Letter of comfort

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The letter of comfort is the collective term for the content and scope of non-standardized declarations under the law of obligations in company law , according to which a company or a local authority ("patron") wants to ensure that a borrowing subsidiary fulfills its credit obligations.

General

The term letter of comfort is derived from French and goes back to the verb patronner ("to stand for"). That is why it is called here “lettre de patronage” or “lettre d'intention”. In English usage, there are various terms for this, such as " letter of comfort ", "letter of assurance", "letter of awareness", "letter of intent" or "letter of responsibility". The letter is a credit security , and indeed it is one concretely in banking to personal securities . Participants in the letter of comfort are the patron issuing it, the subsidiary benefiting from it and its lender .

Legal issues

It does not result from the German Civil Code (BGB) , which has similar loan security means with the guarantee and the loan order as third-party collateral ( intercession ). Rather, it arose from the Kautelarpraxis of business law and is - as the guarantee - the law of obligations to you, that no type coercion knows. The private autonomy under the law of obligations is the reason why letters of comfort are not subject to any content-related requirements.

A legal definition under banking supervisory law was found in the Large Loans and Millions Loans Ordinance (Section 1 (2) GroMiKV old version) of December 29, 1997, which, however, was reduced to regulatory purposes and therefore by no means met general legal requirements:

"A letter of comfort within the meaning of this ordinance is a declaration of intent that obliges the (credit) institution to ensure that another company fulfills its obligations."

Although the letter of comfort is still mentioned in the GroMiKV of December 2013 ( Section 2 (2) No. 1 GroMiKV), it is no longer defined. According to the prevailing opinion , it is to be classified as a non-formal contract in favor of third parties with a unilaterally binding character. In case of doubt, the content of the contract of a letter of comfort is to be determined through interpretation in accordance with § § 133 , § 157 BGB .

Emergence

Originally, at the end of the 1960s, letters of comfort were used by large corporations as a means of supporting their - mostly foreign - subsidiaries in granting loans. Jens Koch traces them back to a few years before 1967. In a German lexicon it appeared for the first time in 1967 as a new form of loan protection that had "recently" developed in order to avoid the company tax liability. The Federal Ministry of Finance took up exactly this connection in December 1967 when it pointed out in a letter that letters of comfort were to be subject to capital tax. The letter of comfort actually served to circumvent a tax liability of the former Capital Transfer Tax Act of October 1934, which provided for a tax liability for conventional loan collateral in Section 3 (2) KVStG. Although the legislature immediately made the letter of comfort subject to the KVStG, neither this nor the abolition of the KVStG in December 1971 changed the popularity of the letter of comfort. It also served as a circumvention of the obligation to notify collateral, as provided for in Section 151 (5) AktG 1965. Even when the Institut der Wirtschaftsprüfer (IdW) classified the so-called “hard” letter of comfort in 1976 as requiring a note, the importance of the letter of comfort remained high. For Rümker, it was still a collective term for various explanations, the "legal bandwidth of which ranges from messages with a" good will "character to obligations with content similar to a guarantee". In 1977 Mosch counted 22 different versions. Since then, the range of wording has been correspondingly wide, which also results from the lack of statutory regulation.

species

Letters of comfort are not regulated by law and are rarely the subject of court decisions. Therefore, the requirements, content and scope are dealt with in detail in the literature. However, what all variants have in common is the reason for their creation. With their help, the "patron" the doubts of the creditor wants on the credit rating of its subsidiary dispel by certain creditors protective formulations selected. In terms of the legal system, the following variants can be distinguished.

"Soft" letter of comfort

It is a legally non-binding “declaration of goodwill” for the “patron”. "Soft" letters of comfort are not aimed at payment and do not develop any liability on the part of the patron, but include other actions such as information, information or so-called "management clauses" with which the patron ensures compliance with monitoring obligations, proper management or his influence on the Management will assert that it fulfills its obligations. They do not trigger any notice or disclosure requirements on the patron's balance sheet . In this, the owner merely declares that he (majority) has a stake in the borrowing subsidiary (participation clause) and does not intend to sell this participation during the loan period ( declaration of intent ). Furthermore, the boss will comply with his corporate law monitoring obligations (control clause). Soft letters of comfort, which are mere information about the solvency of a subsidiary or, at best, morally binding declarations of goodwill , do not have any legal character and thus do not establish any kind of liability on the part of the patron, so that the lending bank cannot derive any actionable claim from this . In such a case, there is basically no room for the lending bank to claim damages based on trustworthiness or negligence when concluding the contract.

"Hard" letter of comfort

It goes beyond the scope of the explanation of the "soft" form. According to this, the patron undertakes without restriction, either internally with his subsidiary or externally with its creditors, to manage and financially support his subsidiary during the term of the loan in such a way that it is able to meet current and future liabilities in due time (provision obligation clause). A hard letter of comfort stipulates a legal obligation of the sponsor towards the addressee of the declaration; up to the BilRuG it triggered an accounting obligation according to § 251 sentence 1 HGB "below the balance sheet", now this liability relationship must be listed in the notes to the annual financial statements of the parent company. The Federal Court of Justice has confirmed the consequences of liability in a fundamental judgment, according to which the credit institutions regularly have a right to compensation for non-performance against the patron based on a “hard” letter of comfort . Having regard to the prevailing opinion in the literature - - Here, the Supreme Court had clarified that borrowing subsidiary and patron next to each other as joint debtor liable, and not as a deficiency guarantor must be considered. Proof of the insolvency of the borrowing subsidiary is sufficient for the patron's unlimited liability .

A group-internal letter of comfort issued by the parent company in favor of its subsidiary is also known as a loss cover commitment or loss assumption declaration. In the insolvency of the subsidiary in its favor, it also establishes a claim against the parent company to be pursued by the insolvency administrator. The insolvency of the subsidiary can be avoided with the help of a group-internal letter of comfort, through which the parent company undertakes to provide its subsidiary with the funds required to meet its due claims. However, this presupposes - if the subsidiary is not given unhindered access to the funds - that the parent company actually fulfills its funding obligation.

The external letter of comfort issued by the parent company to the creditor of its subsidiary turns into an obligation to make direct payments to the debtor in the event of the debtor's bankruptcy. Such an external letter of comfort does not create any claims of the subsidiary against the parent company.

Internal and external letters of comfort

A distinction must also be made between the group-internal and group-external letters of comfort according to the recipient of the declaration.

  • In the case of the group-internal letter of comfort , the parent company, as the patron of the group , undertakes to provide the subsidiary with the funds required to meet its obligations. In this way, the insolvency of the subsidiary can be avoided if the parent company actually fulfills its funding obligation. There is no direct payment obligation to the subsidiary's creditors. In the last-mentioned ruling, the BGH assumes that a hard (external) letter of comfort by the parent company addressed to the creditor neither removes the subsidiary's objective insolvency nor the creditor's knowledge of it.
  • A letter of comfort outside the group is directed by the parent company directly to non-group creditors of the beneficiary subsidiary and, according to previous case law, in the event of insolvency, as an exception, becomes an obligation to pay the patronage directly to the creditor. According to this judgment, a hard letter of comfort establishes a legal obligation on the part of the patron to pay the lender . The patron is liable next to the borrower as with the real joint debt , not in rank after this. However, due to the legal nature of the external letter of comfort, this does not justify the debtor's own claim, since it is only a unilateral contractual obligation of the patron towards a lender to provide the borrower with financial resources accordingly. The BGH also made it clear that the patron is not liable like a default surety, but violates his obligation to provide equipment at the latest when insolvency proceedings are opened against the borrower.

A special sub-form of the group-external letter of comfort is the letter of comfort "ad incertas personas" , which is issued by the owner either generally to the public (in annual reports ) or specifically to a specific group of creditors. It is not assigned a legal character; it is therefore not a contract, because the beneficiary can only assert claims from it if he has gained knowledge of it and has at least implicitly accepted it.

Basis of claim

In contrast to a surety, guarantee or assumption of debt , the letter of comfort does not include the assumption of a contractual payment obligation by the patron to the creditors of the subsidiary if the subsidiary does not meet its obligations. The basis of the claim " Compensation for non-performance" from § § 280 ff. BGB results from the fact that the patron culpably failed to fulfill his obligation to provide financial support and equipment because, contrary to obligations, he did not enable his subsidiary to benefit from the declaration Repay loans on time. The damage consists in the bad debt of the lender.

Letters of comfort from a local authority are equated in their legal scope with a deficiency guarantee under EU state aid law . They therefore have the same effect with regard to the basic notification obligation under EU law.

Even if the letter of comfort represents a typical type of credit security for group connections , this declaration must not be reduced to the relationship between parent company and subsidiary. This declaration can also be made in the case of completely different legal relationships or economic interests.

termination

In exercising the private autonomy to which they are entitled, the parties can agree an ex nunc right of termination for the patroness. The creditors should therefore only accept letters of comfort without a termination clause, otherwise the security will be lost in the event of termination. But an unlimited letter of comfort can also be terminated. Since this is a continuing obligation, this letter of comfort can be terminated for good cause in accordance with § 314 BGB . However, this extraordinary termination only takes effect from the time of termination (ex nunc), so that the outside creditor can claim against the patron with the obligation arising up to this point in favor of the subsidiary.

Questions of interpretation

The legal range of alternative wording for a letter of comfort makes it accessible for interpretation . The starting point for any interpretation is the wording of the contract and the consideration of the interests of the contracting parties. The interpretation of the will to be legally bound is of decisive importance. There is little willingness to be legally bound in private cartridges and letters of comfort vis-à-vis a large number of creditors or even the general public. In the case of credit institutions and companies, however, the literature and jurisprudence tend to assume that these groups carefully select terms and formulations. This is why it can usually be assumed that the facts are clear, so that there is no room for further interpretation.

Accounting

Only the “hard” letter of comfort “under the balance sheet” of the patron in accordance with Section 251 in conjunction with Section 268 (7) of the German Commercial Code (HGB ) is accounted for (more precisely: noted) as other contingent liabilities , as it meets the requirements of a warranty contract. This is an independent accounting-law term that covers every contract that cannot be qualified as a guarantee, through which the obligation is established to be responsible for a certain success or a service or for the non-occurrence of a certain disadvantage, insofar as this may involve an encumbrance of assets. From the note, the obligee can ultimately see that the letter of comfort presented to him has a binding, justiciable effect from the perspective of the patron. Obligations arising from this are only to be recognized as a liability if there is a serious threat of a claim ( Section 249 (1) sentence 1 HGB).

If there is a serious threat of a claim against the patron - instead of the note under the balance sheet - the passivation is to be carried out as a provision for uncertain liabilities ( Section 249 (1) sentence 1 HGB), because every liability - even an uncertain one - suspends an obligation to a creditor ahead of an obligation . The patron seriously threatens a claim in the crisis or the bankruptcy of the borrowing company, because then the creditor is entitled to a directly enforceable claim against the patron.

International

Seen the letter of comfort (is English letter of comfort ) regulated by law in any country in the world, but has gained wide acceptance in international commerce.

Austria

The Austrian Supreme Court sees the letter of comfort “as a means of securing credit for a large number of declarations of different legal character, which are made by a person who is different from the borrower, but who is regularly close to him, the patron, and in terms of their content completely non-binding declarations up to the guarantee contract ”. In the case of the employer, the information is provided under the liability relationships in accordance with Section 199 of the UGB and in the appendix in accordance with Section 237, item 3 of the UGB.

Switzerland

In Switzerland, too, the letter of comfort cannot be classified in the legislative system of security, in particular personal security; it is neither a surety nor a promise of guarantee. Is to judge them as a contingent liability, it must under Art. 670 para. 1 OR in the Annex are listed on the balance sheet.

literature

  • Holger Fleischer : Present problems of the letter of comfort in German and European private law . Wertpapier-Mitteilungen (WM). Journal of Commercial and Banking Law, 53rd Vol. (1999), H. 14, pp. 666-676.
  • Nicola La Corte: The hard letter of comfort; at the same time a plea for a changed case law . Berlin: Duncker & Humblot 2006.
  • Sabine Leitner: The letter of comfort . In: Österreichisches Bankarchiv, 2002, no. 7, pp. 517-527.
  • Dietrich Reinicke (abbreviation): Loan security . 5th edition Neuwied: Luchterhand 2006.
  • Christian Ulrich Wolf: The letter of comfort . Baden-Baden: Nomos 2005.
  • Georg Maier-Reimer / Peter Etzbach: The letter of comfort (also a discussion of BGH NJW 2010, 3442 -STAR21-), NJW 16/2011, 1110

Individual evidence

  1. Thomas Junggeburth: Internal hard letters of comfort as a means of defending against insolvency , 2009, p. 25, FN 1.
  2. Thomas Junggeburth, Internal hard letters of comfort as a means of defending against insolvency , 2009, p. 45.
  3. Thomas Junggeburth, Internal hard letters of comfort as a means of defending against insolvency , 2009, p. 26.
  4. Jens Koch: The letter of comfort , Tübingen 2005, p. 11, ISBN 3161486749 ( preview in the Google book search)
  5. Erich Achterberg / Karl Lanz, Enzyklopädisches Lexikon für das Geld-, Banking- und Börsenwesen , 3rd edition 1967, Volume 2, p. 1080
  6. BMF letter of December 15, 1967, Az .: IV A / 4-S.5102-1 / 67
  7. Section 151 (5) AktG 1965 at Lexetius
  8. IdW (main technical committee), WPg 1976, pp. 528, 530, 534 f.
  9. Dietrich Rümker: Problems of the letter of comfort in the credit protection practice , WM 1974, p. 990
  10. Wolfgang Mosch, letters of comfort from German parent companies and their significance for accounting , 1974, p. 12 ff.
  11. ^ BGH, judgment of July 12, 1993, Az .: II ZR 179/92
  12. OLG Karlsruhe, ZIP 1992, 1394
  13. Jens Koch: The letter of comfort , Tübingen 2005, ISBN 3161486749 , pp. 28 ff. And 78 ff.
  14. BGH WM 1992, 502 ff.
  15. BGH WM 1992, 502
  16. ^ BGH, judgment of May 19, 2011, Az .: IX ZR 9/10
  17. BGHZ 117, 127, 130
  18. ^ BGH, judgment of January 30, 1992, Az .: IX ZR 112/91
  19. Thomas Junggeburth, Internal hard letters of comfort as a means of defending against insolvency , 2009, p. 37.
  20. Jens Koch: The letter of comfort , Tübingen 2005, ISBN 3161486749 , p. 66 f.
  21. Jens Koch: The letter of comfort , Tübingen 2005, ISBN 3161486749 , p. 19.
  22. a b BGH, judgment of September 20, 2010, Az .: II ZR 296/08
  23. BGH WM 2000, 2371, 2372
  24. BGH WM 2001, 1863, 1864
  25. a b Peter Jung: The company shareholder as a personal core of the society with legal capacity , 2002, p. 402 ff., ISBN 3161478622 .
  26. BFH, judgment of December 12, 1990, BFHE 163, 146; BStBl. II 1991, 479
  27. OLG Munich, ZIP 2004, 2102
  28. BFH, judgment of October 25, 2006, Az .: IR 6/05
  29. ^ Dietrich Rümker: Problems of the letter of comfort in the credit protection practice , WM 1974, p. 996.
  30. Jens Koch: The letter of comfort , Tübingen 2005, ISBN 3161486749 , p. 71.
  31. ^ OGH, judgment of July 11, 1985, Az .: 7 Ob 572/85