Introduction

The German FCJ (IX ZR 143/13, 17 December 2015) relates to the requirements and effects of a settlement between an insolvency administrator and the personally liable partners of an insolvent partnership.

The plaintiff was a trading company in an ongoing business relationship with a partnership whose partners (the defendants) were personally liable for the partnership’s debts. Before insolvency proceedings were opened over the assets of the partnership, the plaintiff took legal action against the partners. After insolvency proceedings commenced, the insolvency administrator reached a settlement with these partners regarding their liability for partnership debts. The settlement sum was distributed to the insolvency creditors whose claims were approved in the insolvency table.

The plaintiff also registered his claims to the insolvency table, but the insolvency administrator contested them. Therefore, the plaintiff did not receive any compensation from the settlement. After the termination of the insolvency proceedings, the plaintiff pursued his action against the partners who claimed not to be liable due to the settlement with the insolvency administrator.

Decision

The federal court held that insolvency administrators are entitled to reach settlements with partners which are binding on all creditors who participate in the proceedings. In these kinds of settlement, however, it is crucial to define which claims (e.g. all registered or only the approved ones) will be compensated.

Had the plaintiff not registered his claims with the insolvency administrator, the latter would not have the authority to act on his behalf. Thus, the plaintiff would have been allowed to pursue his claims individually.

Comment

Creditors of contested claims should consider whether or not to pursue the approval of their claims by suing the insolvency administrator.

In this case, the creditor of a claim which was not approved not only failed to receive any compensation; but also lost the right to sue the personally liable partners after the termination of insolvency proceedings.