2008-10-23 Schultze & Braun

Warning for hedge funds with investments in Germany

Hedge funds and other investors are being warned by Schultze & Braun, Germany’s leading
commercial business recovery and insolvency law firm, that new laws coming into force imminently will change the options open to companies being reorganised. This ultimately could benefit creditors who own equities and bonds of particular distressed companies.
The Company Law Reform Bill (MoMiG) is expected to come into force on 1 November 2008. One of the effects of it will be to make it easier for German entities to “travel” to England (ie move the company’s “registered seat” to England while maintaining their legal from governed by German corporate law) in order to use its insolvency regime to help them reorganise.
Annerose Tashiro, a specialist cross-border restructuring lawyer at Schultze & Braun, said: “There already has been a modest trend for German companies in difficulties to move to England because its insolvency procedure is arguably more flexible.”
Examples where this has been done, with varying degrees of success, include Deutsche Nickel AG; Hans Brochier GmbH & Co KG; and Schefenacker AG.
Annerose Tashiro added: “One of the effects of the Company Law Reform Bill will be to make it easier for such distressed German businesses to move to London to undertake CVAs1 under English law, although such companies will still have to make sure that important business activities are also in the UK to secure jurisdiction here.
“This will in fact help hedge funds and other investors in distressed companies since their position as creditors may not be subordinated with a CVA, compared to the reorganisation being done in Germany. In other words, they are more likely to get their money if the reorganisation is successful.
“Clearly this is a new area of law and will depend on specific circumstances. There are also
substantial extra costs of moving a company’s centre of management influence to England. My
advice to hedge funds with distressed German assets is that they need to carefully review the effect of this change on their rights in each investment. A company choosing to take travel to London to seek to a CVA has the potential to advantage hedge fund investors compared to other options.”

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

Additional information:
  • 2016-07-13 Dr Stefan Schmittmann to assist Schultze & Braun as of counsel
  • 2012-10-10 New statistic from Schultze & Braun: Insolvency plan under-used
  • 2009-02-23 Appointment of Frank Tschentscher
  • 2008-12-19 Germany’s crunch to hit even harder in 2009 warn top insolvency lawyers
  • 2008-12-05 Comments on the outlook for investment in distressed debt in 2009
  • 2008-07-25 Schultze & Braun wins landmark case against the Ordre des Avocats de Strasbourg
  • 2008-07-02 Law hits distressed debt investors
  • 2008-04-12 German credit crunch warning
  • 2008-03-03 German ministers seek to inflict pesticide on financial “locusts”
  • 2007-09-28 Leading german insolvency law firm launches in London
  • 2006-09-21 First book on restructuring with the insolvency plan under German law
  • 2005-03-21 New head of Schultze & Braun’s international team
Schultze & Braun LLP
http://www.schubra.de, Email: mail@schubra.de