When insolvency administrators demand the consent of pledgees to realization by private treaty - legal limits and liability risks for pledgees and administrators
Why consent pursuant to section 1245 BGB (deviating agreements) is not required in insolvency for pledged company shares and other rights and why public auction (section 1235 BGB) is the only legally compliant way.
In addition: Intangible rights — such as patents, trademarks, licenses, internet domains — which are reported as assets in the balance sheet are often included in so-called free asset deals in practice, although they are not freely transferable as legally independent rights. However, capitalization on the balance sheet does not replace the legal process of exploitation.
In this way, the pledge realization law is often circumvented unknowingly — with considerable liability risks for pledgees, administrators, advisors and purchasers. This is particularly critical when hedge funds, private equity companies or financiers act as pledgees: If the private sale of pledged rights in insolvency is carried out by private contract as an asset deal, although these are not freely disposable, there is a risk of reversal (section 812 BGB, section 81 InsO) and personal liability (section 60 InsO) if the statutory route of public auction (sections 1228 et seq. BGB) is circumvented.
The legal framework — Section 1245 BGB does not apply in insolvency
For tangible assets, section 166 (1) InsO stipulates that the insolvency administrator may realize security interests with effect for the party entitled to separate satisfaction. However, this provision only covers movable tangible property. According to BGH ruling 27.10.2022 — IX ZR 145/21, the insolvency administrator is not authorized to realize intangible assets — no application of section 166 (1) InsO in the case of rights. In the case of rights, the pledgee therefore remains The insolvency administrator is solely authorized to liquidate the assets and must initiate the liquidation as a public auction without delay in order to avoid a loss of value and to allocate any liquidation proceeds in excess of his claim to the insolvency estate for the equal satisfaction of creditors. The insolvency administrator may not realize the assets “for the account of the person entitled to separate satisfaction”. Instead, the general rule applies to pledged rights Pledge realization regulations of §§ 1233 ff. BGB, the rule of which is public auction (§ 1235 BGB).
When insolvency proceedings are opened, the pledger loses his power of disposal (§ 80 InsO). Thus the possibility of realization by private contract in accordance with Section 1245 BGB does not apply. This requirement can neither be fulfilled in insolvency nor replaced by the pledgee’s consent. Attempts to obtain this consent unlawfully or to replace it by the insolvency administrator would lead to an unlawful interference with the pledgee’s lien and thus to a Violation of the mandatory pledge realization regulations (§§ 1228 ff. BGB).
According to established commentary (e.g. MüKo-InsO/Huber, Section 166 para. 20 et seq.; Uhlenbruck/Sinz, Section 166 para. 9) and the more recent case law of the Federal Court of Justice (judgment of October 19, 2022 — IX ZR 156/21), Section 1245 BGB is not applicable in insolvency proceedings. is not applicable because the pledger’s consent can no longer have any legal effect. The insolvency administrator can neither replace it nor approve it retrospectively.
This makes it clear:
- Section 166 InsOdoes not apply to the realization of pledged rights;
- The insolvency administrator has nolegal power of realization in this area;
- Section 1245 BGB isnot applicable in insolvency;
- the only permissible form of realization remains the public auction in accordance with § 1235 BGB.
The narrative of efficiency
In practice, pledgees are often confronted with misleading arguments. The insolvency administrator claims that a private realization through him is faster, cheaper or common practice. In some cases, it is even suggested that the pledge of rights belongs “to the estate” and can only be realized through him. In fact, none of this is true. Pledges of rights do not belong to the estate, but remain with the pledgee. The administrator may not realize or collect them. The aim of this argument is obvious: by obtaining the creditor’s consent, the administrator gains de facto control over the liquidation process — and thus over possible scope for negotiation, fees and influence over the group of purchasers. In reality, the creditor is forced into a legally risky situation that weakens his position and exposes him to liability.
Consent of the pledger not possible
In fact, however, this practice conceals a fundamental illegality. This is because when insolvency proceedings are opened, the pledger loses his power of disposal (Section 80 InsO). This completely eliminates the central prerequisite for a private sale in accordance with Section 1245 BGB. This is no longer the case in insolvency. The insolvency administrator takes the place of the pledger, but not as the legal successor, but as the statutory administrator of the estate. He is not authorized to realize the pledge of rights. Consent to the realization of rights by private contract can therefore not be effectively granted by the pledger or administrator or by the pledgee within the insolvency proceedings. If the insolvency administrator gives the impression that the pledge of rights automatically falls to the estate or that consent is a “mere formality”, he is objectively acting in breach of duty (§ 60 InsO).
Consent of the pledgee unlawful
The pledgee may also not consent to the insolvency administrator realizing the pledged rights by private contract. At first glance, such consent may appear to be a pragmatic solution — however, it cannot have any legal effect. According to the system of sections 166 et seq. InsO, the insolvency administrator only realizes tangible collateral for the account of the party entitled to separate satisfaction, not for the estate. The administrator has no authority to realize rights. In principle, a pledged object remains legally third-party property and the provisions of sections 1233 et seq. BGB continue to apply. Consent pursuant to section 1245 BGB, which would be required outside of insolvency, does not apply when proceedings are opened because the pledger loses his power of disposal (section 80 InsO).
Even if the pledgee were to “alternatively” declare his consent to the private sale, this would not change the legal situation. The facts of § 1245 BGB would not be fulfilled; the consent would be irrelevant. A realization carried out on this basis could be considered a violation of a statutory prohibition (§ 134 BGB), with the consequence of nullity. In such a case, the pledge of rights would remain in place (§ 1252 BGB), the purchaser would not receive unencumbered ownership and the insolvency administrator would run the risk of liability (§ 60 InsO). The pledgee himself could also be exposed to legal risks if he is proven to have participated in an unlawful form of realization — in the case of pledged rights in insolvency, i.e. circumventing the legally prescribed public auction. This applies in particular to public institutions such as savings banks, state banks and the Kreditanstalt für Wiederaufbau (KfW). If the pledgee knows or should know that section 1245 BGB does not apply in insolvency, his consent could be considered a negligent breach of duty. This breach of duty relates in particular to the duty of care of a prudent businessman (Section 347 HGB) if the pledgee is a financier or an institutional creditor.
The liability risks — for administrators and pledgees alike
A pledgee who agrees to an unauthorized private sale despite being aware of the opening of insolvency proceedings is acting in breach of duty towards the pledger and other creditors. He may be accused of contributory negligence (Section 254 BGB) or even of independent liability due to interference with third-party rights (Section 823 (2) BGB in conjunction with Section 1245 BGB, Section 134 BGB).
If the pledgee acts in collusion with the insolvency administrator — i.e. deliberately to the detriment of other creditors or the pledger — tortious liability for aiding and abetting breach of trust (Sections 27, 266 StGB) or a breach of Section 826 BGB (immoral intentional damage) may also be considered.
If the insolvency administrator urges the pledgee to consent, although section 1245 BGB does not apply, he is objectively acting in breach of duty (section 60 InsO). The unlawful realization leads to a violation of the statutory pledge realization regulations (Sections 1233 et seq. BGB) and can trigger claims for damages by the creditor. In addition, there is a risk of liability in tort (Section 823 (2) BGB) and, in the case of deliberate action, even criminal prosecution for breach of trust (Section 266 StGB) or aiding and abetting a breach of duty.
The pledgee himself also bears a considerable risk. Consent that is based on an incorrect legal basis is not effective, but is subject to dispute: If a transaction is carried out on its basis, it is void under Section 134 BGB because it violates a legal prohibition. The purchase agreement for the pledged property must then be rescinded (Sections 812 et seq. BGB). The pledge of rights remains in place and the purchaser does not acquire an unencumbered right. In addition, the pledgee can be charged with contributory negligence if he or she has joined a recognizably inadmissible form of realization.
Public auction as the only legally compliant method
The only legally compliant way to realize a pledge of rights in insolvency is by public auction in accordance with Section 1235 BGB. It guarantees transparency, market liberalization, legal clarity and an incontestable determination of value by knockdown. The acceptance of the bid is a legally binding act of sovereignty (Sections 156, 383 BGB as amended) and replaces any subsequent consent or approval.
The public auction protects creditors, administrators and purchasers alike. It documents the market value objectively, prevents any suspicion of partiality and rules out renegotiations. For the insolvency administrator, it also means relief: he fulfills his obligations to achieve the best possible and transparent liquidation (Section 1 InsO) and avoids personal liability.
Responsibility means education
It is the responsibility of all (potential) parties to the proceedings to clearly state this legal situation. Pledges of rights are exploitation rights — not negotiation rights. Anyone who settles them via the insolvency administrator risks illegality, liability and reversal. On the other hand, those who choose the statutory standard case of public auction act in a legally compliant, comprehensible and final manner.
The practice of realizing pledged rights by private treaty in insolvency is not an option, but a misguided development. It is based on a misunderstanding of section 1245 BGB, which simply does not apply in insolvency. Where administrators nevertheless demand consent, this is not a legal requirement, but an attempt to gain control where the law demands neutrality. The public auction remains the only permissible and liability-free way — transparent, legally legitimized and legally compliant to the last consequence.
Damage to reputation and trust
In addition to the legal dimension, pledgees also have a Significant reputational damage if they participate in non-compliant recycling. Financial institutions have a particular responsibility to ensure compliance with legal procedures. Unlawful consent can be considered a breach of internal compliance or risk management guidelines, regardless of the outcome of the realization. Particularly in the distressed environment, where transparency, neutrality and equal treatment of creditors are key basic principles (Section 1 InsO), such consent can permanently damage the trust of other parties involved.
Key message:
Section 1245 BGB is inapplicable in insolvency. The insolvency administrator cannot grant or replace consent to the realization of pledged rights by private contract. The only legally compliant way remains the public auction in accordance with § 1235 BGB, which The new version of Section 383 of the German Civil Code (BGB) establishes the objective market value in a binding manner and creates legal clarity.
The legal situation is clear: there are no viable legal arguments for the private realization of pledged rights in insolvency. § Section 166 (1) InsO does not apply, consent to realization by private treaty has no effect, and a realization based on this would be unlawful and give rise to liability. The only legally compliant way remains the public auction in accordance with Section 1235 BGB — it guarantees legal clarity, transparency and the finality of the knockdown.
A pledgee may refuse to allow the insolvency administrator to realize pledged rights in the open market. because § 1245 BGB does not apply in insolvency proceedings. is not applicable. If he does so nevertheless, this consent is legally irrelevant and can This can have consequences under civil law, liability law and reputational law.
As a result of the threat of Invalidity of the realization (§ 134 BGB), Continued existence of the pledge of rights (§ 1252 BGB), Reversal (§§ 812 ff. BGB) and liability (Section 823 (2) BGB, Section 826 BGB, Section 60 InsO). Pledgees should therefore neither declare nor tolerate such consent. The legally compliant way remains the public auction in accordance with § 1235 BGB — this alone guarantees legal certainty, market transparency and freedom from liability.
Legal sources and references
Legal regulations:
- § 1228 ff. BGB-Order of collateral enforcement
- § Section 1233 BGB-Beginning of collateral enforcement
- § Section 1235 BGB-Public auction as the legal rule for collateral enforcement
- § Section 1245 BGB -realization by private contract with the consent of the pledger (inapplicable in insolvency)
- § Section 1252 BGB-Continued existence of the pledge of rights in the event of ineffective realization
- § 134 BGB-Nullity in case of violation of legal prohibition
- § 138 BGB -immorality and usury
- § Section 156 BGB -Conclusion of the contract by knockdown (applicable analogously for the determination of value)
- § Section 280 (1) BGB -Compensation for breach of duty
- § Section 383 BGB new version- Award as a legal act of sovereignty (legal definition)
- § 812 ff. BGB -reversal (unjust enrichment)
- § Section 823 (2) BGB -Liability for violation of a protective law
- § Section 826 BGB-Unethical intentional damage
- § 347 HGB-Duty of care of a prudent businessman
- § Section 1 InsO-Principle of equal treatment of creditors
- § Section 50 InsO-Rights to separate satisfaction
- § Section 60 InsO-Liability of the insolvency administrator
- § Section 80 InsO -Transfer of the power of administration and disposal
- § Section 81 InsO-Invalidity of dispositions by the debtor after the opening of proceedings
- § Section 166 InsO -realization by the insolvency administrator (only applicable to tangible assets)
Jurisdiction:
- BGH, judgment of 27 October 2022 — IX ZR 145/21:
No application of section 166 (1) InsO to intangible rights; the insolvency administrator is not authorized to realize pledged rights. - BGH, judgment of October 19, 2022 — IX ZR 156/21:
Confirmation that Section 1245 BGB is inapplicable in insolvency; consent of the pledger has no effect - Higher Regional Court of Cologne, decision of May 15, 2019 — 2 U 21/18:
Change in market or valuation conditions leads to the invalidity of an earlier consent to private sale.
Commentary literature:
- Münchener Kommentar zum BGB (MüKo-BGB/Schwab), § 1245 Rn. 4–6:
Consent of the pledger must be available at the time of utilization; blanket consent ineffective. - Palandt/Ellenberger, § 1245 marginal no. 1 f.:
Exploitation by private contract only permitted with the current consent of the pledger. - MüKo-InsO/Huber, Section 166 para. 20 et seq.; Uhlenbruck/Sinz, Section 166 para. 9:
166 InsO only applies to tangible assets; not applicable to rights. - Staudinger/Bork, Section 1245 BGB:
Necessity of the pledgor’s current consent; inadmissibility of approval by the insolvency administrator.
Criminal law regulations (liability and criminal liability level):
- § 27 StGB-Aiding and abetting
- § 266 StGB-Unfaithfulness
- § Section 17 UWG -betrayal of business and trade secrets (relevant for data exploitation)
Author
Fritz Eberhard Ostermayer
President of BvV e.V. (Berlin) — Bundesverband öffentlich bestellter, vereidigter und besonders qualifizierter Versteigerer
General publicly appointed and sworn auctioneer for all types of auctions (§ 34b GewO)
IfUS-certified restructuring & reorganization consultant (Heidelberg)
Over 15 years of experience in the liquidation of company shares
Contact:
E‑mail: office@deutsche-pfandverwertung.de | Phone: 08027 908 9928
This information does not replace legal advice in individual cases.
We are publicly appointed, sworn auctioneers (auctioneers) with over 15 years of experience in the realization of legal and contractual pledges of rights in legally compliant online auctions with live stream.
Do you have a specific case? Then get in touch with us: TO THE CONTACT FORM.
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Pledge of rights — everything you need to know explained. A pledge of rights can relate to things, i.e. physical objects, as well as to rights of any kind, such as company shares, patents, securities, IP rights, domains, licenses or trademark rights.
