The legislative amendment which has now been realized stems from an initiative of various trade associations and was even the subject matter of the coalition agreement. The various draft bills and government drafts on the reform of the law on insolvency rescission had been revised repeatedly in the past and corrected due to concerns of legal and fiscal policy. The “major reform” of the right of appeal which was initially sought by the federal government has been significantly scaled down in the meantime, in particular fuelled by the concern that an excessive curtailment of the right of appeal would re-establish the previous situation at the time of the bankruptcy act (in contrast to the bankruptcy act, an additional 25% of proceedings are opened pursuant to the Insolvency Code).

The Changes

The major changes affect the temporal and material scope of application of Section 133 InsO, including a special regulation for payment plan agreements, the new regulation of the cash transaction privilege and the abolishment of interest payments as of the opening of the proceedings. As we already reported, the legislator did not pursue any further the abolishment of the contestability of enforcement measures in the last three months before filing for insolvency. In this regard, experts had warned about a “tax authority” privilege, since the financial administration in particular (and the social insurance agencies) can themselves produce the titles which are necessary for enforcement measures. The major new regulations are: 

• In the context of Vorsatzanfechtung (challenging legal transactions of the debtor which the latter carried out with the intent to disadvantage creditors), the potential period of appeal was reduced from 10 to 4 years insofar as “satisfaction was granted” as a result of the challengeable act, i.e. contract fulfilment, e.g. by payment. 
• Pursuant to the new law, the new regulation only takes effect when the future insolvency debtor is insolvent, provided that the performance in return is “congruent”, i.e. the creditor has a claim for this performance in the agreed manner. Previously, it was possible to carry out an appeal already in the phase of so-called “imminent insolvency”, which is now only possible in the case of “incongruent” services.
• If creditors have agreed deferred terms with the debtors (e.g. payment plan agreement), it is (refutably) assumed that the creditor was not aware of the insolvency. 
• The cash transaction privilege of Section 142 InsO is extended insofar as now an appeal of the payments made in this respect is only possible if the debtor acted “unfairly”.
• Interest on the claim for appeal is linked to the statutory default regulations, i.e. only after the administrator has enforced the claim and established creditor’s default, the claim is subject to interest. Previously, the claim was subject to interest as of the opening of the proceedings, irrespective of the time of enforcement. 
• In comparison to the previous drafts, what is new is that interest is also cut for legacy proceedings. The interest term is suspended when the new law enters into force and only starts to run again when the claims are enforced (interest claims accruing until the law enters into force remain in place). 
• In addition to a codification of the case law of the federal labour court, employees are now also expressly protected in the event of so-called third party payments where another company than the employer pays the salary (e.g. in a corporation). 
• However, the new provisions for appeal only apply for proceedings which are opened after the provisions enter into force.

Practical Information

In our opinion, the major added value of this reform (in addition to the abolition of the interest regulation) for the creditors will be that the changes regarding the applicability of the cash transaction privilege now offer creditors the option to enter into agreements which cannot be challenged with debtors who are discernibly insolvent. Whether or not the further regulations are in fact a “milestone” as it is repeatedly stated by creditor associations, remains to be seen. Even if the reform has removed the most important injustices, creditors would do well not to trust too naively such statements by their associations. We take the view that the former legislation will continue to apply for a variety of scenarios.

Ansgar Hain, Attorney at Law and Insolvency Administrator
Berlin