On 23 November 2022, the Regional Court of Munich ruled that shareholders' damages claims for breach of capital markets law rank as equity and not as general unsecured claims in the Wirecard insolvency. As a result, the shareholders can only recover from the insolvent estate in the unlikely event that all insolvency creditors' claims are fully satisfied.

The decision

The Court held that the damages claims at issue are based on the acquisition of the shareholder position. In contrast to providers of debt capital, this position is associated with the opportunity to share in the company's profits, which justifies the imposition of a higher economic risk, in particular subordination of claims in the event of insolvency. It was not relevant that the shareholders had been deceived when acquiring the shares, as the deception concerned the value of the investment and not the acquisition of the shareholder position. It was also not relevant that shareholder damages claims could be successfully asserted before insolvency. Special rules apply and are justified on insolvency because of creditor competition for the limited insolvency estate.

What next?

The classification of shareholder damages claims in German insolvency proceedings has been the subject of debate before the ruling. It is expected that the judgment will be appealed, and the Federal Court of Justice (Bundesgerichtshof) will deal with this issue further in the future.