Often the insolvency administrator challenges legal transactions that have been carried out by insolvent companies. This legal act is called insolvency challenge. It is very important in practice. In general, an insolvency challenge is a challenge to a legal transaction of the insolvency debtor prior to the opening of insolvency proceedings. It aims to treat all creditors equally. We explain under which conditions the insolvency challenge is possible and what legal consequences are linked to it.

With an insolvency challenge, the insolvency administrator can reverse legal action, factually unjustified dispositions or changes in assets of the insolvency debtor in advance of the insolvency. It is therefore necessary according to § 129 InsO that some conditions are met before an insolvency challenge can take place. As a rule, insolvency is the consequence of the course of a crisis. Therefore, it can often also be recognizable by creditors or debtors. It is therefore unjustified if the debtor voluntarily or under pressure satisfies some creditors rather than others and thus benefits them. Fundamentally, therefore, a legal act of the insolvency debtor is necessary before the opening of the insolvency proceedings, a concomitant creditor disadvantage and the existence of a ground for challenge.

The insolvency challenge must be distinguished from the creditor challenge. The aim of the insolvency challenge is to increase the insolvency mass and to enforce equal treatment of all creditors. Nonetheless, the creditor challenge serves to revoke an order of the debtor made with the intention of withdrawing an asset from access through foreclosure. In addition, the insolvency challenge takes precedence over the creditor challenge. After opening the insolvency proceedings, the insolvency administrator alone is entitled to pursue the challenge. If a creditor has received benefits through contesting creditors, the insolvency administrator can claim them back by contesting the insolvency.

In the case of cross-border insolvency challenges, it is not really clear today which authority is responsible and how it is handled. We can also provide you with useful designs.

First of all, there must be a contestable legal transaction. Among other things, the transfer of property, the transfer of assets, the assignment of claims or rights and the encumbrance of land are contestable. In addition, the insolvency administrator can also challenge foreclosures caused by insolvency creditors. However, all these events must have taken place before the opening of insolvency proceedings.

According to § 130 InsO, a ground for appeal lies in the execution of a congruent cover with knowledge of the pending insolvency. Congruent coverage is a security in a contract between the insolvency creditor and the insolvency debtor or a satisfaction of the corresponding claim that the creditor was able to exercise within the agreed period. As soon as this legal act takes place in the vicinity of insolvency, it is legally disapproved. The insolvency administrator can then assume the prior knowledge of the insolvency creditor. The period shall be three months before the application for insolvency proceedings. This contest is based on the fact that the creditor knowingly wanted to reduce the insolvency estate. The insolvency administrator can prove this according to § 130 II InsO by means of press reports or non-payments of the company. Then the creditor bears the burden of proof that he was allowed to accept the service.

An incongruent cover exists if the insolvency creditor was not entitled to it at the time the service was provided. An example of this is the payment on a statute of limitations or compliance with an actually null contract. But also foreclosures before the opening of the insolvency proceedings belong to the incongruent cover. Important is the time between the service provided and the opening of insolvency proceedings. Nevertheless, an insolvency challenge can easily be based on this reason for challenge, because services without obligations are generally not subject to any (particularly high) protection of legitimate expectations.

The ground for appeal pursuant to § 132 InsO is subordinate to the aforementioned grounds for appeal. The countervailable transactions are therefore transactions which directly disadvantage the other insolvency creditors. This includes, for example, guarantees, the free provision of goods or the waiver of a claim. But it also includes if the insolvency debtor sells a thing far below value. In principle, it is necessary that the creditor was aware of the insolvency of the entrepreneur and that the act took place within the last three months before the opening of the insolvency proceedings.

According to § 133 InsO, a ground for appeal is a legal transaction that the debtor has carried out in the last ten years before the application for insolvency proceedings, if he wanted to intentionally disadvantage the insolvency creditors. Therefore, malicious conduct by the insolvency debtor is necessary. Furthermore, the beneficiary must have realised that the debtor’s action penalises the other creditors. In addition, the other part must have known the intent of the insolvency debtor. However, this is presumed if the other part knew that the insolvency threatens and that the act disadvantages the creditors

According to § 143 InsO, the insolvency administrator has a claim against the respondent for restitution of that which has been sold, given away or abandoned from the debtor's property by the contestable legal act. The insolvency estate is to be returned to the position in which it would have existed had the contestable act not taken place. In fact, this does not reverse the legal act, but its legal effect. Accordingly, the claim can be directed, for example, to repayment or restitution. In addition, however, it can also consist in waiving the debt claim. If, for example, an object can no longer be published in Natura, the debtor is liable for the impossibility caused by him culpably.

From a procedural point of view, the insolvency administrator first checks the requirements of an insolvency challenge on the basis of the data provided to him. If this is the case, he shall address the creditors with the corresponding claims. Only if an agreement is not possible will the proceedings be brought to court. The appeal shall be brought by the ordinary courts: