that have directly or indi - rectly disadvantaged the debtor’s creditors car - ried out prior to the formal opening of insolvency proceedings are subject to insolvency claw-back actions by the insolvency officeholder. Generally speaking, the closer the relevant transaction was carried out prior to the filing for insolvency pro - ceedings, the higher the claw-back risk. Insol - vency 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 distressed 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 participate in the restruc - turing 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 personal/criminal insolvency liability regime for directors. Conversely, however, a liability can under cer - tain circumstances be triggered by granting, as an existing lender, new loans – or by extending existing loans – if such financing was insufficient to achieve a turnaround of the debtor and ulti - mately only delayed an inevitable insolvency fil - ing, thereby harming existing or new creditors of the debtor. When granting new loans or extend - ing maturities of existing loans to borrowers in distress, lenders as a defence against any pos - sible 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
133 CHAMBERS.COM
Powered by FlippingBook