In addition, six colleagues were elected Local Partners and nine colleagues were elected Salary Partners. The newly elected partners are from all six German offices of the law firm, working in seven different areas of competence.

Dr Florian Weichselgärtner handles a large number of liability cases every year, both in the area of manager liability and the liability of lawyers, tax advisors, insolvency administrators, corporate and restructuring advisors and auditors. His area of activity further comprises advice to companies on the processing of liability cases and compliance violations. The interdisciplinary advisory service of ADVANT Beiten enables Dr Florian Weichselgärtner to comprehensively handle the often complex liability cases across all legal areas (tax law, criminal law, labour law, capital market law, insolvency law, etc.). Due to his many years of advisory practice, he has proven experience both in conducting and defending actions for damages as well as in out-of-court dispute resolution.

These are our new Local Partners in alphabetical order:

• Sascha Opheys (Public Sector, Dusseldorf)
• Max Stanko (Public Sector, Berlin)
• Dr Philipp Sahm (Corporate/M&A, Frankfurt)
• Haide Spanier (Banking, Finance & Restructuring, Frankfurt)
• Mark Thönißen (Corporate/M&A, Frankfurt)
• Dr Mark Zimmer (Labour Law, Munich)

Our newly elected Salary Partners are listed in alphabetical order:

• Regina Dietel (Labour Law, Munich)
• Gamze Dogan (Tax Law, Dusseldorf)
• Verena Nader (Real Estate, Munich)
• Dr Christian Osbahr (Corporate/M&A, Freiburg)
• Robert Schmid (Corporate/M&A, Berlin)
• Simon Schuler (Corporate/M&A, Freiburg)
• Etienne Sprösser (Corporate/M&A, Freiburg)
• Maximilian Steffen (Tax Law, Hamburg)
• Ulrike Stöhr (Tax Law, Munich)

"The appointment of our new partners shows how closely we work together across offices and between our practice groups - supported by diverse industry expertise," explains Dr Guido Krüger, Managing Partner of ADVANT Beiten, adding: "The fact that we have had successful elections at all three seniority levels underlines the continuous development of outstanding talent in our firm. Accompanying our colleagues on their path to partnership is one of our central tasks."

ADVANT Beiten also continues to follow its strategy of targeted growth by lateral hires in selected areas. The following Local and Salary Partners reinforced the firm last year:

• Tanja Ehls (SP, Public Sector, Frankfurt)
• Julian Gruß (SP, Real Estate, Dusseldorf)
• Peter Meisenbacher (SP, Public Sector, Freiburg)
• Ansgar Messow (LP, Real Estate, Dusseldorf)
• Johannes Voß-Lünemann (SP, Public Sector, Berlin)

PR
Frauke Reuther
Manager Communication
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Part 26A Restructuring Plan

Even after its exit from the European Union, the United Kingdom still strives to be an attractive location for insolvency and restructuring proceedings. In a number of high-profile cases, debtors have deliberately relocated their Centre of Main Interests (COMI) to the UK to take advantage of the comparatively debtor-friendly legal framework there. Of particular interest to debtors is a restructuring plan under Part 26A UK Companies Act 2006. This process allows for either all creditors or only certain classes of creditors to be included in the proceedings. The key advantage of this instrument, from the debtor’s perspective, is precisely that a large number of creditors can be excluded from participation in the process. The associated, significant, costs—typically running into the millions—for relocating the COMI, engaging specialised lawyers and advisors, and utilising the English courts are willingly borne by many companies in the hope of achieving more flexible debt relief.

The recent decision by the English Court of Appeal to tighten the fairness requirements for such restructuring plans (ruling dated July 1, 2025), was unlikely to significantly reduce the attractiveness of the Part 26A Restructuring Plan for debtors. However, the recent decision of 22 August 2025 from the Frankfurt am Main Regional Court changes the picture entirely: now, from the debtor’s perspective, a major obstacle has been put before them because such restructuring plans are not recognised in Germany. Although Germany is only one jurisdiction, this is of critical significance because, in principle, a cross-border restructuring plan can only be approved by an English court if there is a reasonable prospect of recognition in the other jurisdictions involved. So far, where English courts have considered the question of whether a Part 26A Restructuring Plan is capable of recognition in Germany, they have (until now) affirmed the possibility of such recognition.

Legal Assessment of Recognisability in Germany

The crucial question of how courts in Germany assess the recognisability of Part 26A Restructuring Plans has had many lawyers on tenterhooks. The opinion of the English courts on this matter is irrelevant for recognition in Germany: only German law is decisive.

The recognisability of a Part 26A Restructuring Plan under German law has been a matter of controversial debate. Possible legal bases for recognition include Section 343 of the German Insolvency Code (InsO), Section 328 of the German Code of Civil Procedure (ZPO), and Article 26(1) of the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (EuGVÜ). However, there have been significant reservations about applying any of these provisions, which is why the prevailing view in legal literature has so far been to fundamentally reject recognition. However, until now, no decision by German courts had addressed this question. 

The Frankfurt Regional Court decision and its significance

On August 22, 2025, the Frankfurt am Main Regional Court ruled that a Part 26A Restructuring Plan cannot be recognised in Germany. In doing so, it adopted the arguments frequently presented in legal literature and confirmed a legal position that ADVANT Beiten had already represented on behalf of creditors before the Frankfurt am Main Regional Court.

The court rejected recognition under Sect. 343 InsO, as this provision applies exclusively to insolvency proceedings. Insolvency proceedings under the German Insolvency Code are characterized by the inclusion of all creditors. Since the Part 26A Restructuring Plan does not include all creditors, the required collective nature of the proceeding is lacking.

The Regional Court also followed its previous case law by the Higher Regional Court (OLG Frankfurt am Main) rejecting the recognition of the restructuring plan under the EuGVÜ (Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 1968), on the basis that it was replaced in 2002 by the Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (EuGVVO). Although the EuGVVO no longer applies to the United Kingdom since Brexit, the EuGVÜ as its predecessor does not become applicable again due to Brexit. 

Regarding Sect. 328 ZPO, the Frankfurt am Main Regional Court emphasised that mutual recognition of judgments must be ensured. Accordingly, the recognition of a Part 26A Restructuring Plan in Germany depends on whether comparable decisions by German courts would also be recognised in England. According to the Frankfurt am Main Regional Court, this is a question of fact rather than law, as it depends on the actual practice of recognition. In the case at hand, evidence for the claimed recognition in England could not be provided. Therefore, the court, based on the burden of proof, denied reciprocity and thus rejected recognition under Sect. 328 ZPO. As this is a regional court ruling, the decision is not yet final. It is possible – though in our view unlikely – that evidence of reciprocity could still be submitted later in the proceedings. From our perspective, it is doubtful whether reciprocity can be proven at all. It seems unlikely that a German restructuring decision regarding a claim governed by English law would be recognised in the United Kingdom. This is particularly supported by the so-called Rule of Gibbs, recently confirmed in UK case law. According to this principle, rooted in English common law, foreign insolvency or restructuring decisions have no effect on claims governed by English law.

Conclusion 

The decision of the Frankfurt am Main Regional Court is welcome news for creditors, because it upholds the protection that German insolvency law intends to grant them. Moreover, it ensures that the choice of governing law made at the time of contract conclusion remains effective throughout the entire duration of the legal relationship. A relocation of proceedings and a flight to non-European jurisdictions aimed at circumventing the interests of specific creditor groups is no longer easily possible. Companies considering such an “insolvency relocation” must now seriously consider the lack of recognition of their restructuring measures in Germany. From the creditors’ perspective, this means that affected creditors in Germany no longer must accept the consequences of English restructurings and can continue to assert their original rights. 

If the Frankfurt court’s case law prevails, English courts will also have to take notice. They would be unable to approve Part 26A Restructuring Plan involving Germany, as the lack of recognition would be established. Whether this will happen, and the decision will become final remains to be seen. However, a clear first signal against insolvency tourism abroad has been sent. Creditors affected by a foreign restructuring should examine whether it is also recognisable in Germany and whether their claims have indeed been extinguished.

If you are affected by a foreign restructuring, we are happy to offer a consultation.

Dr Nadejda Kysel
Dr Philipp Sahm
Jessica Schneeberger

ApoBank and the AXA Insurance Group have been cooperating in the sale of financial and insurance products for more than 25 years. Both companies now want to bundle the sales activities of their mobile sales companies apoFinanz and Deutsche Ärzte Finanz more closely. 

As part of the restructuring, apoFinanz will be merged with Deutsche Ärzte Finanz. At the same time, apoBank acquires additional shares in Deutsche Ärzte Finanz. The merger creates the largest financial sales organisation for academic health professionals in Germany. With around 500 independent financial advisors, the new company will serve more than 320,000 customers. The merger will be completed in August 2025. A cross-office team from ADVANT Beiten is providing apoBank with comprehensive legal advice.

With more than half a million customers and total assets of around EUR 52 billion, apoBank is the largest cooperative retail bank in Germany and the number one financial services provider in the healthcare sector. Its customers are primarily members of the healthcare professions, their professional organisations and associations, healthcare facilities and companies in the healthcare market.

With the reorganisation of their joint sales subsidiaries, the partners want to combine the strengths of the companies and use the synergies for additional growth. 

Advisors to apoBank: 

ADVANT Beiten: Heinrich Meyer, Rainer Süßmann (both lead partners in charge, Banking/Finance, Frankfurt), Dr Christian Ulrich Wolf, Maren Dedert (both Corporate/M&A, Hamburg), Christoph Heinrich, Prof Dr Christian Heinichen (both Antitrust Law, Munich), Oliver Korte, Christopher D. Harten (both Commercial, Hamburg), Dr Thomas Drosdeck, Dr Gerald Müller-Machwirth (both Labour Law), Susanne Klein, Lennart Kriebel and Daniel Trunk (all IT- and Data protection Law, all Frankfurt)

Advisor to AXA: Hengeler Mueller

Public Relations
Frauke Reuther
Communications Manager
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Heinrich Meyer
Rechtsanwalt 
ADVANT Beiten
Phone: +49 69 756095-414
heinrich.meyer@advant-beiten.com

D&O insurance is deemed to be an indispensable instrument in the risk management of modern companies. It protects managing directors, members of management and supervisory boards, and other executives against the financial consequences of any erroneous decisions contrary to duty and organisational deficits. 

However, in practice, it turns out: D&O insurance is a complex insurance product that often raises many questions for those involved. Policyholders, intermediaries, injured parties and even insurers are often confronted with a variety of challenging questions. 

Insurance terms and conditions: Inconsistent and difficult to compare

The insurance terms and conditions of D&O policies are often complicated and hard to understand for laypersons. The benefits vary greatly from one provider to another. In addition to defending against unjustified claims and indemnifying against justified claims for damages, many insurers now offer numerous additional services, such as criminal law protection, continued payment of salary in the event of claims for damages, medical and psychological care, reimbursement of ransoms, PR advice and much more. 

Policies also often differ greatly from one another with respect to exclusions. Restrictions on insurance cover are often found not only in the general insurance terms and conditions, but also in the insurance policy or in separately agreed terms and conditions.

Therefore, the scope of cover of D&O insurances is difficult to compare. In any case, a comparison of the sum insured, and the premium alone is not very conclusive. 

D&O insurance usually does not protect against personal liability claims

Claim settlement shows that many policyholders and insured persons do not know how a D&O insurance is designed. They wrongly assume that the injured party can directly contact the D&O insurance company regarding the claim settlement, and, in this respect, no personal liability is threatening. In fact, a D&O policy, however, generally requires such a personal liability claim for the occurrence of an insured event.

In many cases, the existence of such a D&O cover is even the "motivator" for personal liability claims which often renders the insurance purpose absurd. For only in very few cases, D&O insurance provides for a so-called self-insurance which at least allows injured policyholders to make claims directly against the insurer. 

Ambiguities about the scope of insurance benefits

The typical benefits of a D&O insurance include on the one hand providing defence cost protection, i.e. covering the legal costs for the defence against unjustified claim, and on the other hand indemnifying against justified claims. Contrary to the widespread view, not every D&O contract also offers criminal law cover, in other words protection against criminal investigation proceedings. 

The situation is similar with covering fines and penalties, in particular with antitrust violations. In misjudgement of this, insurers are increasingly confronted with the reporting of claims which are already not covered on the merits according to the wording of the insurance terms and conditions. 

Potential for disputes in the event of a claim

Especially in the area of D&O insurance, there are often nasty surprises in the event of a claim.

The parties involved are often not aware of the obligations of a D&O insurance or they are disregarded by ignorance of the legal consequences. It seems to have become common knowledge among claimants that the D&O insurer must be informed immediately of the insured event; in the vast majority of cases, letters concerning liability claims contain such a notice. The legal consequences of a delayed or erroneous damage report, however, still seem to be unknown to the vast majority of claimants. In any case, the damage reports to the insurers are mostly made very late and often only very cryptically. 

But also, the violation of pre-contractual obligations may lead to a (total) loss of insurance cover, for instance where incomplete information is provided in the questionnaires or critical facts are not disclosed upon conclusion of the D&O contract. 

It is noticeable that such cases are becoming more frequent. The reasons therefor are manifold. Mostly, there is a fear that they will not receive any insurance cover or that they must pay a high premium if all information is provided. Often, the questionnaires are simply not given too much importance and are not completed with the necessary care. In this context, it is overlooked that the information for the insurers is relevant for decision-making and the insurers increasingly react to the violation of pre-contractual notification obligations with challenging the entire policy. 

By ignorance of the insurance terms and conditions, the primary obligation to provide coverage from other sources or from the previous insurer is often overlooked. Especially D&O insurances often provide for long subsequent reporting periods which may lead to an obligation to provide coverage of the previous insurer. As a result, the insurer actually responsible is usually informed far too late - in the worst case after expiry of the subsequent reporting period - about the event of a claim. 

In the event of a claim, it is also often revealed that the sum insured was set too low. Very often, this sum insured is not sufficient to cover the entire damage. In larger events of a claim with high amounts in dispute or many parties involved, the sum insured is often used up merely by defence costs. When concluding a D&O policy, it must therefore always be ensured that the sum insured is sufficiently high. In this context, the premium should not always be the decisive criterion. Affordable insurance cover can also be achieved by waiving certain - not always necessary - additional benefits or taking out excess insurances.

Incident reports and serial defect clauses also entail potential for disputes - especially also with regard to the often not sufficient sum insured. Through the incident report, an insured event can be drawn into a previous insurance period. Insurance exclusions are also often defined through incident reports. 

Serial defect clauses can be used to combine several insured events into one claim and assign them to a specific insurance period which may have implications for the sum insured (still) available or retentions. In practice, disputes regularly arise over the range and scope of such incident reports and serial defect clauses. The legal effectiveness of individual serial defect clauses is also highly controversial. 

Change of cover entails the risk of gaps in cover

Frequently, difficulties also arise when changing to a new D&O insurer. The reason for a change is usually striving for a more favourable premium or a better insurance cover. In case of a change, care must always be taken to ensure that the old and new D&O policy harmonise with regard to the insured periods (key word: retroactive cover) and their subsidiarity clauses. Otherwise, a game of ping-pong between the insurers is threatening in the event of a claim. 

In the worst case, changing to a new insurer may lead to the fact that no insurance cover exists for certain circumstances due to the resulting gap in cover. With regard to allegedly affordable premiums or better insurance cover, an expert comparison of the respective terms and conditions is therefore always required.

High demand for advice - expert advisors required

In case of D&O insurances, the demand for advice is high. The numerous insurance products on the market and the often very extensive insurance terms and conditions are mostly very difficult to understand for policyholders. They usually rely on the advice and the recommendation of their advisors and insurance brokers. The situation is similar with the insured persons who rely on their legal advisors in the event of a claim. Brokers and advisors should therefore also always be aware of the numerous pitfalls in processing in order to avoid falling into (their own) liability trap. 

Dr Florian Weichselgärtner

This article was first published in the Versicherungsmonitor magazine on 16 June 2025. Here you can find the original article.

BaFin is increasingly imposing fines on listed companies for violating the provisions of the German Securities Trading Act or the Market Abuse Regulation. Often, amounts in the millions are set for even minor offences. The amount of the fines also varies greatly from company to company for the same offence. This is due to the fact that BaFin bases the amount of the fines on the market capitalisation of the respective companies within the range stipulated by law. As a result, companies with a low market capitalisation have to pay much less for the same infringement than companies with a high market capitalisation.

Experience has shown that many companies agree to a "settlement" with BaFin as part of the fine proceedings. BaFin regularly grants discounts of around 30% on the threatened fine. In return, however, BaFin expects a waiver of legal remedies. 

However, practical experience shows that a significantly greater reduction can be achieved by lodging an appeal against the BaFin's fine notice in the subsequent court proceedings, which take place before the Frankfurt am Main Local Court. In such proceedings, the court has to deal with a very complex regulatory matter that is largely unknown to it and is therefore often interested in a quick resolution. In addition, the court may waive the grounds for its judgement in the event of a court settlement (Section 77b OWiG). The public prosecutor's office participating in the proceedings regularly raises no objections to such a procedure. 

In addition, there are cases in which BaFin interprets supervisory regulations too broadly or the alleged facts that are subject to a fine are disputed. In such cases, it is advisable to seek a complete cancellation of the notice in question - if necessary, by means of a legal appeal to the Higher Regional Court of Frankfurt am Main.

CATT operates its first plant outside China in Arnstadt, Thuringia. With 1,700 employees, the plant is the largest foreign subsidiary of the battery manufacturer. Existing customers in Germany include companies such as BMW and Mercedes-Benz. In addition to the site in Germany, the expansion plans focus in particular on the sites in Hungary and Spain.

CATL has made a profit of approx. 4.6 billion dollars with the stock exchange listing in Hong Kong. The final price per share was set at 263 Hong Kong dollars, this corresponds to the maximum offer price. The scope of CATL's transaction could increase to 5.3 billion dollars, if a so-called greenshoe option results in the sale of a further 17.7 million shares. The fresh capital will be used in particular to finance CATL's further expansion into Europe. 

CATL Advisor - as a German Legal Counsel:

ADVANT Beiten: Dr Dirk Tuttlies (in charge; Capital Market Law), Dr Christian von Wistinghausen (in charge; Due Diligence), Tassilo Klesen, Danah El-Ismail, Simone Schmatz, Christian Burmeister, Lelu Li, Damien Heinrich, Robert Schmid (all Corporate/M&A), Katrin Lüdtke, Korbinian Goll (Public Law).

Public Relations

Frauke Reuther
Communications Manager
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

The new exemptions of the EU Prospectus Regulation, which has been amended since 4 December 2024, were applied for the first time in the admission to trading on the Frankfurt Stock Exchange: The admission of the new shares of Philomaxcap AG was completed without the publication of a prospectus only with the filing and publication of an 11-page admission document. (In accordance with Article 1(5), subparagraph 1(ba) and subparagraph 3 of Regulation (EU) 2017/1129 as amended by Regulation (EU) 2024/2809 and Annex IX). 

In this context, the team led by the two partners Dr Dirk Tuttlies and Rainer Süßmann examined in particular the question of whether shares from a non-cash capital increase, i.e. a contribution in kind, could possibly be classified as a public exchange offer. In addition, the filing of the admission document, which replaces the previously customary prospectus, had to be coordinated with BaFin, the German Federal Financial Supervisory Authority and the Frankfurt Stock Exchange. For both institutions, the application of the now valid exemptions of the EU Prospectus Regulation was the first case of application.

The listing of the new shares on the Frankfurt Stock Exchange was preceded by a successful capital increase with the acquisition of GenH2Corp. This strategic measure led to an increase in share capital from EUR 17 million to over EUR 110 million and was made possible by the issue of around 93 million new shares.

Philomaxcap AG, domiciled in Munich, is a holding company focussing on the hydrogen industry which offers services for existing and future investments. The admission of the new shares from the previous acquisition of GenH2Corp, a US company specialising in liquid hydrogen technology and equipment, ideally complements Philomaxcap's portfolio.

Advisor to Philomaxcap AG on Admission of the New Shares:

ADVANT Beiten: Dr Dirk Tuttlies (Munich), Rainer Süßmann (Frankfurt, both Banking/ Capital Markets)

Public Relations
Frauke Reuther
Manager Kommunikation
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

D&O insurance taken out without disclosing the 'front director' status

In the case at hand, the 'front director' sued the D&O insurer for payment. He had stepped in when the founder of a German private limited liability company (GmbH) joined the civil service as a police officer and had to resign as managing director for legal reasons. As a result, the plaintiff had himself entered in the commercial register as managing director in June 2018 and granted the former managing director power of attorney for all commercial matters (Prokura). The former managing director continued to run the company's business alongside his main occupation as a police officer. The plaintiff was - in his own words - a 'managing director on paper' only. 

In May 2020, the plaintiff, as the legal representative of the GmbH, took out a D&O insurance policy with the defendant. When doing so, he failed to disclose the true management situation. The policy contained a clause stating that the defendant waived the right to contest the contract on the grounds of fraudulent misrepresentation, but that the persons committing the fraud were excluded from insurance cover.

On 1 October 2022, insolvency proceedings were opened over the company's assets and the insolvency administrator made a claim against the plaintiff under section 64 of the old version of the German Limited Liability Companies Act (GmbHG) (now section 15b of the German Insolvency Code (InsO)) for payments made by the company after it had become insolvent. The plaintiff sought indemnification from the insurer, who refused to provide cover. After the plaintiff had lost the first instance and lodged an appeal, the Hamm Higher Regional Court issued the commented decision.

No D&O cover provided for 'front directors'

The Hamm Higher Regional Court ruled that the defendant did not have to provide any insurance cover. The plaintiff had fraudulently misled the defendant when taking out the policy. Under the principles of good faith, he should have informed the defendant of this circumstance even without being asked about it.

The Court concluded this from the explanatory memorandum on section 19(1) of the German Insurance Contracts Act (VVG), which did not exclude avoidance for fraud. According to this rule, there was only an obligation to provide information on circumstances involving a significant risk that was requested by the insurer. A spontaneous duty of disclosure therefore had to meet high standards. It only applied where there existed obviously risk-relevant circumstances that were so rare and remote that the insurer could not be blamed for not having enquired about them.

It was evident that a merely formal managing director who is neither willing nor capable of fulfilling his duties as managing director was not acting with the due care of a prudent businessman. He therefore significantly increased the risk of becoming liable to pay damages to the company. This certainly applied if, as was the case here, the de facto managing director was unable to fulfil his corporate responsibilities due to his other, principal professional activities. Since the insurer would not have issued the policy if the required information had been provided and the Court assumed wilful intent, the Court affirmed fraudulent misrepresentation.

Disclosure of 'front director' status is necessary even when not asked for

D&O policies usually cover the liability of all managing bodies and senior executives of a company and its subsidiaries. This generally includes all formal and actual directors. Before an insurance policy is issued, the insurer regularly assesses the risk on the basis of a more or less standardised list of questions. Hence, insurers are free to ask risk-related questions to determine the circumstances that are relevant for deciding whether or not to issue a D&O policy to a company. If an insurer does not ask a question about a particular circumstance, the policyholder can generally assume that this circumstance has no relevance for the insurer's risk assessment.

With the commented decision, however, the Hamm Higher Regional Court makes it clear that the policyholder's duty to provide information to a D&O insurer is not limited to answering the risk-related questions truthfully. The Court sets high standards for a spontaneous duty to provide information and follows the strictest view expressed in legal literature, which has become the predominant view in the rulings of higher regional courts by now. A policyholder only has to disclose such circumstances without being asked that, on the one hand, have an obvious risk potential and, on the other hand, are so unusual that an insurer cannot reasonably be expected to ask any specific questions about them. In the commented decision, the 'front director' status of the sole managing director was such a circumstance.

The decision is therefore hardly surprising. In a ruling of 4 May 2016 (case no. 1 O 143/14), the Mönchengladbach Regional Court had also considered the status as a 'front director' to require disclosure. The Mönchengladbach Regional Court, however, found no evidence of fraudulent misrepresentation in that case, as it remained unclear whether the insurer was informed of the 'dummy' construct when the insurance was taken out. The plaintiff nevertheless did not receive cover in this case either, as the defendant D&O insurer was able to invoke exclusion on the grounds of wilful breach of duty. According to the Mönchengladbach Regional Court, the timely filing of an insolvency petition is a cardinal obligation where a breach of duty is presumed to be intentional.

The fact that the insurer became aware of the 'front director status' and was also able to prove this in court was, in the commented decision of the Hamm Higher Regional Court, largely due to the statements made by the formal managing director following the notification of the claim.

High risk involved for 'front directors'

The risk for 'front directors' is extremely high: they may be held liable with their personal assets (e.g. under section 15b(4) sentence 1 InsO, section 69 sentence 1 of the German Fiscal Code (AO) or section 43(2) GmbHG) even if they stay completely out of the company's business, and they must also fear that a D&O insurer may refuse to provide cover. The commented decision once again underlines that a registration in the commercial register as a matter of courtesy and without the intention of actually running the company's business can have devastating consequences and should not be made without careful consideration.

Dr Florian Weichselgärtner
Etienne Sprösser

This article was first published in the Versicherungsmonitor magazine on 13 January 2024. Here you find the original article (available in German only).

It happens just before Christmas, preferably on 23 December. The doorbell rings and a friendly postperson hands a registered letter to the managing director. The registered letter reads - in a more subtle way, but usually in exactly the same tone: 'Dear Mr Managing Director, you have breached your duties and have a liability towards the company of 10 million euros. Please remit the amount to the following bank account no later than by 27 December. Sincerely'.

At a first glance, such letters seem grotesque. What individual has several million euros available in their private banking account at short notice and would be willing to transfer them within a few days? At a second glance, they seem comprehensible at least from a legal point. They are not aimed at the managing director's private banking account, but at the D&O insurance policy taken out for the benefit of the director. Only a letter addressed to the managing director can trigger insurance coverage and also default interest. Yet, it does not take much to visualise what such a letter shortly before the Christmas holidays will do to the managing director receiving it.

Obligations under insurance law: notification of D&O insurer

Upon receipt of this kind of letter, the managing director must immediately report the claim to the D&O insurer. Failing to do so is a breach of the director's obligations under insurance law, something a managing director often is not even aware of. But more on that later. In the worst-case scenario, the managing director will lose insurance cover by failing to report the claim. The managing director will also try to find a suitable lawyer for his defence before the Christmas holidays.

Claimants often demand that the statute of limitations be waived at short notice to avoid a lawsuit. Such waiver also needs to be discussed with the D&O insurer and the director's own lawyer. This is often not an easy task during the Christmas season. It is a time that is often highly emotional and overwhelming for the director concerned. There goes Christmas. The holidays are overshadowed by dealing with the accusations and worries about a possible personal insolvency. 

Managing director liability: claims do not become statute-barred at the end of the year

But is it necessary? From a legal perspective, it is normally not necessary to make a claim at the end of the year. Claims based on the managing director's liability expire after five years (section 43 (4) of the German Limited Liability Companies Act (Gesetz über die Gesellschaften mit beschränkter Haftung, GmbHG)). The limitation period, however, does not begin at the end of the year in which the claim arose.

As section 43 (4) GmbHG makes no provision for the start of the limitation period, the limitation period commences immediately when the claim arises, regardless of the company's knowledge or grossly negligent lack of knowledge of such claim (section 200 sentence 1of the German Civil Code (Bürgerliches Gesetzbuch, BGB)). According to the ruling of the German Federal Court of Justice (Bundesgerichtshof, BGH) dated 29 September 2008 (case no. II ZR 234/07), any knowledge of the injured party is irrelevant. The question of why many claims, including demands for waivers of claims, are made at the end of the year can only be explained by the claimants' ignorance of the limitation periods. 

Foresight secures claims

Irrespective of the above, the question remains as to why the claimants mostly use a very harsh tone and why there is no explanation that the claim is being made primarily with regard to the D&O insurance. It is an open secret that the claim against the managing director is usually aimed exclusively at the D&O insurance, as the managing director's private assets are rarely sufficient to satisfy the claim.

D&O insurance is maintained precisely to protect the director against such claims. Why is this not disclosed to the managing directors to ease their worries? There are only a few claim letters that make any reference to the existence of D&O insurance and, more importantly, to what specifically needs to be done to fulfil the obligations imposed by insurance law. The obligations are set out in the terms and conditions of the D&O insurance policy, which the managing director does not usually know.

At the same time, it is also in the claimant's interest that the insurance cover is not unnecessarily jeopardised by not meeting obligations. Without insurance cover, the claimant’s only option would be to fall back on the managing director's private assets, which are usually not worth millions.

A question of style

This article is meant to be an appeal for mutual respect at Christmas time. From a legal perspective, it is normally not necessary to make a claim at the end of the year. If it is, however, it can be worded and timed in such a way that it will not become a Christmas disaster for the managing director and everyone else involved. Particularly in complex D&O cases with several parties involved, economically sensible solutions can often be found for all parties through a settlement process. The comparison and consideration of the different interests in a mediation approach requires good judgement and foresight and − right at the beginning of a dispute − good etiquette.

Dr Florian Weichselgärtner

This article was first published in the Versicherungsmonitor magazine on 9 December 2024. Here you can find the original article.

The i8, with its timber hybrid construction and LEED Platinum certification, PV system and façade made from recycled aluminium, and more such features, has been designed with sustainable construction in mind.

Advisor to the Interhyp Group:
ADVANT Beiten: Anja Fischer (Real Estate, Munich), Dr Christoph Schmitt (Banking & Finance) and Volker Szpak (Tax, both Frankfurt):

Advisor to R&S Immobilienmanagement:
Noerr: Annette Pospich, Dr Antonio DiMieri (both Real Estate) and Steffen Arlich (Tax, all Munich).

The deal was arranged by BNP Paribas Real Estate GmbH, Christoph Bayreuther.

Media Contact
Frauke Reuther
Manager Kommunikation
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Facts of the case

The claimant was the insolvency administrator of a GmbH & Co. KG (the “debtor”). The articles of association of the debtor provided that only the limited partner, U-GmbH, managed the business. The defendant was a director of U-GmbH. U-GmbH was also the managing partner of other investment companies. The debtor raised funds for a stock company (AG) and made these funds available as loans for real estate investments. The loan agreement provided comprehensive collateral as security. The claimant sought recourse from the director for an amount of EUR 200,000 because of payments made to the insolvent stock company. The defendant did not play a part in the transfer.

Judgment of the BGH

Like the lower courts, the Second Senate of the BGH affirmed the debtor’s claim for damages against the director of the GmbH under § 43 (2) of the GmbHG.

Under § 43 (2) GmbHG, the scope of protection of the board and employment relationship between the limited partner GmbH and its directors extends to the KG in the case of negligent management. Managing the business of the limited partnership does not need to be the sole or central task of the GmbH.

BGH affirms contract with protective effect to benefit the KG

The Senate affirmed the requirements of a contract with protective effect to benefit a third party:

1. Under the articles of association, the KG will experience the services of the director when the limited partner GmbH manages the KG. Failures of the directors of the GmbH will always negatively affect the KG.
2. There is a legitimate interest in including a third party – here the KG. A director of the managing GmbH exercises their duties in the interests of the GmbH & Co. KG.
3. There is a good faith need to protect the KG. A breach of the director’s duties when managing the business of the KG will be particularly detrimental to the KG. The KG does not generally have a right to instruct the director. The rights to revoke the power of attorney and object to directors are not contrary to the need for protection.
4. The interests of the KG in being included under the scope of protection is apparent to the GmbH and the extension of the protection is reasonable for the GmbH. This applies even where U-GmbH also managed other funds so that the management of the GmbH & Co. KG was not its sole or material task. The latter issue remained open until now. The BGH followed the judgments of the higher regional courts and the prevailing view in the literature: the fact that directors manage multiple companies does not change their duties. A KG must be able to trust that the director will discharge their duties with care and diligence, regardless of the number of other companies it manages.

Liability, regardless of the internal division of responsibilities

The defendant is also liable when, in line with the internal division of responsibilities, the director was not primarily responsible for managing the debtor. While responsibilities may be divided up, directors will nevertheless remain jointly responsible. In any case, directors will have a supervisory duty. They must follow up on any irregularities or negative developments in areas that are not their direct responsibility. There is no objective reason to limit the protective effect for the KG. The Senate confirmed that the defendant had breached her duty of supervision as she did not prevent the transfers. A report found that the AG had not made enough security available and that only a certain percentage of the investor monies were invested in real estate. If the director had exercised her duties diligently, she would have noticed the maladministration of the core business of the debtor.

Summary

The landmark BGH judgment tightens director liability by extending the scope of the protection inherent in the board and employment relationships of the director. Under the jurisprudence of the BGH, this protection and, accordingly, the liability of directors under § 43 (2) of the GmbHG applies to the limited partner GmbH of a GmbH & Co. KG and extends to the limited partnership. The BGH clarified that the board and employment relationships of a director of a managing limited partner-GmbH lead to protection for the benefit of the limited partnership. The director is therefore also liable to the limited partnership for breaches of their duties under § 43 (2) of the GmbHG.

Dr Florian Weichselgärtner
Valerie Hoffmann

The Terreal businesses to be acquired by Wienerberger are expected to generate revenues of EUR 740 million and a run-rate EBITDA of approx. EUR 100 million in 2022. The enterprise value of the respective Terreal businesses amounts to EUR 600 million, subject to customary adjustments. The acquisition agreement was signed at the end of December, marking the start of the exclusive negotiation phase. The closing is expected to occur in the course of 2023.

The merger control part of the transaction is led by ADVANT Beiten partners Uwe Wellmann and Christoph Heinrich who are jointly responsible for German merger control and coordinate a team of law firms in various jurisdictions. Cross-border merger control advice is provided in cooperation with, inter alia, ADVANT Altana in France, Binder Grösswang in Austria, Woźniak Legal in Poland and Radovanović Stojanović & Partners in Southeastern Europe.

The M&A work stream was led by E+H (Vienna, Graz). ADVANT Beiten partner Dr. Mario Weichel took over its German part and together with a multidisciplinary team performed the legal due diligence on the Creaton business. ADVANT Altana was responsible for the French due diligence.

Advisers to Wienerberger:
ADVANT Beiten: Uwe Wellmann (Berlin) and Christoph Heinrich (both lead partners, both Competition law), Dr Mario Weichel, Maximilian Matusewicz (both Corporate/M&A), Cathleen Laitenberger (Competition Law), Anja Fischer (Real Estate), Katrin Lüdtke and Philipp Früh (both Public Law), Christian Hess (IP), Michael Ziegler and Petra Fendt (Finance), Chiara Peterhammer (Commercial, all Munich), Nima Valadkhani (Commercial), Wolf J. Reuter (Employment Law) and Dr Ariane Loof (Data Protection, all Berlin).

Media Contact
Frauke Reuther
Manager Kommunikation
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Uwe Wellmann
Lawyer
ADVANT Beiten
+49 30 26471-243
uwe.wellmann@advant-beiten.com

The transaction is structured as a share deal whereby Aurelius will acquire the specific legal entities, i.e. Sappi Stockstadt GmbH, Sappi Maastricht Real Estate B.V. (including its subsidiary Sappi Maastricht B.V.), Sappi Finland I Oy and Sappi Finland Operations Oy, which own and control the assets and liabilities of the individual mills.

The enterprise value of the transaction amounts to approximately EUR 272 million and the consideration consists of cash proceeds and retained receivables as well as retained liabilities. The transaction is expected to close in Q1 2023, subject to various standard suspensive conditions.

Sappi is a global leader in dissolving pulp and paper-based solutions, headquartered in Johannesburg, South Africa. It has over 12,000 employees, manufacturing facilities in ten countries spanning over three continents and customers in over 150 countries worldwide.

Advisors to Sappi Limited:

Advant Beiten: Dr Christoph Schmitt (Lead Partner; Banking & Finance) and Dr Markus Ley (Lead Partner, Corporate Law); Dr Mario Weichel and Maximilian Matusewicz (both Corporate Law); Dr Gerald Müller-Machwirth and Maike Pflästerer (both Employment Law); Katrin Lüdtke and Philipp Früh (both Public Law); Anja Fischer (Real Estate); Susanne Klein (IT Law and Data Protection) as well as Christoph Heinrich, Dr Christian Heinichen and Cathleen Laitenberger (all Antitrust and Competition Law).

Stibbe is advising on the Dutch law aspects and Fondia is advising on the Finnish law aspects of the transaction.

Media Contact
Frauke Reuther
Manager Kommunikation
ADVANT Beiten
+49 (69) 75 60 95 - 570
Frauke.Reuther@advant-beiten.com

Markus Ley
Rechtsanwalt
ADVANT Beiten
+49 (89) 35 0 65 - 1211
Markus.Ley@advant-beiten.com

The takeover bid was preceded by a share purchase of Genius with the principal shareholder of Your Family Entertainment AG, F&M Film- und Medien Beteiligungs-GmbH with registered seat in Vienna. Its sole shareholder is Dr. Stefan Piëch, great-grandson of Ferdinand Porsche, the founder of Porsche. The takeover takes place in several stages, i.e. the principal shareholder and Genius are at first bound by a shareholders' agreement so that there is an acquisition of control. Genius itself then has acquired a portion of the shares of F&M Film- und Medien Beteiligungs-GmbH. Genius does not exclude that it will in future increase the holding by means of another public offering.

Advisor to Genius Brands International Inc.:
ADVANT Beiten: Dr. Dirk Tuttlies (Banking & Finance, Munich); Rainer Süßmann (Banking & Finance, Frankfurt).

Press Contact
Frauke Reuther
Communications Manager
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Dr. Dirk Tuttlies
Rechtsanwalt (Lawyer)
ADVANT Beiten
+49 (89) 3 50 65 - 1241
dirk.tuttlies@advant-beiten.com

Founded in 2014, the Berlin-based start-up JUNIQE specialises in prints and posters by artists and is excellently positioned in the market. Since its foundation, JUNIQE has received more than 20 million euros in capital from shareholders, including well-known names such as Vorwerk Ventures, High-Tech Gründerfonds and the Cewe Foundation. The founders of JUNIQE leave the operational management but remain closely associated with the company in an advisory capacity. The JUNIQE location in Berlin and the brand will be retained. The number of MYPOSTER employees increases by 70 to 350 with the takeover.

MYPOSTER was founded in 2011 and has experienced rapid growth in recent years. The MYPOSTER group includes the brands myposter, Kartenliebe, ArtPhotoLimited and its own production company Printhouse. The takeover of JUNIQE is MYPOSTER's largest acquisition to date and represents a milestone for the company. MYPOSTER will further develop JUNIQE's business model strategically and innovatively and thus expand it into an even stronger provider in European e-commerce.

Advisors to MYPOSTER:
ADVANT Beiten: Dr Sebastian Weller (in charge, Corporate/M&A/Venture Capital, Dusseldorf), Dr Martin Rappert, Dr Julia Offermanns, Nico Frielinghaus, Dr Winfried Richardt, Markus Schönherr (all Corporate/M&A, alle Dusseldorf), Tassilo Klesen (Corporate/Commercial, Berlin), Wilken Beckering (Corporate/Commercial, Dusseldorf), Lelu Li (Commercial, Berlin), Thomas Herten (Real Estate, Dusseldorf), Peter Weck (Labour Law, Dusseldorf), Christoph Heinrich (Antitrust, Munich), Mathias Zimmer-Goertz (IP, Dusseldorf), Christian Döpke (Data protection, Dusseldorf), Helmut König (Tax, Dusseldorf), Jan Christian Mohrmann (Tax, Frankfurt), Dennis Grimmer, Vivienne Sulek (both Financial Due Diligence, both Dusseldorf).

Advisors to JUNIQE: Osborne Clarke (Nicolas Gabrysch, Alexandra Nautsch)

Media Contact
Frauke Reuther
Manager Kommunikation
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Dr. Sebastian Weller
Lawyer
ADVANT Beiten
+49 (211) 51 89 89 -134
Sebastian.Weller@advant-beiten.com

WPG is a leading provider of advanced mission-critical drive systems and services for off-highway and industrial applications, headquartered in Lohmar near Cologne, Germany. WPG is represented in 75 countries with components and drive systems for agricultural, industrial, construction and mining machinery and employs more than 2,200 people worldwide. 

The merger of Comer Industries, listed on the Borsa Italiana, with WPG will create one of the world's largest suppliers of drive solutions in the agricultural sector, with an expected combined turnover of one billion euros in 2021.

ADVANT Beiten supported the transaction, which was completed in December 2021, in particular by carrying out legal due diligence, conducting a clearing procedure under the German Foreign Trade and Payments Regulation (Außenwirtschaftsverordnung) and assisting with German and Russian antitrust clearance.

Adviser to Comer Industries: 
ADVANT Beiten: Dr Christian von Wistinghausen (Lead Partner in charge), Tassilo Klesen, Dr Patrick A. Hübner, Lelu Li, Olga Prokopyeva (all Corporate / M&A, Berlin), Dr Klaus Kemen, Robin Maletz (both Real Estate, Berlin), Katrin Lüdtke, (Public Sector, Munich), Michael Ziegler, Petra Fendt (both Banking/Finance & Capital Markets, Munich), Christoph Heinrich, Cathleen Laitenberger (both Antitrust Law, Munich), Uwe Wellmann (Antitrust Law, Berlin), Susanne Klein (IP/IT, Frankfurt), Dr Nicole Hirschvogel (IP/IT, Munich), Julia Alexandra Schütte (Employment & Labour, Berlin), Christian Freiherr von Buddenbrock (Employment & Labour, Dusseldorf), Julia Meler (Employment & Labour, Munich).

ADVANT Beiten, Moscow (Russia) (for regulatory clearances under Russian law): Vasily Ermolin

ADVANT Nctm, Milan (Italy), NOBILI RTZ Legal

Adviser to WPG: Freshfields Bruckhaus Deringer LLP, Milan (Italy)

Media Contact
Frauke Reuther
Manager Kommunikation
ADVANT Beiten
+49 (69) 75 60 95 - 570
frauke.reuther@advant-beiten.com

Dr. Christian von Wistinghausen
Lawyer
ADVANT Beiten
Tel.: +49 30 26471-351
Christian.Wistinghausen@advant-beiten.com

To date, the legal admissibility of crowdfunding and crowdfunding platforms has been governed exclusively by national law. In Germany, crowdfunding service providers often operated as financial investment brokers with a license pursuant to Section 34f of the German Industrial Code (Gewerbeordnung). In practice, in order not to trigger any licensing obligations under Section 32 of the German Banking Act (Kreditwesengesetz) with regard to the financed companies (project owners) and the financing investors due to the operation of banking business in the form of deposit or lending business, loans are usually brokered with qualified subordination clauses or under involvement of a so-called fronting bank to formally issue the loans. The former has the disadvantage that investors only receive subordinated claims, the latter is associated with additional costs at the expense of the crowdfunding service providers' margin or the investors' return.

The ECSP-Regulation for the first time defines EU-wide requirements for the provision of crowdfunding services, the organization, licensing and supervision of crowdfunding service providers, as well as for the operation of crowdfunding platforms.

This also means that crowdfunding service providers will require a license in accordance with the ECSP-Regulation in the future. In Germany, the Federal Financial Supervisory Authority (BaFin) is responsible for granting such licenses. Project owners and investors operating via a licensed crowdfunding platform are dispensed from the aforementioned licensing requirements of the German Banking Act (Article 1 (3) of the ECSP-Regulation).

In addition, the ECSP-Regulation introduces for the first time an "European passport" for crowdfunding services, by means of which crowdfunding service providers licensed in one member state may also provide their services in other EU member states without further permission, merely on the basis of a notification procedure (Art. 18 ECSP-Regulation).

Crowdfunding services that are provided to project owners that are consumers are excluded from the scope of the ECSP-Regulation as well as crowdfunding offers with a consideration of more than EUR 5 million over a period of 12 months. In these cases, the national provisions remain applicable.

The regulation is directly applicable from 10 November 2021, i.e. without transposition into German law. The transition period ends on 10November 2022.

Dr Christoph Schmitt

Joel F. Schaaf

Numerous companies in Germany are facing the question of whether they will survive the corona crisis. Due to the government-imposed lockdown, many stationary outlets, stores and restaurants are closed. Christmas business has been cancelled, carnival did not take place and what happens at Easter remains uncertain. The drop in sales is - without exaggeration - dramatic.

State aid does not suffice

To overcome this crisis, many of the affected companies have applied for state aid or intend to do so. However, the disbursement of these aids is proving more difficult than hoped. In fact, even the application process is very formalistic and complicated. Faced with the large number of applications, the authorities are simply overburden in processing. Companies often wait months for a decision on their application. Having become aware of this problem, the legislator has once again extended the suspension of the obligation to apply for insolvency. Until 30 April 2021, the following applies in principle: If a company affected by the corona crisis applies for state aid by the end of February 2021, which is suitable for eliminating the factual insolvency, the company does not have to file for insolvency despite the company's factual insolvency.

Nevertheless, it is already evident that many companies affected by the corona crisis will not receive any or sufficient state aid and will have to, and be able to, take care of their own rescue.

Protective shield procedure as a way out

One option is the so-called protective shield procedure. It allows companies that are threatened with insolvency and have a fundamentally functioning business model to reorganise themselves in self-management. The existing management remains fully authorised to act and has all the instruments of the German Insolvency Code at its disposal. This way, the protective shield protects against enforcement measures by creditors. Wages and salaries are paid by the Federal Employment Agency for three months and the hurdles for any necessary staff reductions are low.

Disadvantage: High costs

A serious hurdle to the implementation of such a protective shield procedure is the related costs. These costs result in particular from the high requirements for the preparation and implementation of the reorganisation concept on which the protective shield procedure is based. These costs must be paid out of the company's liquid assets. However, this is difficult if the company's cash has been exhausted due to the crisis and the company is only living off the current account. As soon as the banks learn of the protective shield procedure, they usually freeze the credit lines immediately.

Create reserves in credit accounts at an early stage

In this situation, companies are at an advantage if, in addition to their current accounts, they still have credit accounts with banks with which they have no credit relationship. A company threatened with insolvency can use these accounts to finance the protective shield procedure. In any case though, care must be taken to ensure that the use of these funds is in accordance with the company's financing agreements. Without a diligent examination of the relevant disposal restrictions in the loan agreements, the management otherwise puts itself at risk of personal liability towards the banks and possibly even criminal liability.

Conclusion

Corona means one thing above all: Uncertainty. Hence, it is all the more important for every company to act prudently in a future-oriented manner. In view of possible payment difficulties, the protective shield procedure should not be disregarded as a solution. Companies should ensure that they have this option and take the necessary measures.

Heinrich Meyer

Dr Moritz Handrup

According to Art. 42 MiFID II, investment firms without a licence or branch in an EU member state may only provide their services within the EU if the initiative for this comes exclusively from the client in question and is thus a so-called reverse solicitation. In ESMA's view, this is not the case if investment firms merely state in their general terms and conditions that they provide their services exclusively on the initiative of the client, but actually deviate from this. According to ESMA, irrespective of such contractual agreements, an exclusive initiative of the client should not automatically be assumed and, in this regard, refers to Recital (111) to MiFID II.

Investment firms operating in the EU without authorisation risk the initiation of criminal or administrative proceedings. If investors use the services of investment firms that are not duly authorised, they may lose the protection granted to them under EU rules, in particular the coverage provided by investor-compensation schemes under Directive 97/9/EC.

Dr. Christoph Schmitt

Joel F. Schaaf

Free Use of Funds

The advantage of this bond lies in its unbureaucratic handling, the free use of funds and the possibility of combining it with other funding measures. The extensive standardisation enables the Federal Ministry of Economic Affairs to make a rapid decision. In view of increasing processing figures and exhaustible budget funds, companies should nevertheless make the decision on placement at short notice. Especially since the bond must be issued by 31 December 2020.

The issuer can use the raised capital both for investment and for working capital financing. Thus, liquidity shortages, especially but not only due to corona, can be bridged. The bond guarantee is also not subject to any form of exclusivity. A combination with other support measures is certainly possible.

No Bank Auditing

An audit of the company by the main bank is not necessary. In practical terms, this means that companies that were denied access to previous corona aid will now be able to borrow on a state-guaranteed basis.

A disadvantage is the guarantee fee and the limitation to institutional investors. A guarantee fee must be paid for the guarantee. The amount of the fee depends on the remuneration that the issuing company would have to pay on the capital market without the guarantee of the WSF.

In addition, guarantees are only given for bonds that are exclusively aimed at subscription by institutional investors. However, this restriction is put into perspective in view of the expected high demand for state-guaranteed investment opportunities.

All in all, this offer of assistance represents a good opportunity for small and medium-sized enterprises to master the way out of the crisis by their own efforts. If you are interested in the subject and the structure of such alternative financing, please contact me by e-mail or call me: Maximilian.degenhart@bblaw.com, phone: 089-35065-1241.

Maximilian Degenhart

I. The early court rulings

The conflict between insurers on the one hand and the insured using class action law firms on the other has been swiftly brought before the courts. The first rulings were already issued as early as April 2020. All of the early decisions resulted from expedited proceedings (summary proceedings) which is why they should be evaluated with particular care. Furthermore, a cautious approach is necessary because the terms of business shutdown insurance contracts differ considerably and statements made in these rulings may not be easy to generalise.

As regards content, the early court decisions say different things. The Higher Regional Court of Hamm had to deal with insurance terms worded as follows. According to the terms, only diseases and pathogens "listed below (cf. Sections 6 and 7 of the German Infection Protection Act, IfSG)" were covered by the insurance whereas Covid-19 and Sars-Cov-2 were not mentioned. According to the interpretation of the Higher Regional Court of Hamm, the provision does not give rise to a liability of the insurance company. Despite the reference to the German Infection Protection Act in parentheses, there is no dynamic reference which would also include later amendments to the Infection Protection Act.

The Higher Regional Court of Mannheim on the other hand states in its decision that even a de facto shutdown of the business without an administrative act constitutes a shutdown within the meaning of the insurance conditions in individual cases. This statement may be applied to a large number of policies as the terms of the insurance generally refer to an "official measure" without restrictions, and the Coronavirus Regulations of the German federal states constitute official measures. It further argued that the coronavirus is a pathogen covered by insurance because the specific insurance terms did not contain a list of pathogens and merely referred to the Infection Protection Act.

The Regional Court of Bochum (4 O 215/20) had to decide on insurance terms which did not contain any reference to the German Infection Protection Act so that the question of a dynamic or static referral (as in the cases of the Higher Regional Court of Hamm or the Regional Court of Mannheim) did not arise at all. Because the coronavirus was not mentioned in the insurance policy, the Regional Court of Bochum denied an insurance coverage.
While each case is based on differently worded insurance policies, in all of the three cases the court decisions were not issued in normal civil proceedings but in expedited proceedings, i.e. seeking interim relief measures. Interim relief measures to enforce payment claims may only be applied in very exceptional cases - for example, in the case of an acute emergency or threat to the existence of the business (see the decision of the Regional Court of Heilbronn regarding the coronavirus pandemic of 29 April 2020, file ref. I 4 O 82/20).

Policyholders have not been able to prove such an exception in the above proceedings with the result that they lost the proceedings for procedural reasons, irrespective of the scope of the insurance coverage. The application was also rejected in the case negotiated before the Regional Court of Mannheim which in principle assumed that insurance coverage exists.

II. The Judgement by the Munich Regional Court

In contrast to the early rulings, we have now also seen judgements in regular civil proceedings, most notably a judgement by the Regional Court of Munich I. This case has raised public awareness and was prominently covered in the press because the insurer was sentenced to pay the damage for business interruption. The claimant, the leaseholder of a well-known Bavarian restaurant and beer garden, had only concluded the insurance contract in March 2020 after the insurance company had informed its brokers and the claimant that it would consider damages caused by the novel coronavirus as insured.

The court in Munich based its decision on two distinct grounds. The court held that in this case the coverage of damages caused by the coronavirus was individually agreed between the claimant and the insurer. This would already be sufficient to sentence the insurer to pay. However, the court also based the judgement on a separate line of reasoning, arguing that some of the clauses in the insurance contract are not transparent and hence are invalid.

While the first line of reasoning is a rather special circumstance, the second can be applied to a large number of cases because many insurance contracts contain similar clauses. However, it remains unclear whether this second line of reasoning would be upheld if this judgement was appealed. Even if it is, the appeal procedure might not lead to any clarification because the judgement could be upheld only based on the first reason.

III. Interim Conclusion

The cases of business shutdowns will continue to preoccupy those affected and keep the courts engaged for quite some time. Nevertheless, a first interim conclusion can be drawn.

1. It remains unchanged: Whether claims are covered by insurance in the coronavirus crisis must be assessed individually for each case. While in many cases it is possible to make a clear statement, a grey area remains which will keep courts mulling over the issue. Whenever there is such a grey area, a settlement is generally a good solution. Whether a settlement is a good or a bad compromise must also be weighed individually. For this purpose, economic considerations must be taken into account in addition to the prospects of success of legal proceedings.

2. Further court decisions will not be able to eliminate the grey area for business shutdown insurances any time soon. Firstly, courts only make statements for the individual case at hand and the specific terms of insurance. Secondly, different courts may assess the same contract differently.

3. Expedited proceedings are not promising for the enforcement of claims under business shutdown insurance policies in the coronavirus pandemic. An exception to this principle can hardly be justified taking into account the many different emergency aid programmes for shutdowns. As in all other legal disputes, the same applies to cases of business shutdowns in the coronavirus crisis: The best arguments are useless if the procedural enforcement is inadequate.

Dr Philipp Sahm

1. Delayed Reimbursement of Short-Time Allowances?

Or maybe not? Due to the large number of companies that have applied for or will apply for short-time allowances, there are fears that the approx. 600 branches of the Federal Employment Agency could be so overburdened in processing the applications that the short-time allowance will be paid only with a considerable delay. This would be a problem for companies as they usually advance the short-time allowance but currently do not make any turnover or do not get their invoices paid. It is true that the short-time allowance plan provides that the employment agencies initially only check the short-time allowance application for plausibility, and only months later carry out random detailed checks. These checks will then finally verify whether the employer has correctly calculated and applied for short-time allowance. This is to ensure that the employment agencies do not have to check for too long before the short-time allowance is paid out. Nevertheless, according to the law they must carry out this plausibility check before payment and may not simply "wave through" an application. Recording of applications and instructing the payments alone ‑ irrespective of any checks on the content ‑ will already take up a considerable amount of time.

Therefore, some fear that the short-time allowance will not be paid within 15 days of the application ‑ as envisaged by the responsible ministry ‑ but only after a few weeks or even months. This is too long for many companies. The situation is aggravated by the fact that for the month in which short-time work is in effect, the application for payment of the short-time allowance can only be made in the following month.

Unfortunately, there is still a lack of sufficient experience to verify or refute these fears. Most of the companies which have sent their employees into short-time work in response to the coronavirus did so in March of this year and were therefore only able to submit corresponding applications for short-time allowances at the beginning/middle of April. So it remains to be seen how quickly payments will actually be made. This may vary from case to case, and finally also depends on the respective branch office of the Employment Agency.

2. Financing of the Short-Time Allowance Compensation Claim by Main Bank?

For companies which are not willing or able to wait for the compensation payment of the short-time allowance by the Employment Agency, the question arises whether their main bank could refinance the short-time allowance already paid to employees. In principle, this should be possible if the main bank is secured accordingly. For this purpose, the short-time allowance compensation claim that the company has against the Employment Agency could be pledged or assigned as collateral to the main bank. This is legally possible and, in our opinion, does not require the express consent of the respective employee. Due to the payment of the short-time allowance, the employer has its own seizable claim against the Employment Agency under section 670 German Civil Code (BGB). However, the consent of the employees should be obtained if the main bank so requests (see Brand/Kühl SGB III 2018 section 108 margin no 7, 21). Due to the special provisions under insolvency law applicable until 30 September 2020, the claim for reimbursement pledged or assigned by way of security to the main bank would be insolvency-proof.

In view of the uncertainties that arise with regard to the correct calculation of the reimbursement claim against the Employment Agency, a security deduction may be made. The amount of such a deduction will depend on the complexity of the claims to be applied for (e.g. in the case of variable remuneration components). This way, however, it should be possible to have a substantial part of the short-time allowance reimbursement claim financed by the main bank.

Dr. Christof Aha

Dr. Daniel Hund

Heinrich Meyer

Frank R. Primozic

No standardised coverage

As already explained in an earlier blog post (see article “Insurance versus corona - when does a shutdown insurance pay”), the coverage of an insurance must be checked individually for each insurance contract since insurance conditions vary considerably. Whether coverage during the corona crisis exists in the individual case depends, in part, on matters of interpretation. Complicating matters further is the fact that, to date, there is no case law on this particular issue. Case law has merely established the general principle that insurance conditions must be assessed from the point of view of an average policyholder. Consequently, it depends on the understanding and the interests of a policyholder without special knowledge.

Insurers’ willingness to compromise

Against this background, insurers are now beginning to show a willingness to compromise. With the participation of the Bavarian Ministry of Economic Affairs, representatives of the business community and the insurance industry have recently developed a recommendation according to which insurance companies should pay between 10 and 15 percent of the otherwise customary daily rates for the duration of the shutdown. Several insurance companies have already stated that they intend to follow this recommendation.

The press release of the Bavarian State Ministry on this agreement can be found here: Link.

Legal qualification

Legally, this is a settlement, since both parties are making concessions to eliminate uncertainties about the contractual relationship. It is likely that, in the cases in question, the insurance companies will be providing extra-mandatory benefits which they are not obliged to provide pursuant to the wording of the insurance contracts. On the other hand, policyholders will have to waive their right to seek judicial clarification as to whether full insurance coverage does exist after all. In return, they will receive financial support more quickly. In the case of shutdown insurances during the corona crisis, an early compromise could prevent the occurrence of a large number of conflicts.

Conflicts cannot always be avoided – we provide advice on all questions of judicial and extrajudicial conflict resolution.

Dr. Philipp Sahm
(Philipp.Sahm@bblaw.com)

1. Shutdown insurances

Shutdown insurances belong to the so-called loss of earnings insurances which offer protection in case of business interruptions. If operations are at a standstill, costs continue to arise because, among other things, rents, suppliers and staff have to be paid without any income being generated. These costs and the loss of profit are only partially covered by other insurance companies, so that loss of earnings policies can be taken out for this purpose. Such insurance covers the financial consequences of a shutdown or disrupted operation, for example after water damage or fire (fire operation interruption insurance). In the Corona crisis, special attention is paid to the shutdown insurance. Among other things, it protects companies if operations are interrupted for reasons of infection protection. A typical application for such a shutdown of operations is the discovery of salmonella at a food manufacturer or the closure of a care facility due to a multi-resistant infectious agent.

2. When does a shutdown insurance pay?

Companies affected by the measures to contain the coronavirus are now wondering whether a shutdown insurance policy would also cover the damage currently being caused in the fight against the corona pandemic.

As a matter of principle, a shutdown insurance pays in case of official measures on the basis of the Infection Protection Act. In the event of shutdown of operations, three preconditions must be met:

1. Shutdown of the insured operation,
2. on the basis of the Infection Protection Act,
3. due to the occurrence of a notifiable infectious agent.

3. Insurance coverage in the corona crisis?

Whether shutdown insurances in the current corona crisis are liable to payment must be checked individually for each insurance contract. It is true that the three conditions mentioned above all seem to be fulfilled: the current legal regulations force many businesses (such as cultural institutions, catering and retail businesses) to shut down (1). It is also a measure based on the Infection Protection Act (2) because under the Infection Protection Act the state governments are empowered to issue ordinances to combat communicable diseases (section 32 of the Infection Protection Act). Furthermore, the coronavirus is also a notifiable infectious agent (3). But the devil is in the details: Insurance cover is often not provided because the insurance policy does not cover every infectious agent that must be notified.

The insurance conditions usually contain a list of specified diseases and pathogenic agents. In all probability, the new coronavirus (2019-nCoV) will not be included in this list as it has only been known for a short time. Whether the insurance cover applies only to the diseases and infectious agents mentioned in the list or also to new diseases and pathogens must be analysed individually. For this purpose, the often different formulations of the insurance conditions must be examined closely. In some cases, the insurance only covers the diseases and pathogenic agents listed in the insurance conditions. In other cases, however, a reference to the Infection Protection Act is reasonable if the list of insurance conditions refers to the Infection Protection Act. Often it then corresponds to the version of the Infection Protection Act (section 6 and section 7) which was valid at the time of the conclusion of the contract. In these cases it depends on whether the insurance contracts contain a dynamic reference to the Infection Protection Act. Only then does the insurance cover extend to all notifiable diseases and infectious agents. This decision must be made individually for each policy.

If insurance cover exists in principle, the insurance has to be taken out only if the policyholders have fulfilled their duties of cooperation and their obligations. The insurance cover may no longer apply if the policyholder does not show proper conduct after the occurrence of an insured event and informs the insurer too late.

We therefore recommend taking a look at your insurance conditions. Please feel free to contact us.

Dr Philipp Sahm
(Lawyer)