13th ICCML Forum
Pre-insolvency corporate reorganization under the new law (SanInsFoG)
On March 12, 2021, the Institute for Corporate and Capital Markets Law (IUKR) hosted the thirteenth Hamburg Forum on Corporate Law. The speakers presented on current issues of pre-insolvency corporate reorganization under the SanInsFoG, which came into force on January 1, 2021. The event focused on the procedure under StaRUG and the reformed insolvency grounds.
The managing director of IUKR, Prof. Dr. Thilo Kuntz, LL.M. (University of Chicago), opened the forum, which was held virtually for the first time due to the pandemic, with a welcome and a short introduction to the topic.
The first speaker of the day was Dr. Lars Westphal, partner at the law firm Freshfields Bruckhaus Deringer LLP in Hamburg. His presentation dealt with the concepts of over-indebtedness and imminent insolvency according to the reformed §§ 18, 19 InsO He began by discussing the ongoing criticism of the concept of over-indebtedness by academics and practitioners. The changes that have now been made are also subject to criticism. Dr. Westphal criticized the shortened forecast period (now fixed at 12 months) under Section 19 (2) InsO as counteracting the actual intention of the legislator to provide incentives for filing for insolvency at an early stage. He characterized the fact that the periods of the forecasts are different (24 months in the case of imminent insolvency) as inappropriate. While it was true that the new provisions of Sections 18, 19 InsO now achieve a clear demarcation between imminent insolvency and over-indebtedness; at the same time, however, new questions are raised. Ultimately, however, the legislator had missed the opportunity to completely abolish the over-indebtedness definition, in particular due to its low practical relevance and lack of justiciability.
The morning session was concluded by Prof. Dr. Markus Gehrlein, retired judge at the IX Civil Senate of the Federal Court of Justice (BGH), with a presentation on the reformed payment prohibitions and the obligation to file for insolvency pursuant to Sections 15a, 15b InsO. He first explained the changes to the insolvency filing obligation with regard to the period of the filing obligation in the event of imminent insolvency or overindebtedness, which are intended to enable reorganization in the preventive restructuring framework or in self-administration in particular. He then moved on to the prohibition of mass-diminishing payments by Section 15b (1) InsO, which unified the payment prohibitions of Sections 64 GmbHG, 92 (2) AktG.
After a virtual lunch break, Prof. Kuntz opened the afternoon and second part of the Hamburg Forum with a contribution concerning the liability of managing directors in the preventive restructuring framework according to Sec. 43 StaRUG. Here, Prof. Kuntz first pointed out the regulation-theoretical background, according to which, contrary to the traditional view, it is not a gamble for resurrection, but conflicts of interest and self-benefit of managing directors that are the main reason for the liability order. Due to the going concern perspective, there would be no general priority of creditor interests in the case of imminent insolvency, which is why the deletion of Sections 2, 3 StaRUG of the government draft in the version at that time was to be welcomed in principle. However, the imminent insolvency would lead to a modification of the fiduciary duties, which would extend to the creditors from that point on. In support of his theses, Prof. Kuntz cited comparative examples from common law jurisprudence. Prof. Kuntz then explained the relationship between Section 43 StaRUG and the liability order under association law, noting in particular that the restructuring framework grants business managers general entrepreneurial discretion but not the safe harbor of the business judgment rule. He criticized the fact that there was an uncertain legal situation prior to the pendency of the restructuring case and argued for an analogous application of Section 43 StaRUG to this period. In the ensuing discussion, Dr. Westphal raised, among other things, the question of how far this analogous application can go, since, especially in the case of private companies, the members frequently approved measures that completely neglected the interests of creditors and were thus actually liable. Prof. Kuntz replied that in such a case these instructions from the members would be unlawful. He conceded, however, that this solution is difficult to justify, since such instructions generally have an exculpatory effect. However, a comparison of the laws shows that this can be remedied by modifying the fiduciary duties.
Sylvia Fiebig, partner at the law firm White & Case LLP in Hamburg, supplemented the section on the StaRUG with a contribution from practice. There are a number of practical problems in dealing with the StaRUG proceedings, which, according to Fiebig, are related in particular to the tight time schedule of the proceedings. In addition, a great asymmetry of information existed between the debtor and the parties affected by the plan which, however, the StaRUG tolerates. The principle of official investigation contained in Section 39 of the StaRUG conflicts with the general requirement that the StaRUG procedure should be a procedure to be carried out quickly. Also, the general handling of the StaRUG differs strongly from court to court.