Insurance concepts against contesting transactions in insolvency proceedings

Contesting transactions in insolvency proceedings is a considerable risk for businesses. Even a reform of the German law in this area has brought no significant improvement. The risk remains: the insolvency administrator can claim back from you payments you have received from a company subject to insolvency proceedings.

If an insolvency administrator claims back payments by contesting transactions in insolvency proceedings, this can cause serious problems for the business concerned. Especially when payments are contested over a long period of time. The amount of payments which can be claimed back from a company is often substantial.

According to Sections 129 ff. of the German Insolvency Statute (Insolvenzordnung), an insolvency administrator may contest transactions which disadvantage the insolvency creditors. In other words, the insolvency administrator can claim back payments made by the insolvent company to its suppliers long before the insolvency. This means that companies have to refund payments they have received, often over long periods.

The risk of having such payments claimed back is hard to calculate. All companies who were aware of the insolvent firm‘s financial difficulties can find themselves affected. For instance, changes to the contractually agreed payment terms and requests for payment in instalments and deferral count as signs of insolvency.

The main questions arising in this context are:

• How great is the risk of contestation?
• What is the amount of the likely claim?
• Are the insolvency administrator‘s claims in any way justified?

Our solution

Aon offers an innovative solution for covering the risk of contesting transactions in case of insolvency. The key features of this solution are cover for retrospective default and investigation and, if applicable, defence of claims by the insolvency administrator.

Benefits

• Assistance with assessing the risk and designing the appropriate insurance cover.
• All claims arising from contesting transactions in insolvency proceedings are insurable in principle within the agreed scope of cover – even those arising from insolvency proceedings already commenced.
• Specialist lawyers check the insolvency administrator‘s claims and lead the discussions.
• In the case of the justified contest of transactions in insolvency proceedings, both the losses arising from repayment and the costs of instructing lawyers are covered.

Our experts will be glad to answer further questions. Fell free to contact us.