Investors have invested around 282 million euros in DEGAG profit participation rights
Investors have invested around 282 million euros in profit participation rights of the DEGAG companies and now have to expect significant financial losses. The companies are insolvent, and the district court of Hameln opened the insolvency proceedings on August 22, 2025, for DEGAG Deutsche Grundbesitz Holding AG (Case no. 36 IN 7/25 -4), DEGAG Bestand und Neubau 1 GmbH (Case no. 36 IN 8/25 -4), DEGAG Kapital GmbH (Case no. 36 IN 13/25 -4), and DEGAG WI8 GmbH (Case no. 36 IN 14/25 -4).
The significance of the properly submitted applications and the role of the insolvency court as well as the district court in examining these applications are central to the entire process. Debtors and creditors have legal obligations within the framework of the proceedings, especially regarding the filing and substantiation of their claims, which are based on the statutory provisions of insolvency law. The legal basis for claims for damages arises particularly from § 280 BGB and § 280 para. 1 BGB in the event of a breach of duty in a contractual obligation, which plays an important role in insolvency proceedings. For all parties – investors, creditors, and debtors – the registration of claims is of great importance as it influences the prospects of restructuring through an insolvency plan and the fulfillment of obligations. Banks, suppliers, and other companies are key players in securing capital and financing the operations of the DEGAG group. Real estate assets represent a significant contribution to the insolvency estate and substantially affect the operations and fulfillment of obligations toward creditors. The investigations of the insolvency administrator and the involvement of various individuals and groups are crucial for clarifying the economic and legal foundations of the proceedings. The legal and economic reasons for the insolvency and the importance of claim registration concern all affected companies and firms.
Once the insolvency proceedings have been opened, investors and other creditors can now submit their claims in writing to the insolvency administrator by October 7, 2025, attaching the necessary documents.
Course of the Insolvency Proceedings
The insolvency proceedings are a complex process monitored and controlled by the competent insolvency courts in Germany. For companies such as DEGAG and its subsidiaries, but also for creditors, debtors, and investors, it is crucial to understand the individual steps and the associated rights and obligations.
The process begins with the insolvency application, which can be filed either by the debtor themselves, by creditors, or in certain cases by authorities. Upon receipt of the application, the insolvency court examines whether there is indeed payment incapacity or over-indebtedness of the company. Only when these conditions are met is the insolvency proceeding officially opened. Upon opening the proceedings, the insolvency administrator appointed by the court assumes control over the debtor’s assets. The administrator is responsible for securing, managing, and optimally realizing the available assets in the interests of the creditors.
In the further course of the insolvency proceedings, the creditors are required to act: they must register their claims with the insolvency administrator within the deadline set by the insolvency court. This also includes claims arising from profit participation rights or mezzanine capital that were used in the past to finance the company. The insolvency administrator then examines each claim individually for its validity and amount. Especially for subordinated profit participation rights, it is important to know the exact priority order of claims, as the Insolvency Code stipulates a clear hierarchy.
After the examination is completed, the available assets are distributed to the creditors – depending on the rank and amount of the acknowledged claims. For many investors, especially those holding subordinated profit participation rights, there is a risk that they will recover only part of their invested capital or, in the worst case, nothing at all. Within the insolvency proceedings, claims for damages may also arise, for example, if managing directors or other responsible parties have breached their duties.
The insolvency proceedings do not only affect management but also employees, who should inform themselves about their rights and obligations. For companies that have relied on profit participation rights or mezzanine capital as a form of financing, the crisis highlights the importance of carefully balancing risks and opportunities.
Anyone acting as a creditor, debtor, or affected employee who has questions about the course of the insolvency proceedings, the registration of claims, or possible claims for damages should consult an experienced insolvency administrator or attorney promptly. This ensures that their own rights are best preserved within the insolvency process and sets the course for successful resolution.
Registering Claims in the Insolvency Proceedings
The opening of regular insolvency proceedings has been delayed but is an important step for investors to avert or at least reduce financial losses. The economic and legal reasons for the insolvency of the DEGAG companies are primarily due to over-indebtedness, loss of liquidity, and failure to meet obligations to creditors, banks, and suppliers, which is highly significant for all parties – investors, creditors, and debtors. The insolvency directly affects the business operations, real estate, and obligations of the affected companies and firms, as both the continuation and restructuring of the business and fulfillment of obligations are at risk. Banks, suppliers, and other companies play a central role in financing and restructuring the DEGAG group, with the search for new capital and alternative financing methods being crucial for the prospect of a successful restructuring. The prospect of restructuring through an insolvency plan largely depends on the investigations of the insolvency administrator and the decisions of the insolvency court, which are of great importance for creditors and debtors. Claims for damages may arise for investors primarily from breaches of duty by the companies, whereby the legal basis according to § 280 BGB and § 280 para. 1 BGB within the framework of the contractual relationship plays a central role. For the various individuals and groups, registering claims in the proceedings is highly important, with the local court and insolvency court reviewing the applications and managing the further procedure.
However, this should not remain the only step. Independent of the insolvency proceedings, investors can also have their claims for damages reviewed, according to the law firm MTR Legal Rechtsanwälte, which has extensive experience in capital market law. Asserting claims for damages can be even more important since the profit participation rights are subordinated. This means for investors that their claims are treated as subordinate in the insolvency proceedings, after the claims of other creditors. Practically, this can mean a total loss of their invested money for investors. However, such subordination is not always effectively agreed upon. If the corresponding clauses are not clearly and understandably formulated for the investor, they may be invalid. This would mean that investors do not have to stand behind other creditors and their claims are treated equally.
But even if that is the case, investors must still expect significant financial losses, as the available insolvency assets will hardly be sufficient to fully satisfy the claims.
Problems became apparent at the end of 2024
DEGAG Bestand und Neubau 1 GmbH issued the profit participation rights “Degag Wohnkonzept 1” and “Degag Wohnkonzept 2,” in which around 2,900 investors participated with approximately 164 million euros. DEGAG Kapital GmbH issued the profit participation rights of Series L and Degag Wohninvest 7. Around 1,400 investors participated with about 46 million euros. Approximately 2,000 investors invested 72 million euros in the profit participation right Degag Wohninvest 8, which was issued by DEGAG WI8 GmbH. Overall, investors have invested around 282 million euros in the profit participation rights, which are now at risk.
The economic problems of the DEGAG companies had already become apparent at the end of 2024 when it became known that they could not make the due interest and repayment payments to investors. Just a few weeks later, the companies filed for insolvency, and with the opening of insolvency proceedings, it became clear that investors face massive financial losses. They should of course register their claims for the insolvency schedule, but this alone will not suffice to counter the impending capital loss. To further limit the damage, claims for damages may also be asserted independently of the insolvency proceedings, if applicable.
Asserting claims for damages
Claims may have arisen against investment advisors and brokers if they did not properly inform investors about the risks of the investment. The legal basis for a claim for damages arises especially from § 280 BGB and § 280 para. 1 BGB if a breach of duty exists within the framework of a contractual relationship. In insolvency proceedings, the contractual relationship and breach of duty hold particular significance because the right to compensation for damages is governed by the legal provisions of insolvency law. DEGAG investors currently painfully realize that profit participation rights are extremely risky capital investments and, due to the agreed subordination, a total loss of the invested money can occur, especially in insolvency. For security-oriented investors, profit participation rights are therefore not a suitable form of investment. If the investment advisors did not explain or downplayed the risks, they may be liable for damages to the investors. The legal prerequisites for a claim for damages require a breach of duty within the scope of a contractual relationship, with the legal basis according to § 280 BGB and § 280 para. 1 BGB being decisive. For affected individuals and investors, the right to compensation and the legal basis in insolvency proceedings are of central importance to claim reimbursement for incurred losses.
Moreover, investors should have been informed about the complex structures within the DEGAG group.
MTR Legal Attorneys have many years of experience in capital markets law and advise affected DEGAG investors on their legal options.
Feel free to contact us!
