Insolvency Clawback under § 133 InsO: Recovery of Payments Received Long Ago

Many companies are unaware that payments received years ago can be reclaimed by the insolvency administrator if the paying company later becomes insolvent.

§ 133 of the German Insolvency Code (Insolvenzordnung, InsO), however, provides precisely for this. The insolvency administrator may reclaim payments, add them to the insolvency estate and distribute them to the body of creditors in order to promote the economic equal treatment of all creditors in the proceedings. The clawback is, however, subject to certain conditions.

From around 2004 onwards, this led to an escalating wave of clawback claims, which in turn put healthy companies under pressure. The cause was that the case law of the Federal Court of Justice (Bundesgerichtshof, BGH) lowered the threshold for permissible clawback ever further. Even a trivial e-mail from a clerk to a colleague at the payee reading "Things don't look good here at the moment, we will only be able to pay in 60 days" could give rise to the presumption that the payee had improperly collected money that should have been allocated to the insolvency estate and the body of all creditors.

In 2017 the legislature defused the problem with a new § 133(3) sentence 2 InsO, which (greatly simplified) provides that such everyday and banal occurrences no longer trigger a clawback. Shortly afterwards, the Ninth Civil Senate responsible for insolvency law signalled that it would not pay much attention to the statutory amendment. After the presiding judge of the senate was replaced in June 2020, however, the BGH brought its case law into line with the course the legislature had intended with its 2017 reform.

Since then, the prospects of companies confronted with clawback and recovery claims by insolvency administrators have improved considerably, so that dealing with such claims professionally is one of the duties (and opportunities) of company management.