Key point

In a financial restructuring, creditors have to pay attention that the restructuring undertakings of the insolvent company are likely to be achieved.


Under German insolvency law, the insolvency administrator may challenge a transaction if an insolvent company intended to disadvantage its creditors (and the other party knew that intention). The German Supreme Court presumes such intention if a company knew about its impending illiquidity.


A bank repeatedly threatened to terminate a company's credit line due to increased credit risk and demanded additional security which the company could not provide. When the bank terminated the credit line, the company filed for insolvency. In court, the insolvency administrator claimed from a landlord repayment of rent paid since the first threat to terminate the credit line.


Impending illiquidity is assumed if a debtor is more likely than not to fail to meet its existing obligations when due. The Supreme Court found that it was likely for the repayment of the credit line to become due in the forecast period because the company could not provide additional security or repay the credit line. Consequently, the company was already facing impending illiquidity when the bank first threatened to terminate the credit line.

Moreover, the Supreme Court abstained from denying the company's intention to disadvantage because of its negotiations with the bank. Such exclusion may apply only if the debtor has reason to expect that the financial crisis will soon be overcome. However, there was no such reasonable expectation, as the company was never able to provide the required security or repay the loan as requested.