The German Federal Court (BGH) has confirmed that section 166 of the German Insolvency Code (InsO) does not provide the administrator with a right to use or realise secured assets for the benefit of the insolvency estate other than movable assets or claims assigned by way of security.

Background

Under section 166 InsO an insolvency administrator may realise a movable asset in which a right to separate satisfaction exists if it is in the administrator's possession. The same applies to claims assigned by way of security. 

Whether the insolvency administrator´s right of realisation under section 166 InsO can be applied by analogy to other rights such as pledged shares or pledged or assigned trademark rights has long been in dispute under German insolvency law.

Decision

The BGH ruled that the insolvency administrator’s right of realisation pursuant to section 166 InsO does not extend to other rights generally as there is no unplanned regulatory gap which is a prerequisite for such an application of the provision. 

Key takeaways

• The BGH’s ruling provides legal clarity and certainty. This is not only important in insolvency proceedings, but also in collateral valuation, restructuring planning and pre-insolvency contract drafting. 
• The administrator can only realise other rights and claim renumeration for this if the secured creditors voluntarily agree to this by completing a realisation agreement. 

Find out more

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.

BGH, Urteil vom, 27 October 2022,  IX ZR 145/21