The continuation prognosis – always a popular topic of discussion

In two recent decisions, the second civil senate of the German Federal Supreme Court (Bundesgerichtshof, BGH) and the Higher Regional Court of Düsseldorf (OLG Düsseldorf) once again deal with the question of which criteria are to be applied for a positive continuation prognosis (“Fortbestehensprognose“) in the context of the over-indebtedness test according to § 19 (2) InsO. It is interesting to look at both decisions because they are diametrically opposed in essence, but also because they provide a good illustration of the standards for the monitoring and planning obligations of the management, not only of start-ups.

The decision of the BGH

In its ruling of 13 July 2021 – which primarily deals with the decision as to whether and to what extent certain debt collection services violate the German Legal Services Act – the BGH’s second civil senate took the opportunity to comment in great detail, starting at para 65 of the judgement, on the question of when a so-called “soft” letter of comfort is to be taken into account in the preparation of a going concern prognosis. One speaks of a soft letter of comfort if the legal effect of the declaration of the patron (often the parent company in a group) vis-à-vis the recipient of the declaration (usually the subsidiary) is not intended to be binding, i.e. no (enforceable) legal claim can be derived from it (see on the “hard” letter of comfort here).

The BGH ruled as follows:

“The consideration of any financing contributions by third parties within the framework of the income and financial planning underlying the continuation prognosis [does] not necessarily require that these are legally secured or that a legally binding assurance is given.”

“Rather, if the financing of the reorganisation of a company in crisis depends on the reorganisation contributions of third parties, it depends on whether these and thus the success of the reorganisation as a whole can be expected with overwhelming probability.”

“If it is a question of whether, in the case of a company already in crisis, liquidity gaps which are becoming apparent on the basis of the earnings and financial planning can only be closed if one assumes an injection of funds by a patron which the latter has merely promised within the framework of a soft letter of comfort and to which, accordingly, there is no legal claim, narrow limits are, however, set on the management’s scope for assessment against the background of the interests of the company’s creditors.”

“[In particular] the reference to the fact that the patron has provided financial resources in the past, even if these may have been substantial, is not sufficient in itself.”

The decision is in the end less groundbreaking than one might think at first sight. Until now, the rule was that a “soft” comfort letter could simply not be taken into account in the continuation prognosis. The second senate has now created a further loop of discussion and, in a probability test, first determines whether and to what extent a reasonable management could expect compliance with the “obligation in kind” resulting from the “soft” letter of comfort, only to then negate the “classic” assumption that the patron would already pay if he had paid in the past. Thus, in the final analysis, the loop now drawn should lead to interesting theoretical discussions, but in practice the decision of a qualified and well-advised management should not turn out any differently than before the ruling: a “soft” letter of comfort is generally disregarded when assessing the continuation prognosis of the company.

The decision of the OLG Düsseldorf

More interesting is the approach of the OLG Düsseldorf in its decision of 20 July 2021 on the question of the criteria to be applied for a positive prognosis of continued existence for so-called “start-ups”. Accordingly, “in the case of a start-up company […] the principles established by the BGH for a positive continuation prognosis of continued existence are not fully applicable.” The OLG further states in its reasoning that – since such start-up companies are initially dependent on third-party financing (in order to gain market share) – the BGH does not require findings on future earning capacity (self-financing capacity) when examining the continuation prognosis. On this basis, according to the OLG Düsseldorf, “the documented promise of payment by [a] shareholder” should be sufficient to assume a positive continuation prognosis. And this is also the case if “the further financing was subject to the proviso that realistic plans are submitted and the liquidity requirements are proven“. Also, a “legally secured and thus enforceable claim to the financing contributions […] is in any case, […] not a prerequisite for a positive continuation prognosis“. The decisive senate’s comments culminate in the statement: “Rather, the managing director may assume a positive prognosis as long as it is not concretely probable that the financier will not continue to finance the start-up company.” The senate already indicates that payments made previously on a similar basis (shareholder loans according to fianancing plans) may constitute an indication that further payments will be made.


Initially, the decisions of the BGH and the OLG Düsseldorf seem to be consistent with each other on the question of the legal certainty of the claim to be included in a going concern prognosis: Both courts initially unanimously assume that claims that cannot be enforced can also find their way into a continuation prognosis. While the OLG Düsseldorf subsequently allows an inference from payments previously made in a similar situation, the 2nd Civil Senate of the BGH, however, closes off precisely this path. Moreover, the last statement of the deciding judges from Düsseldorf reverses the required probability test in the final analysis: According to the Düsseldorf decision, it would have to be shown (by the insolvency administrator) that it was “concretely probable” that the financier would cease its financing activities. This is not likely to stand up before the BGH, which requires proof that the continuation of the business was “predominantly probable”, i.e. the management must prove that it could assume that the financier would continue its financing activities in the specific case. The BGH also applies higher standards to start-ups than to “normal” companies, at least with regard to the monitoring obligations (see the discussion of the decision of the BGH, judgment of 14 May 2007 – II ZR 14.05.2007 – II ZR 48/06, here, in German) and it is questionable whether it will deviate from this course with regard to the planning obligations discussed by the OLG Düsseldorf.

For the advisory practice, the two decisions discussed here are not very fruitful, because in the “fog of war” of advising management in a corporate crisis, one will not want to test the finer points of this cautelar jurisprudence. In practice, the “soft” comfort letter remains a no-go and start-ups are more likely to follow the hard line of the BGH than the soft line of the OLG Düsseldorf, i.e. to apply higher standards to the monitoring and planning obligations. The reference of the OLG Düsseldorf to the then legendary so-called “Dornier” ruling of the BGH from 1992 does not change this. For one thing, the (legal) world has generally moved on since this ruling of the BGH – which established the two-stage concept of over-indebtedness. For another, the BGH did not explicitly decide in the aforementioned ruling that in the case of start-ups the “earning capacity (self-financing capacity) is not to be regarded as a prerequisite for a positive continuation prognosis” (para 13), nor that a “legal risk of over-indebtedness” is to be regarded as a prerequisite for establishing a positive continuation prognosis (para 13) nor that a “legally secured and thus enforceable claim to […] financing contributions […] is not a prerequisite for a positive going concern prognosis” (para. 14), as the OLG Düsseldorf claims. Also for these malcitings, the Düsseldorf decision should be taken with a pint of salt rather than a pinch.

BGH, judgement 13.7.2021 – II ZR 84/20 (from no. 65 onwards)

OLG Düsseldorf, decision 20.07.2021 – 12 W 7/21

BGH, judgement 13.07.1992 – II ZR 269/91 („Dornier“) 

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