International Insolvency

As your co-chairs, we are very excited to welcome new members to the committee and also look forward to connecting with long-time committee members. Thanks to those who have contributed articles to this newsletter (and to Simon Eickmann and Olya Antle for acting as editors). Special thanks to Evelyn Meltzer for her service as co-chair of the International Committee over the past two years, and a warm welcome to Ken Kraft as the incoming co-chair.

In cross-border restructuring cases, frequently there is a U.S. or U.K. parent company and a German subsidiary. In a crisis, the managing director of the German entity often has a hard time explaining to the parent company what the duties are under German law if there is a crisis. From a U.S./U.K. perspective, the managing directors seem to be “wetting their pants” for no reason. This article wants to show that the dangers are all too real. It is also meant to raise awareness about these issues for managing directors of German corporations who have no German background.

This article deals with the controversial practice of a Polish debtor being a capital company entering a multi-million M&A procedure by dividing assets and transferring part of the assets to a new shell company, in which the ownership structure was created on the model of the old company. We will assess this practice from the perspective of debtors withdrawing assets from the company by dividing it while simultaneously using a speculative accounting method, the adjusted net assets method, in order to understate the value of the transferred assets.