Germany: Insolvency Claw-back Reform Provides Some Relief for Creditors

The reform of claw-back rights in German insolvency proceedings which provides for more legal certainty for creditors has become effective on 5 April 2017.

Following their interpretation by German courts, the claw-back rights under German insolvency law left creditors with severe risks and legal uncertainties if they granted deferrals or other payment accommodations to distressed debtors as they had to fear that any subsequent payments they received could be challenged (up to ten years prior to a filing for opening of insolvency proceedings over the assets of the debtor). On 16 February 2017 the German parliament (Bundestag) adopted the reform of the claw-back provisions which now provides for a better balance of interests among creditors in insolvency proceedings. On 10 March 2017, the reform passed the German federal assembly (Bundesrat) and has now become effective.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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