– New BGH ruling: How the insolvency administrator achieves confiscation and immediate realisation
The most common form of company pension scheme (bAV) for the managing partners is the pension commitment. A new ruling by the Federal Court of Justice (BGH ruling of 18 July 2013, file no. IX ZR 219/11) opens up further possibilities for the insolvency administrator to access the assets of the Mittelstandskapitalgesellschaft to reinsure the pension scheme.
Challengeability of the pledge of a reinsurance to the managing director
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 legal acts from the last year before the opening of insolvency proceedings would be contestable at best – i.e. in the case of repayment of shareholder loans without collateral.
All loans and loan-like transactions affected
It is important to note that since 1 November 2008 the possibility of rescission has also affected all loans and loan-like transactions, regardless of whether Mittelstands-GmbH was in crisis or not. This also applies, of course, if a managing director of his GmbH defers his salary or profit entitlement, as is the case with so-called “deferred compensation”. The intention of a creditor disadvantage is not important.
This gives the insolvency administrator the opportunity to reverse all payments into the reinsurance or similar legal transactions such as allocations to working time accounts from the last 10 years before the opening of the insolvency proceedings in order to increase the insolvency assets. This is also the case if the start of the pledge, e.g. of the reinsurance cover still to be established, was more than 10 years ago. The managing partner then literally looks into the mountains with the stovepipe.
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.
No 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.
Contestation after advertising with insolvency protection by product providers
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 already opened the insolvency administrator to challenge the insolvency proceedings according to § 133 InsO (OLG Brandenburg, judgement of 13.02.2002, Az. 7 U 152/01) due to conditionally deliberate creditor disadvantage. 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.
Sales fairy tales of insolvency security with 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.
Trust models as a means of putting creditors at a disadvantage
The use of a trust model already indicates the intention to disadvantage creditors, § 133 InsO. It is sufficient that this disadvantage is possible and only occurs indirectly, i.e. that it is accepted, Section 3 of the Act on Contestation (AnfG). The intent always follows from the purpose of the contract, which can be read in black and white from the content. § Section 133 InsO and Section 3 I AnfG protect both old and new creditors. Contracts with trustees “in the event of insolvency” have proven to be immoral according to case law and thus null and void from the outset.
Problem solving 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 do this, because as a rule the use of any intermediary from Switzerland or abroad will render the choice of foreign law null and void.
by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm
by courtesy of
www.markt-intern.de (published in Bank-internal, supplement to 41/2019 on 07.10.2019)
www.k-zeitung.de (published on 02.10.2019 under the heading: GmbH insolvency: total loss of pension scheme threatened)
www.experten.de (published on 07.10.2019)
www.submission.de (published in Submissions-Anzeiger issue no. 189 of 30.09.2019, pages 40-41)
www.markt-intern.de (published in Bank Intern Spezial, supplement to No. 41/2019)
www.gff-magazin.de (published in GFF Das Praxismagazin für Produktion und Montage,
Edition 12/2019, page 106-107 under the heading: Is your pension scheme also at risk)?
www.der-bau-unternehmer.de (published in Der BauUnternehmer, issue 12/2019, page 6
under the heading: In the case of GmbH insolvency the boss is threatened with total loss of his pension provision)
CampingImpulse (published in CampingImpulse, issue 02/2020, page 26 and 27
under the heading: When all is lost)
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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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