(German federal high court – decision of September 24th, 2015 – IX ZR 272/13)

Legal background

In accordance with sec. 166 para 1 German Insolvency Code (“InsO”) an insolvency administrator is entitled to utilise tangible assets in his possession, even where the assets are encumbered.

Although the German Insolvency Code regulates the disposal and utilization of tangible assets and claims encumbered in favour of a creditor no regulation exists for rights such as shares, trademarks or intellectual property rights.

Case Summary

The banks granted the debtor a loan for the purchase of stocks of M-AG, a stock corporation established under the laws of Germany (“Stocks”). The loans were secured by a pledge of the Stocks acquired by the debtor. The Stocks were physically deposited for the debtor in a securities depository, making the debtor an indirect proprietary possessor of the Stocks. The membership rights of the debtor resulting from the ownership of the Stocks had been transferred to a trustee.

After the commencement of insolvency proceedings over the estate of the debtor the banks sold the Stocks pledged in their favour. The insolvency administrator considered the disposal of the Stocks as a violation of his right of utilisation according to sec. 166 InsO.

Main Rulings

  • The German federal high court (“BGH”) ruled that indirect possession of tangible assets of the debtor may give an insolvency administrator a right to use those assets where the tangible asset could be considered a part of the economic entirety of the debtor.
  • Collateralized stocks deposited in a securities depository which the debtor has pledged as security cannot be utilized by the insolvency administrator where the respective stocks are held by the debtor merely for investment purposes.


The main issue of the case was the question whether or not pledged stocks could be utilised by the insolvency administrator in accordance with sec. 166 para 1 InsO.

Sec. 166 para 1 InsO requires as a precondition direct or indirect possession of the tangible assets in question. The pledged Stocks did constitute tangible property since they were embodied in a physical document. Moreover the debtor was in indirect possession of the Stocks as indirect proprietary possessor.

In this case, one argument for refusing the administrator a right of disposal was the different levels of possessory rights between the debtor and the banks: The depository of securities was direct holder of the Stocks, due to the fact that it was physically holding the stock certificate. The banks managing the security account of the debtor had indirect possession, because they were beneficiaries of the pledge. The BGH highlighted the fact that due to the deed of trust the debtor had renounced his rights as a shareholder of M-AG. The court concluded that the lack of membership rights indicated the Stocks were not part of the economic entirety of the debtor. As a consequence the court decided that the insolvency administrator was not entitled to utilize and dispose of the Stocks.