Taylor Wessing helps German insolvency administrator claim damages

Taylor Wessing’s Düsseldorf restructuring team has helped the insolvency adminstrator of five subsidiary companies sue three former board members of Babcock Borsig.

Babcock Borsig has been a major German manufacturing group with 20,000 employees. In July 2002, the Babcock Borsig group filed for insolvency. Before the insolvency filing, the parent company (Babcock Borsig AG) had served as a cash pool for several subsidiary companies.

The insolvency administrator of five subsidiary companies represented by Taylor Wessing’s Düsseldorf restructuring team (partner Dr Michal Malitz and associate Dr Daniel Kunz) sued three former board members of Babcock Borsig AG for damages amounting to €8m (£6.6m). He argued that the board members of the parent company delayed the application for insolvency. As a consequence, the subsidiary companies provided the parent company with further money in line with the cash-pooling agreement.

After having been rejected in the first instance, the Higher Regional Court of Düsseldorf decided in favour of the claimant. The court considered the parent company’s application for insolvency as delayed as the company was not able to repay loans to financing banks. These loan claims had become due in the meaning of insolvency law around two months prior to the insolvency filing.

Furthermore, the court held that the damage claim was not time barred. The insolvency administrator could not be expected to know every relevant detail, especially in large-scale insolvency proceedings. In the particular case, the limitation period therefore did not start to run prior to the completion of the criminal proceedings against the board members.