New task for finance departments

Credit risks due to changes in the insolvency code

The Financial Market Stabilisation Act (Finanzmarktstabilisierungsgesetz – FMSTG) eliminated the equity capital requirements for companies that had previously been customary: At its core, this relates to the amendment of the provision of section 19 II of the Insolvency Code (InsO), according to which over-indebtedness now only exists if the debtor’s assets no longer cover the existing liabilities, unless the continuation of the business is predominantly probable under the circumstances.

There is no legal obligation to inform one’s own contractual partners of this. Finance departments in particular, especially as creditors, are thus forced to check the creditworthiness of their own business partners more closely. Balance sheet analyses no longer permit a reliable assessment of creditworthiness, at the latest since the changes in valuation regulations in 2002 and 2008. Since the financial market crisis, so-called ratings have also proven to be useless in many cases, as they are outdated. Creditors are therefore increasingly demanding standard bank loan collateral. In case of doubt, companies will continue to operate over-indebted, at the longest until they have reached a state of insolvency: Then an insolvency ratio of “0.00” is likely to be the result. The fact that, in addition to insurance companies, the banks’ own house banks must now also be put to the test is particularly sensitive.

by Dr. Johannes Fiala

by courtesy of (published in Finance 05/2009, page 29)

Our office in Munich

You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.

About the author

Dr. Johannes Fiala Dr. Johannes Fiala

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.
»More about Dr. Johannes Fiala

On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.

Arrange your personal appointment with us.

Make an appointment / call back service

You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.

Obtain a second legal opinion

(The first phone call is a free get-to-know-you conversation; without consulting. You will learn what we can do for you & what we need from you in terms of information, documents for a qualified consultation.)