SUNDRY MATTERS RELATING TO A BANKRUPT’S AFFAIRS IN GERMANY
Where the official receiver wishes to deal with a movable assets in Germany, he/she should instruct agents to take possession of and sell the asset, as he/she would do were the asset situated in the UK.
This is, obviously, subject to any security interest in relation to the property.
Technical Section are in the process of sourcing a list of agents in Germany who would be able, and willing, to act for the official receiver in the realisation of assets situated in Germany. The information will appear here as soon as it is obtained.
The law applicable to the advertisement of a bankruptcy order will be the law of England and Wales under the general principle that the law of the country of the opening of the proceedings is the law applicable to the administration of the estate [note 1]. This requires that the making of the order is published in the London Gazette (see Part 2 of Chapter 5) and allows further publication (in a newspaper, for example) at the discretion of the office holder (see Part 3 of Chapter 5).
There is nothing in the EC Regulation that requires the official receiver to place an advertisement in any country of the EU [note 2]. Where he/she decides to do so, the publication must be in line with the procedures for advertisement in that other country, and must state whether the proceedings are main or secondary (this should be clear from the wording on the order) (see paragraphs 41.25 and 41.26 for information on the different types of proceedings).
Mandatory publication of the making of a bankruptcy order is carried out in England and Wales through the London Gazette, and any further publication is at the discretion of the official receiver (see paragraph 43.1.52 and Chapter 5, Part 1).
Where a bankrupt has the majority of his/her creditors in Germany, the official receiver should consider exercising this discretion by publicising the making of the order in Germany (see paragraph 43.1.55). This will increase the chances of the bankruptcy coming to the attention of those in Germany with an interest in the bankrupt’s affairs such as undeclared creditors or those with information regarding assets.
In Germany, advertisement is administered by the court covering the area in which the bankrupt has his/her assets [note 3]. Annex B11 is a list of the courts in Germany with insolvency jurisdiction. See paragraph 43.1.22 for assistance on identifying the correct court.
The court in Germany is required to publish notice of the making of the bankruptcy order when requested by the official receiver [note 4].
The advert would not be placed in a newspaper (there is no procedure for this in Germany), it would appear in the Federal Gazette (Ebundesanzeiger) and in an electronic format, and must include the information that would normally appear in a full description [note 5]. To make the advertisement worthwhile, the full description should be translated into German (see http://intranet/PSC/Communications/translation.htm for information on facilities available for translation).
It may assist the official receiver, when investigating the affairs of a German national, to understand the German taxation system. For example, a perusal of tax statements should help to establish income levels where there is doubt.
The German tax year runs from 1 January to 31 December.
The following paragraphs (43.1.57 to 43.1.60) outline the main German taxes.
In Germany there are two forms of income tax, one for paid wages (similar to the PAYE system in operation in the UK) (this is known as Lohnsteuer), and one for other forms of earned income, such as income from self-employment, rental income and investments (this is known as Einkommensteuer).
In reality, the two taxes differ only in the way that they are collected. As in the UK, the PAYE equivalent (Lohnsteuer) is deducted at source, whereas the “general” income tax (Einkommensteuer ) is collected by a tax return system.
Under the Einkommensteuer, the tax office (Finanzamt) calculates the tax liability for the current year based on the final payment of the previous year. This tax liability is then divided into four payments which must be made in March, June, September and December (on the 10th of the month). The balance is then paid after the submission of the tax return on 31 May of the following year.
For the year 2009, the tax rates in Germany are as follows (in Euros):
0 to 7,834 – 0%
7,835 to 52,151 – 14%
52,152 to 249,999 – 42%
250,000 and above – 45%
The rates for couples are combined, with each band being roughly double that shown above. For example, a couple with a combined income of 95,000 Euros would be subject to a tax rate of 14%, rather than 42%.
There are also tax allowances (similar to the tax credits system in the UK) for families with children.
Germany operates a system of sales tax (similar to VAT in the UK) which is known as Mehrwertsteuer. The standard rate is 19% which is chargeable on most services and goods. There is a lower rate of 7% which is chargeable on items such as food, books, public transport and newspapers.
As in the UK, Mehrwertsteuer is collected by traders and accounted to the tax office after having off-set Mehrwertsteuer that they have been charged. The returns have to be made by the 10th day of March, June, September and December.
Some items, such as petrol, alcohol, tea, coffee and tobacco carry sales taxes (similar to duties in the UK) in addition to Mehrwertsteuer.
Trade tax – this is a tax on business profits charged by the Federal States of Germany (http://www.bund.de/cln_163/EN/Administration/Administration-of-the-Federal-States/Administration-of-the-federal-states_node.html). The rate charged is set by each State, within levels set by the National Government. The current range is from 7% to 17.5%. This tax may be off-set against income tax (see paragraph 43.1.57) for sole-traders.
Corporation tax – this is charged at 15%. This is similar in principle and operation to corporation tax in the UK.
Solidarity tax – this is charged at 5.5% of the individual’s income tax liability (not of earnings). The monies raised are to fund the costs of integrating the States of the former East Germany into the re-unified Germany.
There are also taxes on inheritances, gifts, capital gains, church membership and real estate.
It is open to the official receiver, as trustee, to issue a disclaimer [note 6] of onerous property situated in Germany, following exactly the same procedures and decision making process as with property situated in the UK (see Chapter 34 for information on disclaimers).
Where a disclaimer is issued in respect of property situated in Germany, Annex G1 (being a list of FAQs explaining the disclaimer process) should be included with the papers when the disclaimer is served on interested parties in Germany. Annex G2 is an English translation of Annex G1.
Where secondary or territorial proceedings are opened in Germany (see paragraph 43.0.32), the official receiver should send the letter attached at Annex H1 to the German insolvency administrator to inform him/her of the official receiver’s position in respect of those other proceedings. Annex H2 is an English version of Annex H1.
43.1.63 German system of child maintenance (November 2010)
Germany has a largely judicial (court-based) system for deciding the liability to pay, and level of, child maintenance (by contrast, the system in England and Wales is largely administrative, overseen by the Child Support Agency).
The applicant for maintenance first has to have the obligation for the payment of maintenance recognised before a decision is taken regarding the amount to be paid. The court will, generally speaking, only become involved in this stage if the parties are unable to reach agreement (see paragraph 43.1.64).
The requirement to pay maintenance can, in effect, be open ended and will not necessarily end when the child reaches a certain age. The requirement may end on a particular event, such as the child leaving full time education or getting married.
(Amended September 2012)
In order to assist parties in reaching agreements, the higher courts in Germany produce tables showing how much maintenance should be paid based on the age of the child and the net income of the party that has to pay the maintenance. The most widely used of these tables for voluntary agreements is the “Düsseldorfer Tabelle”.
Where the official receiver is assessing a bankrupt for an IPA and he/she advises that he/she is subject to a maintenance order/agreement in Germany the official receiver may consider the contents of the Düsseldorfer Tabelle (Here) to verify that the stated level of maintenance is correct.
43.1.64a German child maintenance arrears not a provable debt; lump sum debts provable but not released on discharge
As explained in paragraph 43.0.24, the general principle under the EC Regulation is that the law of the State of the opening of the proceedings is the law that is used to decide matters [note 6a]. There are exceptions to this general principle, but none of them cover debts made under matrimonial proceedings.
The relevant part of English law is the Rules [note 6b], which provide that any obligation (other than an obligation to pay a lump sum or to pay costs) arising under an order made in family proceedings is not a provable debt. A debt arising as a result of an order for a lump sum maintenance payment would be provable debt, but would not be released on discharge [note 6c].
The Act defines "family proceedings" as having the same meaning as that given in the Magistrates Court Act 1980 [note 6d]. The Magistrates Court Act 1980, as amended, refer to European Directives on the jurisdiction, and the recognition and enforcement, of judgements in civil and commercial matrimonial matters and matters of parental responsibility [note 6e].
This being the case, it is likely that an order of a German court in matrimonial proceedings would be recognised by the English court and fall within the definition of "family proceedings" in the Rules.
In summary, arrears of child maintenance under the German order are not a provable debt in an English bankruptcy [note 6f]. A debt following a German order for a lump sum maintenance payment is a provable debt, but is not released on discharge.
Where a bankrupt holds shares in a German company the basic principle to apply is the same as if the shares were in a UK company – that is, the shares should be valued and, if appropriate, sold (see Chapter 31.5, Part 5).
Following the general principles of the law [note 7], the shares would vest in the official receiver upon his appointment as trustee, but German law should be followed so far as the procedure for selling the shares is concerned [note 8].
The following paragraphs (43.1.66 to 43.1.73) give guidance on the procedure for realising shares in Germany.
The most common types of German companies are:
So far as encountering shareholdings are concerned, the official receiver is most likely to encounter the first three in the list (GmbH, AG and eG).
A GmbH is the type of German company that is most comparable to a UK limited (‘ltd’) company. The shares are held privately and cannot be sold through a stock exchange, or offered for sale to the public. The company’s articles of association will dictate the circumstances in which they can be sold and the procedure to be applied to the sale.
Any transfer of shares, by law, has the formal requirement to be in writing and in front of a notary.
It is likely that the persons most interested in purchasing shares in a GmbH would be the other shareholders or directors of the company (depending on the terms of the company’s articles of association, they may be the only persons to whom a sale can be made).
In the interests of creditors, the official receiver, as trustee, should not let the limited market for the shares stop him/her seeking a fair price for them. In this respect, the official receiver may consider the principles outlined at paragraph 31.5.65. Depending on the likely value of the shares and/or the difficulty in obtaining information the official receiver may consider appointing a local agent to assist in the valuation and sale of the shares (see paragraph 43.1.69).
In short, and under normal circumstances, the valuation of shares follows the same principles as in the UK. The most common valuation methods include discounted cash flow or discounted earnings methods, comparable transactions or comparable companies approaches, or – if these methods do work – a net asset valuation.
Unless the official receiver has his/her own arrangements, he/she may consider the use of the services of:
Robert E Weidinger
D- 83626 Oberlaindern (Valley)
Tel: 00 49 8024 30 31 778
Fax: 00 49 8024 30 31 779
Mobile: 00 49 171 313 57 30
This firm, or Mr. Weidinger in his capacity as a chartered accountant, can provide any professional service, apart from legal advice, in the context of business transactions, which namely includes
RWCF can act for the official receiver, as trustee, in the valuation and sale of shares in all types of German corporations except AGs.
The costs of obtaining a valuation and/or advice regarding the sale of shares (including the representation of the official receiver, as trustee, in front of the notary public, where appropriate) should be met by the potential purchaser. In exceptional circumstances (such as where there is a strong indication that the shares have value), the official receiver may incur a debit balance on the estate account (but only with the prior permission of Technical Section) to obtain a valuation and market the shares.
An AG is the equivalent to a UK PLC. Generally speaking, the shares will be listed and traded on one of the German stock exchanges. By far the largest stock exchange is the Deutsche Börse (http://deutsche-boerse.com/dbag/dispatch/en/kir/gdb_navigation/home) on which the current value of listed shares may be established.
Shares in an AG are usually held in deposits with a bank so the most straightforward way of arranging for the sale may be for the official receiver, as trustee, to instruct the bank to sell the shares. Otherwise, it will be necessary to seek the appointment of a stockbroker – though consideration should be given to the value of the shares against the costs of sale.
The German for stockbroker is ‘boersenmakler’ and an internet search of that word should provide some useful links to assist the official receiver in locating the services of a stockbroker..
There is no requirement for the shares in an AG to be transferred in writing and in front of a notary.
An eG is a cooperative society. These have been encountered where bankrupts are members of a cooperative bank (a very rough equivalent of a member-owned UK building society), but they are also found in the agricultural sector. Where a bankrupt owns shares in an eG it is likely that the cooperative society will be able to provide information regarding the value of the shareholding and, also, deal with the sale.
Alternatively, the agent detailed at paragraph 43.1.69 will be able to assist.
Where a bankrupt has shares in companies other than a GmbH (see paragraph 43.1.67), an AG (see paragraph 43.1.71) or an eG (see paragraph 43.1.72), it is likely that the official receiver, as trustee, will need to seek specialist advice from a firm such as that detailed at paragraph 43.1.69 to establish the process for selling the shares and valuation (where that information is otherwise unavailable).
It is possible that a German organisation may refuse to provide information relating to a bankrupt’s affairs, or may refuse to assist otherwise in the realisation of an asset, citing German data protection legislation. It is not clear the effect that the exemptions to data protection legislation available to official receivers [note 9] would have in Germany. The official receiver should, instead of trying to persuade the organisation to provide the information, have the bankrupt complete the data protection disclosure authority [note 10] and send that to the organisation concerned. A German version of this form is attached at Annex I.
[Back to Part 4 – Dealing with a motor vehicle in Germany]