Companies and individuals are often surprised when an insolvency administrator seeks repayment of amounts received months or even years before the opening of proceedings. Such claims may be based on German insolvency-avoidance rules.
Purpose of insolvency avoidance
The rules are intended to reverse certain transactions that placed individual creditors in a better position than the general body of creditors before insolvency proceedings began.
Not every payment is avoidable
The fact that a payment was made shortly before insolvency is not enough by itself. Timing, the nature of the transaction, the debtor’s financial situation and, in some cases, the recipient’s knowledge are relevant.
Review the underlying business relationship
Invoices, payment arrangements, reminders, correspondence and historical payment patterns can all matter when assessing the claim and possible defences.
Do not pay without review
A demand from an insolvency administrator does not automatically mean the amount is legally due. The statutory basis, deadlines, factual allegations and potential objections should be examined before payment or acknowledgement.