Obligation to file an insolvency petition - Reorganisation

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Die Justiz des LandesNordrhein-Westfalen

Obligation to file an insolvency petition - Reorganisation

International Exchange of Experience on Insolvency Law (IEEI)

10th ColloquiumDubrovnik, May 14, 2009

, Justizministerium NRW 02.07.2007

Die Justiz des Landes Nordrhein-Westfalen

Obligation to file an insolvency petition under German law
15a Insolvency Code:"(1) Where a legal person becomes insolvent or over-indebted, the members of its governing board . . . shall, without culpable delay but in any case no later than three weeks after insolvency or over-indebtedness has occurred, file an insolvency petition. The same applies to the members of the governing board of a business organisation who act on behalf of the members authorised to represent the company . . . where the company has no legal personality and none of its personally liable members is a natural person; . . . (4) Anyone who, in violation of sub-section (1) sentence1, also in combination with sentence2 . . . , fails to file an insolvency petition, or fails to file it correctly or on time, is liable to imprisonment for up to three years or to a fine. (5) If an offender within the meaning of sub-section4 acts negligently, the penalty shall be imprisonment for up to one year or a fine."
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Obligation to file an insolvency petition under German law
64 Act on Limited Liability Companies / 92 (2) Stock Corporation Act:"The managing directors are liable to indemnify the company for payments made after insolvency of the company has occurred or over-indebtedness has been established. This does not apply to payments after that date that are made with the due care and diligence of a prudent businessman. The same liability is incumbent on managing directors for payments to members in so far as such payments were bound to result in insolvency of the company unless such insolvency could not have been foreseen even if all due care and diligence mentioned in sentence2 had been exercised. . . ."
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Insolvency and over-indebtedness
Over-indebtedness as insolvency cause only with regard to legal entities

If the debtors assets no longer cover the liabilities

Continuation of business as basis for the valuation of the debtors assets where likelihood of continuation as going-concern

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Insolvency and over-indebtedness
Financial Market Stabilisation Act (October 18, 2008):No over-indebtedness if there is a predominant likelihood of the business as a going concern

Academic discussion: New law as chance for reorganisations or as danger for creditor rights?Reorganisation within or outside insolvency proceedings?
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Creditor protection Comparison among IEEI countries

Conflict of principles:Reorganisation is better than insolvencyversusEarly insolvency is better than late insolvency (Germany)

Forum shopping between countries with different insolvency regimes
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Are debtors or the members of their board under an obligation to file an insolvency petition in other IEEI countries, too? If so:What are the pre-conditions of that obligation? In particular, is there an obligation to file a petition in the case of over-indebtedness?
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Is there a link between the obligation to file a petition and its specific design on the one hand and the pre-insolvency opportunities for reorganisation on the other? Are (strict) obligations to file a petition and pre-insolvency opportunities for reorganisation incompatible or are there models that enable both pre-insolvency reorganisation to be sought and creditor protection to be adequately ensured on the basis of obligations to file an insolvency petition? Are there other ways of adequately ensuring creditor protection than by legally binding obligations to file a petition?
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What are the approaches and the experience to pre-insolvency reorganisation in other IEEI countries?

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Should the reorganisation be sought before or rather during insolvency proceedings?

Or should there be an elaborate insolvency regime that incorporates both solutions?

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Dubrovnik 2009

Thank you!
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02.07.2007
, Justizministerium Nordrhein-Westfalen
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Obligation to file an insolvency petition - Reorganisation

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