Germany: Insolvency/Bankruptcy

Shareholder loans serve as vital financing tools for German Mittelstand companies, but they can trigger insolvency obligations when financial difficulties arise. A qualified subordination (qualifizierter Rangrücktritt) offers a solution by converting these loans into liable capital, yet the Federal Court of Justice has established strict substantive requirements that must be met to achieve the desired legal and tax effects.

Mayer Brown's "Knowledge Nuggets – Insolvency & Restructuring" series delivers concise, actionable insights into critical insolvency law topics. From recognizing warning signs of insolvency and managing director liability to safeguarding supply chains through direct payment arrangements, these resources help legal and business professionals navigate complex restructuring scenarios with clarity and confidence.

When a contractor faces financial distress, companies often make direct payments to the contractor's upstream suppliers to maintain supply chain continuity.

The number of insolvent hospitals is growing. Inflation and rising personnel and energy costs are putting increasing pressure on hospitals.

In its judgment of 23 July 2024, the Second Civil Senate of the German Federal Court of Justice (Bundesgerichtshof – BGH) dealt with two key issues.

In an era where the number of insolvencies is on the rise, a growing number of claimants involved in ongoing court proceedings are faced with the question: "What will happen to my lawsuit if the opposing party becomes insolvent?"

The Management Board (der Vorstand) must initiate appropriate means and measures to recognize any damaging developments that might threaten the survival of the company.

The last 12 months have seen a string of insolvencies announced in the German fashion retail space – from high-profile cases such as Galeria Kaufhof and Peek & Cloppenburg to mid-size...

Historically, the objective of the proceedings provided by the Insolvency Code (Insolvenzordnung, InsO) or its predecessor, the Bankruptcy Code (Konkursordnung, KO)...