The wave of insolvencies is coming. What is to be considered thereby and how self-employed persons and GmbH managing directors could lose also the old age pension, explain the examined financial and investment advisor and banker Dr. Johannes Fiala and the expert for insurance mathematics Peter A. Schramm.
In the so-called Corona crisis, the state helps, for example by providing tax relief – such as reducing advance payments and deferral of payments upon application. This applies to income tax, corporate income tax and value added tax, but not to wage tax and capital gains tax. Social security could also be deferred. Payments for rent, electricity, gas, water, telephone and internet could be temporarily suspended under conditions which must be provable at least at a later date. This means an increase in debt, now and in the future.
Banks are reluctant to grant aid loans
The most effective were state grants, with no repayment obligation. As well as the option to grant employees a bonus of up to € 1,500 in addition, tax and social security free for liquid employers (BMF from 09.04.2020 – IV C 5 – S 2342 20 10009 001). Courts ruled that Corona aid is exempt from seizure (LG Köln, ruling dated 23.05.2020, file no. 39 T 57/20; FG Münster, ruling dated 13.05.2020, file no. 1 V 1286 AO) – old debts thus also remain unredeemed.
The wave of insolvencies will probably come in 2021
From 01.03.-30.09.2020 the obligation to file for insolvency was suspended; with an extension option for the Minister until 31.03.2021. A turbo effect is likely to come from the deferred and then maturing accumulated debts, including loan repayment obligations also against the banks. the state. Another hurdle is that the relevant criminal law has not been suspended.
Insiders currently estimate that up to more than 60% of innkeepers will give up anyway – liquidation or insolvency. The UN World Food Programme (WFP) expects a hunger pandemic, which in April already put 265 million people at risk of death. At that time, the International Labour Organisation (ILO) estimated that almost every second job worldwide would be lost and the basis of existence would then be missing.
Total loss of private and occupational pension provision
The fact that the tax shifting model for Riester savings and basic pensions, although private pledging by the policyholder is prohibited, does not in any way mean complete protection against sovereign attachment and/or realisation by means of collection by the insolvency administrator. However, this can be checked and often made legal – even for normal life insurance policies.
It is particularly bitter for employees if they fail to check and ensure the insolvency protection of their own company pension scheme in order to be referred to the Pensionssicherungsverein by the insolvency administrator at a later date – with good prospects of a de facto reduction in their own claims.
The Federal Court of Justice (BGH, ruling of 18.07.2013, file no. IX ZR 219/11) opened up further possibilities for the insolvency administrator to access the assets of the Mittelstandskapitalgesellschaft to reinsure the company pension scheme (bAV); especially in the case of pension commitments to managing partners.
Contestability of the pledge
The Federal Court of Justice (BGH) has ruled that for a challenge to the provision of securities for the managing director (e.g. pledging or assignment) by insolvency administrators or creditors pursuant to Section 135 of the German Insolvency Code (InsO), it is sufficient if the managing director holds 50% of the company’s share capital and is also the managing director with sole power of representation.
According to the legal regulation in force since 01.11.2008, such securities (e.g. pledging of a life insurance policy), which the company has granted in the last 10 years, are contestable – even if at that time there was no intention to disadvantage creditors. This applies not only to collateral to secure loans from the shareholder, but also to legal relationships that are economically equivalent to a loan to the company. For the later pension, the managing director has provided a work management service, but in some cases has not had his salary paid out, but has instead left this money with his company as a loan until he reaches retirement age: This speaks strongly in favor of the assumption of a loan-like business. If there would be no security, e.g. no pledge, then at most legal acts from the last year before the opening of insolvency proceedings would be contestable – e.g. the repayment of shareholder loans without collateral.
Even unreasonably high pension commitments contestable
If the pension commitment is unreasonably high, the insolvency administrator will assume a (mixed or partial) gift in accordance with § 134 InsO and challenge it (Bochum Regional Court, ruling of 10 May 2011, ref. 9 S 251/10). This possibility is also available to any ordinary creditor who has otherwise not been able to successfully enforce his claims.
Rarely effective protection through trustee models
A trust agreement which always puts the creditors of the Mittelstands-GmbH at a disadvantage is deemed to have been entered into at the time when the trust property is created (BGH, ruling of 24.05.2007, file no. IX ZR 105/05). If reinsurance is built up (e.g. in a life insurance policy or via a securities account) by means of regular payments, or if assets are transferred in rem to a trustee, only the last partial act in time is decisive in the case of multi-step legal transactions.
If the trustee would be entitled to effective defences against the insolvency administrator’s claim for payment, which the Mittelstands-GmbH could not raise, the payment to the trustee would already be disadvantageous to the creditors and thus contestable.
Rescission after advertising with insolvency protection
Already the aim of also pursuing asset protection by pledging the reinsurance of a pension commitment, even in economically good times of the Mittelstands-GmbH, has so far already opened the insolvency administrator to challenge the decision in accordance with § 133 InsO (OLG Brandenburg, judgement of 13.02.2002, file no. 7 U 152/01) due to conditionally deliberate disadvantage to creditors. What is new is that the objective of creditor disadvantage is no longer relevant if the underlying transaction is considered to be similar to a loan.
The fairy tale of the security of pledged reinsurance
Depending on the structure of the pension commitment with reinsurance, including the trust model, the insolvency administrator, like any normal creditor, may have retroactive access to the reinsurance funds of the managing partner which have accrued since then for up to more than 10 years without further ado, provided that the managing partner holds at least 50% of the company and is entitled to sole management.
Problem solving often not within the domestic legal area
First of all, insolvency law and civil procedure law, including enforcement law, only apply in Germany. Only through an effective choice of law can asset protection in individual cases be achieved abroad. The background to this is the legal policy decision between the interest of creditors on the one hand and the interest of the state as well as employees and managers in securing retirement benefits on the other. However, it is not possible for insurance brokers to arrange this, because as a rule the use of any intermediary from home or abroad will render the choice of foreign law void.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
published in Giesserei-Praxis magazine 1-2 2021 pages 46-48
www.network.karriere.com (published in Network-Karriere 04/2021, page 30)
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About the author
PhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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