Company takeover from insolvency: problem case liability

Buyers are liable for liabilities in the company takeover. So lurk pitfalls in the form of contaminated sites that buyers have to take into account – differences can be seen as to whether the insolvency administrator or the owner takes over. Since this type of takeover is complex, it should always be accompanied by specialized business start-up advice or management consultancy. This is also subsidized by the state.

Liabilities remain included in the company takeover

The idea of ​​buying up an insolvent company and then being able to restructure it without any inherited liabilities in the form of outstanding liabilities does not correspond to practice. This also applies to popular asset deals that do not correspond to “cherry picking”, but rather to Section 25 HGB (external link). clear liability rules set up for the buyer and thus new owner.

Inevitably, according to § 75 paragraph 2 of the tax code (external link), all liabilities from the acquired company are transferred to the buyer, provided that these towards the state exist. This includes all forms of operating taxes, in particular trade and sales tax, which the insolvent company may not have paid for some time or has deferred. The same do not expire with the company takeover and must therefore be offset against the purchase price by buyers.

This also applies to statutory liabilities, for example if the insolvent company has received aid of a nature contrary to Community law or if environmental contamination has accumulated on the property of the insolvent company. The legislator grants both of these in the form of a liability to be assumed by the insolvent company and thus, in the next step, by the buyer.

Employees are viewed as a whole as part of the company

the securing the workforce is regulated in the case of a company succession by § 613a BGB (external link). The legislator stipulates that buyers of insolvent companies must take over all existing employment relationships in their entirety when making a purchase. This, in turn, is intended to ensure that buyers do not just take on highly qualified or particularly high-performing employees, while leaving a second part of the workforce behind. Likewise, the legislator wants to counteract the targeted purchase of manpower, representatively through takeovers from insolvencies. The process is automatic: With the purchase, it is automatically agreed that the entire, currently existing workforce will be transferred to the buyer of the insolvent company.

This applies when insolvent companies exceed the awarded liquidator be bought. The transfer of business also applies to employment relationships that were terminated before the takeover, but then only up to the end of the statutory or contractually agreed notice period. Liabilities that still exist from the time before the insolvency are not borne by the buyer. In practice, this primarily affects pensions that were granted by the previous owner to his workforce. These are not subject to the payment obligation of the new owner. The insolvency administrator is responsible for their fulfillment, if possible.

Insolvency administrators usually get former employees on board for company-specific activities, such as continuing bookkeeping and accounts receivable management. Formerly because the active workforce is transferred to the new owner.

Risks should be strictly calculated with every company takeover

In the case of a planned takeover, a distinction must be made between two options: One is dedicated to the takeover before insolvency proceedings are opened, the so-called asset deal. With this it is conceivable to leave liabilities with the seller, but only under one condition. The purchase price that the seller receives must be such that it is able to fully pay off the liabilities left behind.

If this is not the case, the seller would inevitably have to file for insolvency, and the buyer could face a challenge under § 129 ff InsO (external link). The insolvency administrator is responsible for this. If he sees a situation in which creditors can no longer be satisfied due to the previously disadvantageous sale, he can reverse the transaction. The previously sold parts of the company would then be transferred to the insolvency administrator, who would liquidate them to meet creditors’ claims. Theoretically buyers would get back the amount previously paid: Only after the creditors’ claims have been fulfilled, there is usually nothing left of it. The buyer then spent money, but in the end received nothing in return.

For buyers, such an approach to a business takeover is very risky. The risk can be reduced if the Asset deal with the insolvency administrator is being wound up instead of the previous owner. Where possible, the liquidator may agree to a no-obligation transfer. Since he agrees to this himself, there is no potential challenge to the deal.

No guarantees when taking over a company from insolvency!

Insolvency administrators exclude any liability in the event of a sale from the insolvency estate. This concerns:

  • Profit prospects from the purchase of the company
  • Liquidity and value of fixed and current assets
  • Amount of intangible assets

For buyers who are considering a company takeover from bankruptcy, this results in many uncertainties. Therefore, it is advisable to consult an expert. You can never really be sure what you’re actually getting, and then again, whether what you’re getting is worth the money you’ve invested (the purchase price). Due diligence checks (simplified: careful checks) can only be carried out to a limited extent for such takeovers from insolvency and are not considered reliable. It is therefore inevitable for buyers to already be aware of all these risks and obligations purchase price priced in and thus reduce your own economic risk.