Collateral enforcement for financial institutions.
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Collateral realization of company shares, securities, patents, trademark rights, licensing rights, IP rights and domains based on contractual lien agreements or statutory provisions
Pledges of rights as a strategic financial instrument for sustainable liquidity
We specialize in the exploitation of rights of all kinds
Solid investor network
Identification and selection
Pool of prospective buyers
Transparency and new options for action
Many years of experience
For over fifteen years, we have been entrusted with the exploitation of rights — securities, company shares, patents, IP rights, trademark rights, domains.
Time and cost savings
No time-consuming and cost-intensive dunning and legal proceedings necessary.
Auctions of company shares and rights based on statutory pledges of rights:
According to Section 65 (3) of the German Stock Corporation Act (AktG), the company must sell the shares of shareholders excluded due to non-payment of the contribution. In accordance with Section 214 AktG, the company must sell the new shares issued from shareholder funds after the capital increase that have not been collected by the shareholders after one year. In the event of a capital reduction through a consolidation of shares, the stock corporation must sell the new shares issued in place of the shares declared null and void (226 para. 3 AktG).
In all cases, the shares must be sold at the official stock exchange price through a broker. If there is no stock exchange price, the shares must be sold by public auction. (Compulsory exclusion of shareholders of a GmbH or AG.
If payment of the amount in arrears cannot be obtained from legal transactions, the company may have the share sold by public auction. Any other type of sale is only permitted with the consent of the excluded shareholder.
The sale of company shares such as stocks, limited liability companies or limited partnership shares can sometimes generate better proceeds than the sale via the usual trading venues.
Share deals are playing an increasingly important role. Creditors can be forced to convert their claims into shares (debt-to-equity) even against their will. As a rule, creditors have no interest in becoming shareholders. We offer the desired exit by selling the shares at auction.
There are advantages to acquiring company shares out of insolvency. The buyer then does not have to assume responsibility for the insolvent company’s existing tax obligations or other liabilities under commercial law. The sale can be arranged in such a way that all existing liabilities remain with the insolvent company.
The private sale of company shares in insolvency proceedings can also be carried out by a publicly appointed, sworn auctioneer.
The insolvency administrator must sell the company at the best possible price. If he uses the generally publicly appointed, sworn auctioneer for the sale, this is legally valid due to the surrogate principle. The insolvency administrator does not need to obtain approval from the creditors’ committee, as control is ensured by the public auction because the generally publicly appointed auctioneer is sworn to perform his task conscientiously and impartially.
The shareholder of a limited liability company has the right of abandonment if he is unwilling or unable to fulfill an obligation to make an unlimited additional payment. He can then release his share in the company.
Accordingly, in the event of an unlimited obligation to make additional contributions, the shareholder can exempt himself from paying the additional contribution demanded by making his share available to the company. The share must be sold by public auction
1) In the event of delayed payment, the defaulting shareholder may be issued with a new request for payment within a grace period to be determined, under threat of exclusion from the share to which payment is to be made. The request shall be sent by registered letter. The grace period must be at least one month.
(2) If the deadline expires without result, the defaulting shareholder shall be declared to have forfeited his share and the partial payments made in favor of the company. The declaration shall be made by registered letter.
(3) The excluded shareholder shall remain liable to the company for the loss suffered by the company in respect of the amount in arrears or the amounts of the capital contribution subsequently claimed on the share.
(1) Each co-heir may demand settlement at any time, unless otherwise provided for in sections 2043 to 2045.
(2) The provisions of section 749 (2), (3) and sections 750 to 758 shall apply. Each heir may at any time demand the settlement of the community of heirs, unless the settlement is excluded in the will or there are reasons for postponing it. If the heirs fail to reach an agreement on the settlement, the community shall be dissolved by selling the common property in accordance with the provisions on the sale of pledges.
(1) Upon the death of a person (succession), their assets (inheritance) shall pass in their entirety to one or more other persons (heirs).
(2) The provisions relating to the inheritance shall apply to the share of a co-heir (inheritance share).
The provisions on the pledge of rights to movable property also apply to the pledge of rights to bearer securities.
Bailiffs work exclusively in their assigned district and have many different tasks to perform. Conducting public auctions is only a small part of their work. In practice, bailiffs refuse such an assignment — due to functional incompetence (alternatively according to § 191 No. 1 GVGA) — also with the reference that suitable publicly appointed, sworn auctioneers are available. Bailiffs may refuse without giving reasons, section 191 (1) GVGA. See also: OLG Cologne, decision 30.12.1999 — AZ: 7 VA 2/99.
The short-term and best possible realization of objects or rights of all kinds seized by the bailiff on the basis of a judgment is often not possible or sensible on site. The requirement to keep costs to a minimum already prevents the judicial officer from advertising the pledged object appropriately. On the other hand, attracting national and international buyers and carrying out collateral enforcement is clearly within the core competence of the publicly appointed, sworn auctioneer. The enforcement court authorizes the auction by another person (the auctioneer) at the creditor’s request. The application must be made by the creditor. Please contact us if you have any questions. We can give you valuable advice from our practical experience.
§ Section 825 ZPO Other type of realization
(1) At the request of the creditor or the debtor, the judicial officer may realize an attached object in a manner or at a place other than that specified in the preceding paragraphs. The judicial officer must inform the defendant of the intended realization. Without the consent of the defendant, he may not realize the object before the expiry of two weeks after service of the notification.
(2) The enforcement court may order the auctioning of a seized item by a person other than the bailiff at the request of the creditor or the debtor.
Auctions according to § 825 ZPO
Pursuant to Section 825 (2) ZPO, the enforcement court may, at the creditor’s request, order that the auction of pledged items be conducted by a person other than the bailiff. The generally publicly appointed, sworn auctioneer may be appointed to conduct the auction. The purpose of section 825 (2) ZPO is, among other things, to enable the auctioning of a pledged property by the generally publicly appointed, sworn auctioneer if the auction by the bailiff cannot be expected to yield proceeds corresponding to the true value of the property.
Auctions of company shares and rights based on contractual pledges of rights:
Bearer bonds are bank bonds, savings bank bonds, savings bank certificates, savings bonds, registered bonds, public bonds, industrial bonds, convertible bonds, certificates, mortgage bonds, industrial bonds, etc.
The issuers of bearer bonds are companies from trade, industry, transport and the banking sector that are eligible to issue bonds. They have been admitted to regulated stock exchange trading in accordance with Section 32 et seq. of the German Stock Exchange Act.
Bearer bonds are securities that securitize claims against borrowers. They are issued as bearer securities for transfer. Each holder may demand the promised performance from the debtor.
The holder of a bearer bond is also presumed to be its owner. Section 935 (2) BGB stipulates that the debtor must make payment to the holder of bearer bonds that have been stolen, lost or otherwise come into circulation without the debtor’s consent.
The issuer’s obligation to pay is triggered by the presentation of the certificate. The issuer may only refuse payment if the issue of the certificate is invalid or if there are objections (such as lack of maturity). Due to their informal transferability, bearer instruments are highly fungible. Their legal status is regulated in accordance with § 793 of the German Civil Code (BGB) and the owner of this document is not named. With the liberalization of the capital market in 1990, the approval requirement was abolished.
Bonds may be sold by way of auction by the generally publicly appointed, sworn auctioneer.
A land charge may be created in such a way that the land charge certificate is issued to the bearer. The provisions on bearer bonds apply accordingly to such a letter.
The land charge certificates can be sold by auction by a generally publicly appointed, sworn auctioneer.
(1) A land charge can be created in such a way that a certain sum of money is to be paid from the property at regularly recurring intervals (annuity debt).
(2) When the annuity debt is created, the amount must be determined by the payment of which the annuity debt can be redeemed. The redemption amount must be specified in the land register.
In practice, this land charge is used as a life annuity for the purpose of retirement provision. A fixed sum of money is to be paid at regular intervals from an encumbered property.
This construct is also used in agriculture. Farmers are thus able to satisfy their creditors from current income.
§ Section 1204 Legal content of the pledge of rights to movable property
§ Section 1205 Creation
(1) In order to create a pledge, the owner must hand over the object to the creditor and both parties must agree that the creditor is to be entitled to the pledge of rights. If the creditor is in possession of the object, agreement on the creation of the pledge of rights is sufficient.
§ Section 1206 Substitution of surrender by granting joint possession
Instead of the surrender of the object, the granting of joint possession is sufficient if the object is under the joint control of the creditor or, if it is in the possession of a third party, the surrender can only be made jointly to the owner and the creditor.
§ Section 1207 Pledging by a non-entitled party
If the object does not belong to the pledger, the provisions of sections 932, 934 and 935 applicable to the acquisition of ownership shall apply mutatis mutandis to the pledge.
§ Section 1208 Acquisition of priority in good faith
If the item is encumbered with the right of a third party, the pledge of rights shall take precedence over the right, unless the pledgee is not in good faith with regard to the right at the time of acquiring the pledge. The provisions of section 932 (1) sentence 2, section 935 and section 936 (3) shall apply accordingly.
Auction of movable property pledged as security
The conditions for the effective creation of a contractual pledge of rights are set out in the
§§ Sections 1204 to 1208 of the German Civil Code (BGB) . This is important for lombard transactions of credit institutions and other lenders and for commercial pawnbrokers.
Short-term loans are granted against movable, fungible assets (e.g. securities, bills of exchange, receivables, goods and precious metals) as collateral. The amount of the Lombard loans ranges from 50% to 90% of the pledged assets and rights.
In the event of default under the loan agreement, this collateral can be sold by the publicly appointed, sworn auctioneer by way of auction or private sale.
Pledge of rights to bearer securities in accordance with § 1293 BGB: The provisions on the pledge of rights on movable property also apply to the pledge of rights on bearer securities. This applies to bearer bonds (§ 793 BGB), bearer land charge certificates (§ 1195 BGB), annuity bonds (§ 1199 BGB), bearer shares (§ 10 para. 1 AktG) and investment certificates.
§ Section 793 BGB rights from the bond to the bearer
(2) The validity of the signature may be made dependent on the observance of a special form by a provision included in the document. A signature made by mechanical reproduction shall be sufficient for signing.
§ Section 1195 BGB Bearer land charge
A land charge may be created in such a way that the land charge certificate is issued to the bearer. The provisions on bearer bonds apply accordingly to such a letter.
§ Section 1199 Legal content of the annuity debt
(1) A land charge can be created in such a way that a certain sum of money is to be paid from the property at regularly recurring intervals (annuity debt).
(2) When the annuity debt is created, the amount must be determined by the payment of which the annuity debt can be redeemed. The redemption amount must be specified in the land register.
Questions about:
Manageable costs
We are obliged to carry out the valuation and realization at reasonable costs, taking into account the rights of all parties involved. The amount is based on the type of pledge and the effort required to achieve adequate realization proceeds in the interests of the debtor. As remuneration for his expenses and activities, the auctioneer receives a lump sum from the client and a so-called premium on the hammer price from the buyers. In order to avoid any accusation of squandering, the pledge should be advertised in an appropriate form. The greater the demand for the pledged item, the lower the flat fee.
Important to know: The debtor bears the costs of the proceedings. Unrealizable costs can be claimed as expenses for tax purposes by the creditor.
The Auctioneer shall have unlimited and personal liability for culpable breaches of duty. The client cannot release the auctioneer from this liability for damages. The auctioneer’s remuneration is therefore always also a liability remuneration.
Quick guide for financial institutions and funds
Realization of pledged company shares or rights in the event of insolvency
What it’s all about
- Pledge on rights ≠ Pledge on tangible assets; rights are not eligible for possession. § Section 166 InsO is therefore not applicable.
- The right of realization lies solely with the pledgee.
- Statutory standard form: public auction in accordance with §§ 1228 ff., 1235 BGB.
- Sale by private treaty (§ 1245 BGB) after the opening of insolvency proceedings is inadmissible/void because neither the pledger nor the insolvency administrator can effectively consent.
Do’s — what to do immediately
- Actively assume the role of pledgee; no delegation of realization to insolvency administrator or M&A advisor.
- Appoint a publicly appointed and sworn auctioneer (§ 34b GewO). This is the only way to create a legally binding award (§ 156 BGB).
- Initiate recovery immediately; delay may result in damage and liability.
- Define process setup: Announcement of the auction with core data (§ 1237 BGB); confidential information exclusively via data room according to NDA.
- Request cooperation and documents from the debtor/administrator; security agreement regularly contains corresponding obligations.
Don’ts — typical liability traps
- No M&A “auction sale”/bidding procedure instead of the statutory auction. This is legally not an auction.
- No sale by private treaty after the opening of insolvency proceedings — not even on the basis of an earlier contractual clause (Section 1245 BGB)
- No subsequent agreements with the insolvency administrator on the type of realization, process or price.
When exceptionally market/broker realization?
- Only if an objective market or stock exchange price exists: Realization via a commercial broker or a person authorized to conduct public auctions (§ 1221 BGB).
- In the case of company shares, there is usually no objective market price → public auction remains mandatory.
Liability risks in the event of deviation
- Insolvency administrator: Liability pursuant to Section 60 InsO in the event of unauthorized or delayed liquidation.
- M&A advisors/law firms: Tortious liability (Sections 823 (2), 826 BGB) for involvement in unauthorized exploitation structures.
- Pledgee/creditor’s representative: Liability for organization and advice (§ 280 BGB) in the event of unlawful action.
- Criminal risk: breach of trust (§ 266 StGB) in the event of asset management in breach of duty.
Practical recommendation (workflow)
- Insolvency signal (application/preliminary administrator) → internal switch to “collateral enforcement right”.
- Mandate a publicly appointed auctioneer.
- Set up data room/NDA; define auction information.
- Schedule and announce the auction.
- Award, revenue recognition and complete documentation for audit trail.
