2006-02-09 Phoenix Kapitaldienst GmbH

Insolvency plan procedure aimed for - payments to creditors may be earlier than first expected

The creditors’ committee in the PHOENIX insolvency case has met today. The members of the committee instructed the insolvency administrator, attorney Frank Schmitt of Schultze & Braun, to take the first steps towards an insolvency plan. If this insolvency plan is eventually accepted by the majority of creditors, the first payments to the injured investors could be expected by the end of the year.

In today’s meeting, the insolvency administrator and his team informed the members of the creditors’ committee in detail about the progress of the proceedings. Before the meeting, the members of the Committee had received various reports by renowned and high-ranking independent legal experts on a number of issues addressed at the first meeting of creditors. These reports and the lively discussion during the meeting of the creditors’ committee show quite clearly that the question of how the investors are to be recompensed has no easy answer. As there are various differing and at times conflicting interests, both among the individual investors and also in relation to EdW, the insolvency administrator stressed again that the funds under administration can be distributed in due course only once the disputed issues are resolved by way of an insolvency plan. In this respect, the insolvency administrator outlined to the members of the Creditors’ committee a number of different proposals based on most recent findings. In particular, he submitted calculations showing the economic effects of the different conceivable variants. The administrator has now been instructed to make preparations for an insolvency plan and to calculate further variations on the various compensation options. This work is expected to be completed in the first quarter of 2006.

At the meeting the insolvency administrator emphasised once again that time frames in insolvency proceedings differ substantially from conventional concepts of time in that the announcement of results “in due course” can well mean several months of sustained effort and work. Even assuming that an insolvency plan will be prepared, the investors may therefore realistically expect payments in the current calendar year only if everything proceeds smoothly, if conflicting interests are harmonised and reconciled, and if there is a general readiness to waive maximum demands.

The insolvency administrator also reported on the developments regarding the Danish subsidiary. Efforts are being made to distribute the proceeds from the liquidation of the company evenly and equitably to all insolvency creditors and to ward off the Scandinavian investors’ exclusive claim to the assets of the Danish subsidiary.

The database set up by the insolvency administrator which will constitute the basis for the compensation payments by EdW has made good progress. However, the investors’ data from the past 13 years must first be collected (some from paper records or reference files), checked and abstracted. The insolvency administrator is confident that he will be able to access consistent data by the end of the first quarter of 2006 at the latest, which will then serve as the prime prerequisite for any payments, whether by EdW or by the insolvency administration.

Complying with resolution adopted by the creditors’ committee, the insolvency administrator has now begun to approach investors who have received payments immediately prior to the filing for insolvency and to demand repayment. The first legal actions have already been instituted on behalf of the insolvency administrator. The insolvency administrator was also pleased to report that some voluntary repayments have been made.

The investigations into the facts of the case by the “Forensic Services Criminal Insolvency” Department are almost completed. The head of this unit, Mr. Otto Lakies, said that he expects his officers to complete their work also by the end of the first quarter of 2006. They have succeeded in disclosing a number of pertinent details on the nature and manner of these fraudulent deals. As before, the investigators and the insolvency administration continue to cooperate closely.

What are insolvency plan proceedings?

Plan proceedings have been included in the insolvency code in early 1999 and now constitute an alternative to regular insolvency proceedings. The creditors, the insolvency administrator and the debtor may file for insolvency plan proceedings. Once the insolvency plan has been worked out, it is forwarded to the insolvency court which will first review if the plan complies with certain formal aspects and if there are any severe defects. Following this preliminary review, the insolvency court will convene a creditors’ meeting in which the content of the plan will be discussed and where the members decide on whether plan will be accepted or rejected. Insolvency plan proceedings can be completed within just a few months after filing, whereas regular insolvency proceedings can run for years.

Schultze & Braun have recognised the advantages offered by the insolvency plan procedure and have specialised in this field. The firm both carries out its own plan procedures and drafts insolvency plans for third parties. Besides developing various types of insolvency plans, Schultze & Braun have helped to shape the way in which the insolvency plan procedure is applied in practice, both on the national and the international level.

For further information please contact our spokesperson:
Mail: Presse@schubra.de, Phone: +49 (0) 7841/708-0

Additional information:
  • 2011-02-16 BGH ruling: No right of separation for Phoenix investors
  • 2007-04-25 Majority of creditors agree on insolvency plan – one creditor objects
  • 2005-05-04 Assets worth approx. 210 million Euros secured
  • 2005-03-16 Involuntary insolvency proceedings opened - 30,000 investors affected
Schultze & Braun GmbH Rechtsanwaltsgesellschaft - Wirtschaftsprüfungsgesellschaft,
http://www.schubra.de, Email: mail@schubra.de