To date, the German Insolvency Code (Insolvenzordnung) does not contain provisions governing group insolvencies. If several entities within a group of companies become insolvent, individual insolvency proceedings are opened and sometimes even individual insolvency administrators are appointed for each entity.

German proposals

The German Federal Government intends to ease the handling of group insolvencies and has therefore presented a draft bill with the purpose of preserving the economic unity of a group of companies within insolvency proceedings and to streamline these. The draft aims at, inter alia, stimulating the appointment of a single insolvency administrator and establishing general cooperation rights and duties of insolvency administrators, insolvency courts and creditors’ committees. Another major aspect concerns the choice of the legal venue. The deliberate choice of a particular court – forum shopping – is supposed to be prevented more effectively. The draft bill has been submitted to various expert committees, but it is not yet to be foreseen if and when a corresponding reform act will get into force.

European Insolvency Regulation

Nonetheless, German insolvency law cannot regulate an insolvency of an international group of companies. Many multinationals only generate little of their turnover in Germany and are closely linked to their subsidiaries in Europe. In the long run it seems therefore necessary to implement European rules governing group insolvencies. The revision of the European Insolvency Regulation is a first step in this direction. In December 2012 the European Commission submitted a proposal for an amendment of the European Insolvency Regulation which is, according to the working schedule of the European Commission of 2014, a preferential initiative of legislation.