Reinforcement of creditor rights

In order to reinforce creditor rights, the Act provides the legal basis for setting up a provisional creditors’ committee immediately after the application to initiate the procedure has been received, as long as at least two of the three following threshold values have been reached in the preceding fiscal year (Section 22a Para 1 InsO):

  • Balance sheet total 4.84 million Euros after deduction of a demonstrated deficit on the assets side
  • in the meaning of Section 268 Para 3 HGB [Commercial Code]
  • sales revenue of 9.68 million Euros and, averaged over the year, 50 employees.

Upon application by the debtor, the provisional trustee or a creditor, a provisional committee of creditors can be established, even if the threshold values are not reached, provided persons are named as possible members of the committee and the statements of acceptance given by the persons named are attached to the application (Section 22a Para 2 InsO).

The powers of the provisional creditors’ committee are extensive:

  • Prior to the appointment of the administrator, the provisional creditors’ committee must be given the opportunity to comment on the demands which are to be made on the administrator (Section 56a Para 1 InsO).
  • If the creditors’ committee is unanimously in favour of a particular person to be appointed as administrator, then that decision is binding on the court, unless the person who is proposed is unsuitable to assume the position (Section 56a Para 2 Sentence 1 InsO).
  • If the court has appointed an administrator without consulting with the creditor’s committee, the provisional creditors’ committee can, by unanimous decision, appoint a different administrator at its first meeting (Section 56a Para 3 InsO).
  • The provisional creditors’ committee must be given the opportunity to express its opinion before a decision is taken on the application to allow self-administration (Section 270 Para 2 No. 2 InsO).
  • An application for self-administration submitted by the debtor can be rejected by the court only if circumstances are known that would make it appear likely that such self-administration would result in disadvantages for the creditors (Section 270 Para 3 Sentence 1 InsO).

For more information read: Reinforcement of self-administration and the protective shield procedure

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