The expansion of risk management can become vital for creditors. Alternatives in the management of payment risks are indispensable.
Starting point
In recent years, internal and external influences have caused lasting and profound fragility in the German economy, particularly as a result of the transformation processes initiated by the legislator. Along with falling earnings, the economy is increasingly suffering from incalculable risks and uncertainties. Small and medium-sized enterprises in particular, which are focused on our domestic market, are looking forward with great concern to a long period of irreparable cracks and distortions.
Most creditors are aware that sooner or later a wave of sluggish payment behavior, including payment defaults and insolvencies, can inevitably overwhelm almost any company. It is therefore high time to realign internal debtor management.
Problem amplifiers for creditors: StaRUG, ESUG, Insolvency Code
The main driver of this development is the politically desired expropriation of creditors legitimized by the legislator and driven forward step by step by interested parties. Many entrepreneurs consider it an unacceptable undermining of the property rights enshrined in the German Basic Law if they are unintentionally called upon to reorganize and restructure their defaulting debtors by means of ongoing amendments to debt law such as the StaRUG, ESUG and the Insolvency Code. This is also perceived as unfair if not even the implied promise is kept that creditors will at least retain the restructured debtor or its business model as a customer after the end of the insolvency proceedings.
In practice, however, companies that are no longer solvent are restructured by means of change management and then released back onto the market, often with a completely new business model. The beneficiaries of this system are the consulting industry, interim managers, insolvency administrators and their specially installed and sometimes owned liquidation companies. The possibility of insolvency under self-administration opens the door to moral hazard.
Alternative courses of action: Pledges of rights to secure receivables
In their risk management, forward-looking SMEs are now using newly developed instruments to secure receivables in the case of larger credit exposures or trade receivables. The basis for this is the use of contractually agreed pledges of rights. This provides additional planning security and opens up the opportunity to react immediately at the first sign of a default on a contract. Securing receivables via agreed pledges of rights to company shares or other rights (license rights, trademark rights, domains, IP rights, patents) is particularly advantageous.
By drafting the contract accordingly in advance (by a lawyer specializing in this area), the creditor puts himself in an advantageous position vis-à-vis the insolvency administrator in the event of insolvency. It has been established by the Supreme Court that the insolvency administrator has no right to realize rights of any kind under section 166 (1) InsO. In the case of non-performing loan commitments, information deficits and loss of control occur time and again, sometimes even driven by criminal energy. Transparency and new options for action vis-à-vis the previous management, also with regard to possible criminal misconduct, arise when changing from creditor to active owner. This can be compensated for by the timely, complete takeover of the borrowers by way of a public auction, which the lender is entitled to do in accordance with Section 1239 of the German Civil Code (co-bidding by creditors and owners).
The acquisition of pledged company shares incurs manageably low costs for the creditor. Control is obtained by acquiring the debtor’s shares by public auction. The creditor can offset the purchase price called in the auction against his pro rata claim to repayment of his claim, i.e. he does not have to pay the purchase price as long as his bid does not exceed the claim. A fiduciary model is also conceivable if the creditor wishes to obtain control indirectly and not acquire the shares himself.
Deutsche Pfandverwertung — Specialist for the pledge of shares
It is very important to have the right partner on board for the timely and legally compliant auction of pledged company shares.
The publicly appointed, sworn auctioneers of DEUTSCHE PFANDVERWERTUNG are specialized in such sales. For many years, we have successfully conducted auctions of all kinds of rights such as GmbH shares or other company shares as well as securities, patents, IP rights, trademark rights and domains. As generally publicly appointed, sworn auctioneers, we are authorized by the German state to carry out this sovereign act as an organ of the administration of justice.
In the event that the creditor does not wish to take over the company shares pledged to him, DEUTSCHE PFANDVERWERTUNG has contacts to interested risk investors.
If you have a specific case, please contact us at > using the contact form
Video — Instructions for clients: > How it works
