Bankruptcy

In insolvency law , insolvency is the privilege of certain debtors to be exempt from the generally applicable insolvency regime by law .

General

As a rule, debtors of all legal forms and private individuals are also subject to insolvency law internationally , i.e. they are capable of bankruptcy or bankruptcy. In some states, however, special regulations are provided for certain debtors. These exceptions lead to insolvency inability ( English bankruptcy inability ) with the result that creditors have not expected due to insolvency asset losses because the insolvency provisions are not applicable. In addition, debtors who are incapable of insolvency - if they are legal persons - do not run the risk of being officially deleted after the conclusion of the insolvency proceedings due to lack of assets and thus losing their existence.

Germany

Statutory regulation of insolvency

As early as January 30, 1935, Section 116 (2) of the German Municipal Code stipulated the inadmissibility of insolvency over municipal assets. This was carried over into the now applicable state municipal regulations . At the federal level, the German Insolvency Code (InsO) provides clear regulations for certain legal entities under public law. The bankruptcy of the federal government and the federal states ( Section 12 Paragraph 1 No. 1 InsO) is excluded by federal law. Municipalities , municipal associations and districts are excluded from insolvency ( Section 12 (1) No. 2 InsO), provided that the federal states have regulated this under state law (such as Section 128 (2) GemO NRW). This exclusion is intended to maintain the functionality of state power and public administration . The law says that bankruptcy proceedings over the assets of this group of debtors are inadmissible. The bankruptcy of the federal government would express itself in a national bankruptcy . Its insolvency or over-indebtedness can only be countered by means of state or administrative law. In addition, it is argued that insolvency law does not provide suitable regulations in the event of a national bankruptcy. The inability of the Federation and the Länder to become insolvent is also an expression of the "eternity guarantee" of Article 79.3 of the Basic Law, according to which an amendment to the Basic Law with regard to the division into the Federation and the Länder is absolutely inadmissible. Similar special regulations exist for federal legal entities under public law through federal laws; state law excludes other legal entities under public law. Therefore, Federal corporation people are insolvent incapable of public law ( public institutions and public corporations , see for example § 45 AGGVG in Baden-Wuerttemberg), chambers of commerce , craft guilds and District Trade machinations , craft chambers , bar associations , organized under public law credit institutions (exception: Sparkassen and Landesbanken ), municipal properties and publicly owned enterprises , state-approved alternative schools, student unions, trade unions and political parties. At the state level, laws ( law on the insolvency of legal persons under public law ) make it clear that insolvency proceedings are inadmissible for the assets of legal persons under public law that are subject to direct state supervision.

Public broadcasters and television companies are also not eligible for insolvency (Section 32 Germany Radio State Treaty, Section 1 Paragraph 3 State Treaty on Südwestfunk); where such express regulations are missing (for example at the WDR ), the BVerfG has closed this gap and declared the public broadcasters to be insolvent as a whole. “The guarantee obligation requires the state to avert the broadcasting corporation's insolvency. If necessary, the country has to take responsibility for the broadcasting corporation's liabilities. ”Some public-law credit institutions can only be dissolved by law and are therefore de facto incapable of insolvency. These include the Deutsche Bundesbank with the regional central banks ( Section 44 BBankG ) and the KfW (Sections 1, 13 (1) Law on KfW). Churches and ecclesiastical organizations recognized as corporations under public law are also excluded from insolvency proceedings according to Article 4, Paragraph 2, Article 140 of the Basic Law in conjunction with Article 137, Paragraph 3, Clause 1 of the Weimar Constitution . In § 11 para. 3 WAY indissolubility and insolvency inability of the owner community provided.

In addition to this absolute ban on total enforcement, there is also extensive protection against individual foreclosure at the federal, state, institutions / corporations under public law and foundations under public law ( § 882a ZPO).

Recognition in other laws and in case law

Occasionally, the law also recognizes a lack of insolvency risk and then allows exceptions to the general obligation to provide security . As a rule, clients of construction services are obliged to provide security to the building contractor according to § 648a BGB . According to Section 648a, Paragraph 6, No. 1 of the German Civil Code (BGB), legal entities under public law as clients are excluded because they have no risk of insolvency. According to Section 651k (6) BGB, travel by legal entities under public law is excluded from the tour operator's insolvency protection obligation , so that schools, adult education centers or universities as tour operators do not have to issue a security certificate. According to Section 1 (2 ) of the German Debt Securities Act (SchVG), this law expressly does not apply to German bond debtors in the legal form of a legal entity under public law (federal, state or city bonds). The reason is that the SchVG is intended to prevent the bond debtor from becoming insolvent, but German regional authorities are incapable of insolvency and therefore do not require insolvency protection. The case law also assumes that there is no risk of insolvency in numerous decisions. In the context of the public tender, it is against equal opportunities if a company that is not exposed to the risk of bankruptcy enters into competition with companies that are exposed to this risk. The case concerned an institution under public law with municipal guarantor liability . The risk of recovery is also associated with virtually no risk of insolvency because the State of Berlin is the guarantor of the debtor (public law institution in the context of waste disposal) (Section 4 BerlinBG).

consequences

In Germany, the insolvency inability protects legal entities under public law from universal insolvency proceedings. The debtors concerned are not subject to the insolvency regime. Even if they were to fulfill one of the three insolvency categories of insolvency , impending insolvency or over-indebtedness , insolvency law will not apply to them.

However, the legally stipulated insolvency cannot protect against the insolvency of the beneficiary debtor. German law assumes the possibility of de facto insolvency / over-indebtedness. If the legal entity under public law is insolvent or overindebted, its employees can claim from the responsible federal state the amount that would have been paid by the Federal Employment Agency (insolvency money) or the insolvency insurance provider (company pension scheme) in the event of a - hypothetical - insolvency. Insolvency- incapable debtors cannot be called upon to pay contributions to insolvency payments ( Section 358 (1) SGB ​​III ) and contributions to insolvency insurance for company pension schemes ( Section 17 (2) BetrAVG). The respective federal state is to a certain extent liable as the “initiator” within the framework of a specific default liability. These are, in terms of content, tightly limited warranty claims by employees of public-law entities that are incapable of insolvency against the responsible federal state. This legally required automatic assumption of liability by the responsible federal state is limited to these specific facts.

Bankruptcy remote

But contractual arrangements or economic configurations can cause certain debtor as insolvency remote ( English insolvency remote can be called). While you are formally capable of bankruptcy, your bankruptcy is highly unlikely. Often these are special purpose vehicles that only perform certain tasks that are financed from a relatively or absolutely secure source of finance (see Structured Financing ). , A prerequisite is that the revenue of the SPE not only the debt service beyond cover the debt, but also the other costs of the special purpose entity. Various additional regulations are intended to provide creditors with a similar level of risk comfort as with insolvency. Replacement solutions range from government guarantees to tough letters of comfort .

criticism

The extensive exemption of the public sector in Germany serves - in addition to safeguarding public administration - also to protect creditors. Lenders do not have to expect to be drawn into insolvency proceedings with their claims and possibly having to waive claims . According to the statement of the Federal Government, the creditors could not suffer any disadvantage due to the lack of insolvency capacity of the municipalities, since the regional authorities could cover shortfalls using the tax refinancing option in accordance with Art. 28 (2) sentence 3 of the Basic Law. In addition, the government points out the competences of the municipal supervisory authorities , which could avert the insolvency of a municipality from the outset through supervisory means. These are the main reasons for the municipal credit of the credit institutions . It is therefore possible that even municipalities in the budgetary security concept or over-indebted municipalities still receive credit. It is argued against this that economical housekeeping is not seriously pursued because unlimited borrowing is possible. This moral risk was possibly one of the reasons for the excessive indebtedness of many municipalities, as they can make budgetary mistakes without the threat of bankruptcy.

foreign countries

According to a response from the federal government to a small request from members of the Bundestag, the evaluation of the insolvency regulations of almost 40 states showed that only very few states have insolvency proceedings for municipalities. In Europe these are Hungary and Latvia. In Bulgaria, Romania and Estonia there are discussions about introducing a municipal insolvency procedure based on the Hungarian model. Outside Europe, the United States of America and South Africa ( English Municipal Finance Management Act 2003 ) have a debt settlement process for insolvent municipalities.

Switzerland

As a result of the “Federal Act on Debt Collection Against Municipalities and Other Corporations of Cantonal Public Law”, which was passed on December 4, 1947, which excludes municipal bankruptcy, the Swiss municipalities were subsequently considered to be solvent debtors. According to Art. 2 Para. 2 SchGG, debt enforcement against municipalities in the event of bankruptcy is not permitted, the enforcement can only be aimed at garnishment or the realization of a pledge (Art. 2 Para. 1 SchGG). According to a decision by the Swiss Federal Supreme Court, as a consequence of Art. 2 Para. 2 SchGG, the regulations on bankruptcy proceedings are not applicable to over-indebted municipalities. These special federal law enforcement regulations for municipalities aim - in addition to a certain protection of creditors - primarily to maintain the creditworthiness of the community. However, there is no provision for the canton's liability for the obligations of the communes, which the Federal Council even expressly pointed out in its dispatch on the law.

On October 21, 1998, the “provisional compulsory administration by the State Council” was ordered for the touristically known municipal and civic community of Leukerbad . She was so over-indebted that she could not even pay the current interest, let alone repay the loans it had taken out. On July 3, 2003, the Swiss Federal Supreme Court finally decided in four judgments that the canton of Valais, to which Leukerbad belongs, was not liable for the damage claimed in the case of the heavily indebted municipality of Leukerbad. At the same time, the creditor banks were judicially proven to be analytical errors, because the amount of their loans "was not within reasonable limits to the financial strength of the municipality", so that the canton's liability was excluded. That left only the debt cancellation by the creditors; however, they rejected 80% debt relief. Then, the partially government was forced administration arranged, confirmed the court on July 20, 1999th As a result, the creditors had to waive 78% of their claims against the community.

After the special case of Leukerbad, lenders became aware that losses cannot be ruled out in loans to municipalities without risk analysis.

Austria

Municipalities in Austria are set up as a legal person and independent asset holder in accordance with Art. 116 Para. 2 B-VG ; they can be debtors in their own name and are therefore formally bankrupt - but only with their bankrupt assets. Assets capable of bankruptcy are only those assets of the municipality that are not necessary for the fulfillment of their sovereign tasks according to § 15 of the enforcement order. Conversely, Austrian municipalities with their municipal assets serving for sovereign tasks are incapable of insolvency.

United States

In the USA , municipalities and counties below a state (" English municipalities ") are eligible for bankruptcy under 11 USC Chapter 9. In the United States, there is no state liability for the financially distressed communities. The right to apply lies with the communal debtor alone, not also with the creditor. The only reason for insolvency is insolvency, which is considered to have occurred six months after the due date of a liability. The aim of the procedure is to reorganize the municipal finances and thereby facilitate a new beginning. Chapter 9 was used over 500 times. These included spectacular cases such as Orange County (December 1994), Harrisburg (October 2011) and Detroit (July 2013), where bad debts ran into billions. Magin selected 7 international insolvency cases and came to the conclusion that in 6 of these the citizens were significantly involved in the restructuring (tax increases, spending cuts), while the creditors were only involved in 3 cases. The author argues against the introduction of a municipal bankruptcy capacity, as the state in particular already has instruments at its disposal for discipline.

The primary aim of the bankruptcy regulation in the USA is to solve the persistence problem in favor of the municipal debtors, because creditors refuse to agree to the restructuring with the aim of receiving full repayment (see Collective Action Clause or Holdout problem ). In the USA, the no-bailout principle prevails , according to which over-indebted municipalities are not saved by higher-level states.

United Nations proposals

In June 2004 the United Nations Commission on Commercial Law ( UNCITRAL ) presented guidelines for the unification of national insolvency law. This expressly excludes states and their subdivisions (“subnational governments”), municipalities and public companies from a uniform insolvency regulation, provided that the latter are not in competition. These recommendations show that the public sector should also be freed from the insolvency regime internationally. However, since there is a lack of international agreement on this point, UNCITRAL has refrained from proposing insolvency procedures for the municipal level.

The insolvency of local authorities below the state is therefore a recurring process, the dangers of which are grave.

Individual evidence

1. ↑ Gerhart Kreft, Commentary on InsO , 6th edition 2011, p. 56
2. ↑ An application for insolvency must therefore be rejected as inadmissible by the competent bankruptcy court.
3. ↑ BVerfGE 15, 126 , 135 f. and § 882a ZPO
4. ↑ BVerfGE 15, 126, 155
5. ↑ Friedrich L. Cranshaw, Insolvency and financial law perspectives of insolvency of legal entities under public law , 2007, p. 109
6. ↑ Subsidiary and unlimited municipal guarantor liability was abolished in the regional savings bank laws in July 2001
7. ↑ Gerhart Kreft, Commentary on InsO , 6th edition 2011, p. 56 with further references
8. ↑ Wolfgang Henckel / Walter Gerhardt, Insolvenzordnung Volume 1 , 2004, p. 356 ff.
9. ↑ BVerfGE 89, 144 , 145 ff.
10. ↑ BVerfGE 89, 144, 154
11. ↑ Katrin Rohr-Suchalla, VOB / B: Basic knowledge for construction professionals , 2008, p. 115
12. ↑ Jörn W. Mundt, travel event: Lehr- und Handbuch , 2007, p. 138
13. ↑ Declaration by the Federal Government on the admissibility of rescheduling clauses; Printed in the annual report for 1999 of the Deutsche Bundesbank, p. 117 ( Memento of the original dated February 3, 2007 in the Internet Archive ) Info: The archive link has been inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. 
14. ↑ OLG Celle, decision of November 8, 2001, 13 Verg. 11/2001
15. ^ BGH, judgment of July 5, 2005, Az .: X ZR 99/04
16. ↑ Christian Koenig, Insolvency of legal entities under public law - a state aid according to Article 87 (1) EC? , in: Betriebs-Beratung, issue 10/2003, February 2003, p. 1
17. ↑ German Bundestag Printed Matter 15/5095, 15th legislature, March 15, 2005, p 3
18. ↑ German Bundestag, printed matter 15/5095, 15th electoral period, March 15, 2005, p. 2 ff. (PDF; 225 kB)
19. ↑ However, only assets that do not serve the fulfillment of public tasks can be seized. Because according to Art. 9 SchGG, the assets of a community that directly serve the fulfillment of its public tasks represent its administrative assets and, even with its consent, can neither be seized nor utilized as long as they serve public purposes (para. 1). Tax claims may neither be seized nor realized (para. 2).
20. ↑ BGE 127 III 55 E. 5c, p. 63
21. ↑ BBl. 1945 I, p. 13
22. ↑ Swiss Federal Supreme Court, judgments of July 3, 2003, Az .: 2C.1 / 2001, 2C.4 / 1999, 2C.4 / 2000 and 2C.5 / 1999
23. ↑ Cantonal Finance Inspectorate of September 26, 2011, Debt of the municipalities in the Canton of Valais - Legal framework , p. 5 (PDF; 74 kB)
24. ↑ Cantonal Finance Inspectorate of September 26, 2011, Debt of the municipalities in the Canton of Valais - Legal framework , p. 9
25. ↑ Supreme Court, judgment of November 21, 1933, Az .: 4 Ob 435/1933, as well as the prevailing legal opinion: Rebhahn / Strasser, “Zwangsvollstreckung”, 33 ff. With further references
26. ↑ Rebhahn / Strasser, “Zwangsvollstreckung”, p. 33 ff. With further references
27. ↑ United States Code Title 11
28. ↑ Christian Magin, Municipal Accounting , 2010, p. 211
29. ↑ Detroit's receivers
30. ↑ Christian Magin, Municipal Accounting , 2010, p. 215
31. ^ Christian Magin, Municipal Accounting , 2010, p. 230
32. ↑ World Bank, Lili Liu / Michael Waibel, Subnational Insolvency: Cross-Country Experiences and Lessons , January 2008, p. 16  ( page no longer available , search in web archives )  Info: The link was automatically marked as defective. Please check the link according to the instructions and then remove this notice.  
33. ↑ UNCITRAL Legislative Guide on Insolvency Law , 25th June 2004, p. 40 ff. (PDF; 2.6 MB)
34. ↑ UNCITRAL Legislative Guide on Insolvency Law , 25th June 2004, Section 8, p. 40
35. ↑ World Bank, Lili Liu / Michael Waibel, Subnational Insolvency: Cross-Country Experiences and Lessons , January 2008, p. 3

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