Insolvency law challenge of payments on monetary conditions in the context of discontinued criminal proceedings
Recent decisions by the Higher Regional Courts highlight the relevance of insolvency law frameworks for payments made as part of the discontinuance of criminal proceedings against a monetary condition. In its judgment of December 4, 2023 (Case No.: 4 U 137/23), the Higher Regional Court of Frankfurt am Main clarified that even such payments may be challenged by the insolvency administrator, provided certain conditions are met. In practice, this decision affects not only criminal law, but also has significant implications for insolvency and corporate law as a whole—as well as for the organizations involved.
Insolvency law background and core of the dispute
The discontinuance of criminal proceedings against a monetary condition pursuant to Section 153a of the German Code of Criminal Procedure (StPO) is a standard tool of law enforcement authorities. Within the framework of such discontinuance, the accused is often required to pay a specified sum in favor of charitable organizations or the state treasury. Up to now, such payments have frequently been the subject of insolvency law debate, particularly regarding their contestability in favor of the insolvency estate after the opening of insolvency proceedings.
In the present case, a company involved in criminal proceedings made the required payment shortly before filing for commencement of insolvency proceedings. After an insolvency administrator had been appointed, the administrator challenged the payment and demanded the return of the funds, referring to the principles of insolvency challenge.
Content and scope of the decision of the Higher Regional Court of Frankfurt
With its decision, the Higher Regional Court of Frankfurt confirmed that payments made as part of a discontinuance against a monetary condition are generally subject to challenge. The court relied primarily on the provisions of Sections 129 et seq. of the Insolvency Code (InsO). In particular, the payment was classified as a legal act that disadvantages the body of creditors, as otherwise part of the company’s assets would be permanently withdrawn from the estate. According to the Higher Regional Court of Frankfurt, the fact that a monetary condition is related to a criminal case and ordered by the state does not exempt it from insolvency law scrutiny.
In its reasoning, the court emphasized that the legislative goal of insolvency law—to ensure equal treatment of creditors and prevent unilateral transfers of assets—must also be observed in cases where criminal proceedings are discontinued. While the monetary condition is part of a procedural resolution, it results in a transfer of assets that may, in individual cases, diminish the prospects of satisfaction for other creditors.
Practical implications and special issues
The decision creates considerable uncertainty for organizations that regularly receive payments in the context of monetary conditions. Charitable associations, foundations, or other entities are now under an obligation to critically examine donations they have received from potentially insolvency-related situations in light of the law of challenges. Since the challenge periods can sometimes extend over several years, legal certainty regarding payment flows to such recipients cannot be fully guaranteed.
Effects also arise on the side of the paying companies and their organs. If obligations are fulfilled shortly before impending insolvency or once overindebtedness has already occurred, there is a significant risk that such payments will be subject to repayment. The decisive factor is, in particular, the point in time when objective insolvency occurred and whether the payment was made in a contestable manner.
Classification of the decision in the insolvency law context
The judgment is in line with the principle codified in the Insolvency Code that all creditors should be treated equally and that privileged individual grants—regardless of their purpose—may, in principle, be reclaimed via a challenge. In conjunction with Section 134 InsO, the granting of a monetary condition may be regarded as a gratuitous transaction if it is not offset by an equivalent counter-performance. Beyond the pure payment flows, it should also be taken into account that insolvency law issues regularly exhibit cross-departmental relevance—for example, concerning tax consequences or possible liability risks at the management level.
Outlook and options for the parties
The current decision opens additional debate on the structuring of future procedural terminations involving conditions. In particular, proof of good faith on the part of the recipient will likely play an important role in defending against challenge claims. It also remains to be seen whether and to what extent judicial practice in the future will rely on Section 851(1) of the German Code of Civil Procedure (ZPO) or similar provisions to further privilege or regulate certain grants. Given the ongoing need for clarification on individual points, further developments should be closely monitored.
Note on the legal situation
Finally, reference should be made to the presumption of innocence that applies in ongoing proceedings. The case described is an individual judicial decision, whose binding effect relates to the specific set of facts. The judgment of the Higher Regional Court of Frankfurt can be found under case number 4 U 137/23. (Source: https://urteile.news/OLG-Frankfurt-am-Main4-U-13723Zahlung-auf-Geldauflage-zur-Einstellung-eines-Strafverfahrens-kann-insolvenzrechtlich-angefochten-werden~N34719.)
Case-specific legal assessments always require consideration of the individual circumstances. For questions regarding the insolvency law treatment of procedural discontinuance against monetary conditions or related topics, the contacts at MTR Legal Rechtsanwalt can provide further information based on their diverse experience in national and international business law.
