Insolvency Avoidance Claims

Definition: When Does Prejudice to Creditors Exist?

Prejudice to creditors exists where an impugned legal act either:

• Increases the liabilities (more debts), OR
• Reduces the assets (less property)

…and thereby creditors’ access to the debtor’s assets is:

• Frustrated (made impossible),
• Impeded (made more difficult),
• Jeopardised (called into question), or
• Delayed (postponed in time)

The BGH Line on Prejudice to Creditors (2024)

BGH ZRI 2024, 58 – Current legal position:

Prejudice to creditors is exceptionally absent only where the insolvency estate without the avoidance action is sufficient to satisfy all insolvency creditors in full.

Practical consequences:

• The insolvency administrator need not prove that individual creditors were prejudiced
• It is sufficient that the prospects of satisfaction were worsened
• Prima facie evidence: Prejudice is presumed in favour of the administrator
• The avoidance defendant (usually the preferred creditor) must prove that the total estate is nonetheless sufficient

Critical question for avoidance defendants:
Can it be demonstrated that the insolvency estate even without the impugned payment, at the time of the decision on the avoidance claim, can still satisfy all outstanding creditor claims?

This is practically almost impossible to prove, meaning the prima facie evidence is virtually irrefutable in practice.

§ 133 para. 1 InsO: Wording and Basic Provision

“A legal act is voidable that the debtor carried out in the last ten years before the application to open insolvency proceedings or after such application with the intent to prejudice creditors, if the other party at the time of the act was aware of the debtor’s intent.”

The four requirements:

• Legal act: Any payment, provision of security, transfer of assets – Low difficulty
• Ten-year period: The longest of all avoidance periods! – Low (long period)
• Debtor’s intent to prejudice: Debtor must know they are prejudicing creditors – VERY DIFFICULT to prove!
• Creditor’s knowledge: Creditor must know of the intent – VERY DIFFICULT to prove!

Practical significance of the 10-year period:
Enables avoidance of payments made up to 10 years before the insolvency application. Payments after filing of the application are also voidable (practically irrelevant). First hurdle: the limitation of the underlying claim can make avoidance practically impossible.

The “Floodgates” and the Reorientation: BGH ZRI 2021, 645

Historical development:
BGH ZIP 2006, 1261 (the so-called “floodgates decision”): The BGH developed a generous cascade of presumptions, leading to a massive expansion of intentional avoidance actions. Problem: almost all payments during crisis phases became voidable, creating massive legal uncertainty.

Reorientation (BGH ZRI 2021, 645 of 06.05.2021) – Landmark decision:
The BGH has significantly tightened the requirements:

• The debtor’s intent to prejudice is NO LONGER to be presumed
• The insolvency administrator must provide full proof
• It is not sufficient that the debtor was insolvent
• The debtor must have known or accepted that they would also be unable to pay in the future (BGHZ 230, 28)
• Insolvency alone is not sufficient. What matters is the extent of the liquidity gap:
  – A small gap (< 10%) does not indicate intent
  – A large gap (> 20–30%) does indicate intent
• Decisive: The debtor must have recognised the hopelessness of the situation

Exceptions for restructuring attempts:
A genuine restructuring attempt can excuse the intent to prejudice. The debtor may rely on external restructuring advisers (BGH ZRI 2022, 267).

Practical consequence: Intentional avoidance has become considerably more difficult, but remains the most dangerous avoidance provision.

The Role of the Liquidity Gap and Payment Default

BGH ZRI 2022, 267 – Case groups of indicators of intent to prejudice:

*Particularly in cases of extended payment delays or refusal to file for insolvency.

Additional indicators of intent to prejudice (BGH ZRI 2022, 267; BGH ZIP 2024, 1089):
Non-payment of wages, social security contributions, taxes; requests for deferral of not-yet-due liabilities; operating on the economic brink; dishonoured cheques; high liabilities (e.g. tax office debts > EUR 300,000) not settled by the time insolvency is opened; suspension of payments under § 17 para. 2 InsO (no payment for 3 weeks).

The Presumption of § 133 para. 1 sentence 2 InsO – Creditor’s Knowledge

Wording:
“This knowledge is presumed if the other party knew that the debtor’s insolvency was imminent and that the act prejudiced creditors.”

BGH ZRI 2023, 301 – Clarification on the presumption:
The presumption requirements are unaffected by the reorientation. The presumption is not subsidiary – it can be pursued in parallel with full proof. The avoidance defendant can only rebut the presumption by full proof to the contrary (BGH ZRI 2024, 64).

What must the creditor have known?
The debtor’s imminent insolvency; that they are being preferred (other creditors are not being paid).

Special Case: Inadequate Restructuring Attempts – Case Group 2

BGH ZRI 2022, 267 – Exception without intent to prejudice:
If the debtor has undertaken a restructuring attempt, intent to prejudice is not to be assumed WHERE:
– A professionally prepared restructuring concept exists (e.g. IDW S 6 report)
– Concrete measures have been implemented
– External reputable advisers were involved
– Realistic prospects of success existed

EXCEPTIONS: Inadequate restructuring attempt, delay in filing for insolvency, preferential treatment of related parties.

Practical tip for managing directors: Document every restructuring attempt in writing and in detail. External advisers significantly reduce the risk of accusations (BGH ZRI 2022, 267).

The 2017 Reform: Paradigm Shift in the Cash Transaction Privilege

Previous legal position (§ 142 I InsO old version, before 05.04.2017):

• Cash transactions were difficult to avoid
• Requirement: Immediate equivalence

New legal position (§ 142 I InsO new version, from 05.04.2017):

• Rule-exception relationship reversed!
• Cash transactions are in principle protected (safe harbour)
• Exception: Recognised dishonest conduct by the debtor

§ 142 para. 1 InsO – The New Cash Transaction Privilege

A performance by the debtor for which an equivalent counter-performance immediately enters their assets is only voidable if the requirements of § 133 paras. 1 to 3 are met and the other party recognised that the debtor was acting dishonestly.

Practical significance:

• Normal transactions (purchase against payment, delivery against invoice) are in principle safe from avoidance
• Avoidance is only possible if dishonesty was recognised
• This is a significantly higher hurdle than the previous legal position

What is a Cash Transaction? § 142 para. 2 InsO

§ 142 para. 2 sentence 1 InsO:
The exchange is immediate if, given the nature of the exchanged performances and taking into account the customs of commercial dealings, it takes place within a close temporal connection.

The “30-day case law” (BGH ZInsO 2008, 101):
For fees, commissions and services, a cash transaction is only to be assumed if:

• The service is invoiced and paid within 30 days
• OR an advance payment is consumed within 30 days

General rule for other commercial relationships:

• Delivery and payment within a few days = cash transaction
• Payment within 14 days of delivery = cash transaction (commercially customary)
• Payment after 30 days = borderline case (depending on industry)
• Payment after 60+ days = not a cash transaction (granting of credit)

When Does “Dishonest Conduct” Exist? BGH ZRI 2025, 73

Definition of dishonest conduct:
A debtor acts dishonestly if the cash transaction serves or leads to the deliberate harm of other creditors or to the preference of one creditor over others.

Examples of dishonest conduct (BGH ZRI 2025, 73):

1. Squandering of assets for worthless or pointless services
2. Payments immediately prior to an intended insolvency filing
3. Payments to dissuade creditors from filing for insolvency (delaying tactics)
4. Transfer of the last remaining assets to individual creditors
5. Inadequate restructuring attempt with deliberate preferential treatment
6. Preferential treatment of related parties (shareholders, managing directors, family)

No dishonesty where (BGH ZRI 2025, 73):

• The company continues to make losses
• Normal commercial transactions even during crisis phases
• Breach of § 15a or § 15b InsO alone – this is not a sufficient indicator of dishonesty

Practical consequence for buyers in a cash transaction:
Anyone who buys and pays for goods during a crisis is in principle protected from avoidance – unless the seller acts with recognised dishonesty (e.g. squandering, last remaining assets).

Why Is § 135 InsO So Dangerous?

• Objective avoidance provision (no intent or knowledge required!)
• Long avoidance periods (10 years for security interests, 1 year for repayments)
• Subordinated claims – the shareholder cannot profit
• No barrier contracts possible (shareholder loans cannot be contractually protected)

§ 135 para. 1 No. 2 InsO – Repayment of Shareholder Loans

A legal act is voidable that grants satisfaction of a shareholder’s claim for repayment of a loan or an equivalent claim, if the act was carried out in the last year before the opening application or after such application.

The four requirements:

What Are “Equivalent Claims” under § 138 para. 2 InsO?

The scope of § 135 InsO also extends to “equivalent third parties”:

Vertically connected third parties:

• A third party holds an interest via multiple group levels (e.g. G holds 15% in intermediate company Z, which holds 50% in the debtor)
• Even small shareholdings > 10% can lead to equivalence

Horizontally connected third parties:

• A shareholder holds a material interest in several companies (e.g. a group company that grants a loan)
• The shareholding must enable “controlling influence” over the granting of the loan

Trust arrangements:

• A beneficiary on whose behalf a trustee holds shares is treated as a shareholder
• Loans for the account of others (trusts) also fall within this scope

BGH ZIP 2024, 2418 – Important clarification: Equivalent third parties may include the group companies themselves, but not their shareholders – even if these are “materially” involved in the group company.

The Restructuring Privilege – § 39 para. 4 InsO

The safety valve for restructuring loans:
If a creditor acquires shares in a company in imminent or actual insolvency or in over-indebtedness for the purpose of its restructuring, this does not lead to the application of § 39 para. 1 No. 5 to their claims from existing or newly granted loans until sustainable restructuring has been achieved.

Practical significance:

• An investor who provides funds for restructuring does not become subordinated
• The restructuring investor’s loan is NOT subject to avoidance
• This is the only genuine escape route from § 135 InsO

Requirements pursuant to BGH ZIP 2006, 279:
The restructuring purpose requires:

1. Objective viability of the company for restructuring
2. Restructuring concept with realistic prospects of success
3. Restructuring within a foreseeable time frame (not: years)
4. Concrete implementation of the measures

Problem: The restructuring privilege cannot be granted retrospectively – it must have been intended at the time of granting the loan.

The Small Shareholder Privilege – § 39 para. 5 InsO

The genuine exception from subordination:
Para. 1 No. 5 InsO does not apply to a non-managing shareholder of a company who holds ten percent or less of the nominal capital.

BGH ZRI 2023, 292 – Important clarification:

• Even a shareholding of exactly 10% falls within the privilege
• This is NOT a drafting error by the legislator
• The passive minority is protected (not: active management)

Conditions for the privilege:

1. Non-managing (no employment relationship as managing director)
2. Shareholding ≤ 10%
3. No coordinated external financing (otherwise: dissolution of the privilege under § 39 para. 4 InsO)

Trap: Coordinated external financing even outside the one-year period can remove the privilege if it amounts to an assumption of entrepreneurial responsibility (BGH ZRI 2023, 292).

Avoidance of Lease Agreements under § 135 InsO and § 133 InsO

BGH ZIP 2015, 589 – Clarification:
Lease agreements and rental payments are NOT directly covered by § 135 para. 1 No. 2 InsO (unlike shareholder loans).

However: Avoidance is possible under:

1. § 135 para. 1 No. 2 InsO in the case of de facto deferral (debtor does not pay, landlord accepts the delay)
2. § 133 para. 4 InsO if the lease agreement was concluded within the last two years before the filing (incongruent cover)

Special feature: Compensation claim under § 135 para. 3 sentence 2 InsO
The use fee is calculated on the basis of the average amount paid in the last year before the insolvency application – not opening (drafting error!) – that is safe from avoidance (BGH ZIP 2015, 589).

§ 15a InsO – Wording

Managing directors of a limited liability company or comparable company who recognise, or negligently fail to recognise, insolvency or over-indebtedness must file for insolvency without culpable delay, but no later than three weeks after the onset of insolvency.

The four elements of the criminal offence:

§ 15b InsO – The Contested Provision

Managing directors are liable for payments from company assets after the onset of insolvency, unless the payment is compatible with the diligence of a prudent and conscientious manager.

What is a “payment” within the meaning of § 15b InsO?

• Any depletion of the estate (outflow of funds without counter-performance)
• E.g.: salary, interest on loans, trade payables, repayment of shareholder loans
• Not: Passive exchange events (e.g. mere drawing down of credit lines)

Diligence Criteria under § 15b para. 2 InsO

A payment is permissible if two conditions are met:

1. Payments are made in the ordinary course of business (normal operating activity)
2. Management has conscientiously pursued measures to remedy insolvency or to prepare the insolvency filing

Practical examples:

Permissible payments:

• Wage payments to employees (required for ongoing operating activity)
• Procurement of materials (necessary for fulfilment of orders)
• Rent and ancillary costs (business continuation impossible without)

Impermissible payments (typically):

• Repayment of shareholder loans
• Bonuses and profit shares for managing directors
• Capital repayments to shareholders
• Litigation costs without a restructuring connection

Emergency Management After Expiry of the Filing Deadline

Critical rule (§ 15b para. 3 InsO):
After expiry of the 3-week period (§ 15a InsO), subsequent payments are as a rule no longer compatible with the diligence of a prudent and conscientious manager, unless:

• They constitute emergency management to prepare the insolvency filing (e.g. final necessary payments, wage payments for operational stability)

Practical consequence: A managing director who continues ordinary business beyond the filing deadline is liable for practically every payment.

The Enforcement Bar under § 93 InsO – Protection and Bar Combined

§ 93 InsO – The Central Framework for Shareholder Liability:
In insolvency proceedings concerning the assets of a partnership or limited partnership, the personal liability of a partner for obligations of the partnership may only be asserted by the insolvency administrator.

Dual effect of § 93 InsO:

1. Bar effect: The company creditor cannot directly pursue the shareholder
2. Authorisation effect: The insolvency administrator receives exclusive authority to assert the claim

Exceptions to the bar effect:

• Not covered: Liability from guarantee, surety, assumption of debt
• Not covered: Tax liability (§ 34 AO, § 69 AO)
• Not covered: Tortious liability (§ 826 BGB)
• Not covered: Liability based on appearance (where shareholder acted as contracting party)

Liability for Insolvency Proceedings Costs (New BGH Line)

BGH II ZR 69/22 (21.11.2023) – Cost liability of shareholders:
A personally liable partner of a partnership or GmbH & Co. KG is regularly liable for:

• Court costs of the insolvency proceedings (§ 54 No. 1 InsO)
• Remuneration and expenses of the insolvency administrator (§ 54 No. 2 InsO)

These costs are not insolvency claims but estate liabilities that the insolvency administrator can assert directly against the shareholders.