BGH: Reverse gear in the “dawn of a new era”?

With a view to a recent decision on the law of insolvency avoidance, the question arises as to whether the BGH has just shifted into reverse gear to the “new era” it itself initiated in 2021 (see here for more details).

Facts of the case

In the facts underlying this decision, the debtor purchased shares in a company that owned a property in Berlin. The later insolvent debtor intended to divide the house into condominiums and sell the flats at a profit. The subsequent opposing party to the avoidance action granted the debtor loans to acquire the shares. The debtor was unable to repay the loan (in instalments) on time. Some payments were made after reminders, others by way of seizure. Then the debtor fell into insolvency and the insolvency administrator in the end successfully sued the lender for the return of the repaid loan instalments.

Legal assessment

The BGH initially assumes under appeal law that the debtor acted with intent to disadvantage and that the lender was aware of the debtor’s at least imminent insolvency and the disadvantage to creditors, meaning that the presumption of § 133 (1) sentence 2 InsO applies. “If the conditions of the presumption are met, the opposing party must therefore provide evidence to the contrary. He must demonstrate and prove that he was not aware of the debtor’s intention to disadvantage“, the BGH continued (para. 10 f.). Accordingly, the debtor, who is insolvent at the relevant time pursuant to § 140 InsO, only acts with intent to prejudice creditors when granting “congruent cover” (“kongruente Deckung“) if he at least accepts that he will not be able to satisfy his other creditors in the future in the time available. Accordingly, the opposing party has no knowledge of the debtor’s intention to disadvantage if it can assume that the other creditors will be satisfied in the time available. This must be an objectively justified assumption that is based on sufficient facts; a mere hope that the other creditors will be satisfied is not suitable to rebut the presumption of knowledge of the intention to disadvantage. The BGH assumes this “sufficient factual basis” with reference to previous decisions, for example in the case of a “serious but ultimately failed attempt at reorganisation” (see here and here).

Remarkably, the BGH then lists a second case group of “sufficient factual basis“, according to which the “cause of the debtor’s crisis that led to its insolvencymaybe temporary”, which in the opinion of the BGH could be the case, for example, if a sole trader or a freelancer falls ill or if the crisis is caused by external circumstances, which could be “a temporary (e.g. pandemic-related) closure of business operations by the competent authority“. “In such cases, no attempt at reorganisation is required, but rather a concept that ensures economic survival for the duration of the crisis and can, for example, lie in a standstill agreement with the debtor’s creditors.” Even if the crisis is not only temporary, the debtor does not necessarily have to strive for a sustainable reorganisation; rather, it is sufficient for the debtor to be content with winding up the company outside of insolvency proceedings if “from anex ante perspective, thisleadsto the satisfaction of its creditors within the time available for this” (para. 18).

In the view of the BGH (para. 19), the creditor / potential opposing party is “generally” dependent on information from the debtor in order to be able to assess whether the other creditors can be expected to be satisfied within the time available. According to the BGH, the need for information will be all the greater the further away the opposing party is from the relevant events in the debtor company. If the opposing party does not obtain the necessary information, it is acting with a risk of avoidance. In the case under discussion, the relevant information available to the lender was limited to an email correspondence from which the debtor’s management hoped that a sale of shares would be successful.

Conclusion: In the decision from October 2023 commented on here, the BGH dealt with the requirements for rebutting the presumption rule of § 133 (1) sentence 2 InsO. In contrast, in the decisions that led to the assumption of a “dawn of a new era” at the BGH (see here (2021) and here (2022)), it dealt with the constituent elements of § 133 (1) sentence 1 InsO. I had already pointed this out in the commentary on the 2021 decision, but hoped that the somewhat creditor-friendly case law would have a “radiating effect” on the presumption in sentence 2. The BGH has now put halt to this hope. While the BGH still ruled in 2022:

However, the opposing party, who only knows the debtor’s payment behaviour towards him, generally lacks the knowledge required to assess the impending insolvency”,

it very quickly disregards this point in the current decision and states that the opposing party (only) does not have knowledge of the debtor’s intention to disadvantage if it can assume that the other creditors will be satisfied in the time available. In other words, the BGH states here – probably correctly in the specific facts of the case – that the opposing party was aware of the “circumstances necessary to assess the impending insolvency“.

From the creditor’s point of view, however, it will now have to be assumed – until a possibly clarifying decision by the BGH – that the creditor has “knowledge that is necessary to assess the impending insolvency” , especially in the case of (documented) discussions between the debtor and creditor. Accordingly, from the creditor’s point of view, the “sufficient factual basis” required by the BGH will have to be created – for example in the form of an IBR, a standstill agreement supported by the express determination of the temporary nature of the illiquidity (for example due to illness or business closure during a pandemic), or a liquidation plan – in order to ensure as far as possible that the presumption effect of § 133 (1) sentence 2 InsO can be rebutted.

In view of this interpretation of the decision, it is questionable to what extent the criteria differentiated by the BGH in the previous decisions for the existence of the requirements of sentence 1 are still relevant at all from the creditor’s perspective. At least in the specific situation – debtor does not pay or is slow to pay – this should only be the case if the creditor does not enter into discussions with the debtor but simply tacitly accepts any late payments. As soon as he enters into discussions, is confronted by the debtor with his payment problems or enforces the claim, he will have to be advised fto request a restructuring report, a liquidation plan or at least a standstill agreement (in the case of only temporary suspension of payments) in order to minimise the risk of avoidance.

It appears that the BGH is replacing the previous “chain presumption rule” with a detailed review process, which, however, cannot take place in the specified form in the specific situation or depends on coincidences. For example, if the debtor pays late several times, but without further discussions with the creditor, the payment should not be contestable, as the creditor has no knowledge of the debtor’s other payment behaviour. However, if the parties discuss the payment behaviour, there is a risk of avoidance if the debtor cannot be forced to provide extensive documentation on the (sustainable) restructuring, liquidation with payment of all creditors or the short-term nature of his suspension of payments. Accordingly, little remains of the previous “dawn of a new era” in the end. The dogmatics of the standard in § 133 InsO are in favour of the BGH, that much must be acknowledged. The only question is whether this still achieves the objectives of the 2017 reform of avoidance law (see here) – i.e. relieving creditors of avoidance risks.

BGH, Urt. v. 26. Oktober 2023 – IX ZR 112/22 (in German)

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