OLG Frankfurt on the avoidance of advisor’s fees

With its judgment of 19 October 2016, the OLG Frankfurt (Frankfurt Higher Regional Court) upheld a ruling by the LG Frankfurt am Main (Frankfurt Lower Regional Court) from 2015 on the avoidance of advisors’ fees in the insolvency of the photovoltaic company Q-Cells.

The judgment of the LG Frankfurt had already caused a stir (see here and here (in German)), also because it highlighted the practical problems sorrounding the prognosis period for “imminent illiquidity” according to § 18 InsO (“Insolvenzordnung”, the German Insolvency Act) and furthermore raised the barrier for the success probability of reorganization concepts by (wrongly) mixing two decisions of the German Federal Court of Justice (“Bundesgerichtshof”, BGH).

The decision initially refers to the recently tightened BGH-jurisprudence (2016), stating that the knowledge of the debtor’s imminent illiquidity is already a strong circumstantial evidence of the debtor’s intention to discrimnate  against the creditors. The respondent in the underlying case could not invalidate this circumstantial evidence, since he could not present circumstantial evidence to the contrary, e.g. in the form of a conclusive and serious reorganization concept.

The circumstantial evidence related to the knowledge of imminent illiquidity may be excluded if the contested transaction was part of a serious, even if ultimately failed reorganization concept on which the debtor could seriously rely and which at least had reached an early stage of execution.

In the following, however, the OLG Frankfurt then follows the decision of the LG and takes over the faulty confusion of two BGH judgments by stating that the debtor must have the “sure expectation that the restructuring at the respective time of the transaction would be successfully completed in the near future.” With this citing of two different BGH-judgements pertaining to two totally different situations, the OLG continues the error of the previous instance without any substantive discussion.

The OLG  also concludes that the legal opinion of another branch of the Frankfurt lower regional courts (which was ultimately rejected by the BGH), in the question of the applicability of the SchVG (the German Bond Act), which was decisive for the execution of the reorganization concept, should have been considered an insurmountable legal obstacle to the successful implementation of the reorganization concept.

Finally, the OLG simply pushes aside the (legitimate) objection of the respondent, according to which the transaction was based on a “bargain-like situation”, with the argument that the exception of § 142 InsO does not apply to § 133 InsO. Although the OLG Frankfurt actually has the text of the provision on its side, it overlooks the – also questionable – jurisprudence of theBGH (2015), according to which an avoidance according to § 133 InsO may be excluded if the debtor has made a transaction which constitutes an indispensable contribution to the continuation of his business and which generally benefits the creditors,  ie an exchange of services similar to a cash-transaction takes place (precisely the “bargain-like situation”). Even if in the present case there are doubts about a “indispensable consideration for the continuation of his business”, the simple non-consideration of the OLG Frankfurt of this well-known BGH’s legal figure is rather astonishing.

Overall, this decision of the OLG Frankfurt is quite questionable because of the deficiencies mentioned. After the entry into force of the reform of the avoidance provisions at the beginning of April 2017 (see also here), the case-law in this particular field could relax again so that the decision could be “booked” as a (regrettable) individual case. However, this case-law, even if it refers to the avoidance of advisor’s fees at first sight – if upheld by the BGH – is likely to have far-reaching implications for other areas, in particular the issue of liability for late filing for insolvency. Thus the further appeal of the case also requires careful observation.

OLG Frankfurt am Main, judgement of 19.10.2016 – 19 U 102/15

BGH, judgement of 21.01.2016 – IX ZR 84/13

BGHjudgement of 17.12.2015 – IX ZR 61/14

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