German regulations for insolvency proceedings of group companies (Konzerninsolvenzrecht)

Regulations

On 21 April 2018, new rules regarding the handling of "group" insolvency proceedings of companies in Germany became effective.

The regulations aimed at better coordination between separate insolvency proceedings, which must be implemented for every company within a group under German insolvency rulings. Prior to the regulations becoming effective, coordination was quite difficult, due to the separate responsibilities of different courts and insolvency administrators.

Amendments to the German Insolvency Act

Sec. 3a of the German Insolvency Act (Insolvenzordnung (InsO)), as implemented by the regulations, allows consolidation of insolvency proceedings of the individual companies of the group in one competent central court (Koordinationsgericht).

To achieve the objective of improving coordination between individual proceedings, Sec. 56b InsO creates the opportunity of having just one administrator. Otherwise the administrators, in relation to the assets of group entities, are required to cooperate with each other, Sec. 269a InsO.

The same also applies to committees of creditors (Gläubigerausschuss), Sec. 269c InsO. To ensure efficient coordination, the central court can appoint a proceedings-coordinator (Verfahrenskoordinator), Sec. 269d et seq. InsO.

Comment

The regulations are similar to those of the European Union (Regulation on insolvency proceedings (EU) 2015/848) which set rules for better coordination in European group insolvency proceedings.

Overall, the regulations do not offer the opportunity to conduct only one insolvency proceeding for the whole group. However, there are some new tools that could represent the beginning of a genuine merger of insolvency proceedings of companies within one group. With a view to the new position of a proceedings-coordinator, a potential business area may emerge.