Insolvency Law Contestation of Payments Made as Monetary Conditions in the Context of Discontinued Criminal Proceedings
Recent decisions by higher regional courts underscore the relevance of insolvency law frameworks with regard to payments made as part of the discontinuation of criminal investigations in exchange for 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 such payments may also be contested by the insolvency administrator if certain conditions are met. In practice, this decision not only affects 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 discontinuation of criminal investigations against the imposition of monetary conditions pursuant to Section 153a StPO is a standard instrument used by law enforcement authorities. In the context of such a discontinuation, the accused is often obliged to pay a certain amount for the benefit of charitable organizations or the state treasury. To date, such payments have frequently been the subject of insolvency law debates, particularly regarding their contestability for the benefit of the insolvency estate after insolvency proceedings have commenced.
In the case at hand, a company involved in investigative proceedings made the required payment shortly before filing for the opening of insolvency proceedings. After an insolvency administrator was appointed, the latter contested the payment and demanded restitution of the amount, referring to the principles of insolvency contestation.
Content and Scope of the OLG Frankfurt Decision
With its decision, the OLG Frankfurt confirmed that payments made as a condition for discontinuing proceedings in exchange for a monetary condition are in principle contestable. The court primarily relied on the provisions of Sections 129 ff. InsO. In particular, the payment was regarded as a legal transaction detrimental to all creditors, as otherwise a portion of the company’s assets would be permanently removed from the estate. The fact that the monetary condition is associated with criminal proceedings and stems from a government order does not, according to the OLG Frankfurt, exempt it from insolvency review.
In its reasoning, the court emphasized that the legislative objectives of insolvency law – the equal treatment of creditors and the prevention of unilateral asset shifts – must also be observed in cases involving the discontinuation of criminal investigations. Although the monetary condition forms part of a procedural settlement, it nevertheless results in an asset shift that, in individual cases, reduces the prospects of satisfaction for other creditors.
Practical Implications and Special Issues
The decision creates significant uncertainties for organizations that regularly receive payments in the context of monetary conditions. Non-profit associations, foundations, and other institutions are now obliged to critically examine donations they receive from situations that may be close to insolvency, in light of contestation rights. Since contestation periods can in some cases last several years, legal certainty regarding payment flows to such recipients cannot be guaranteed without reservation.
Effects also arise for the paying companies and their governing bodies. If conditions are fulfilled shortly before imminent insolvency or already in a state of over-indebtedness, there is a significant risk that such payments become subject to restitution. Of particular importance is the timing of the objective onset of insolvency and whether the payment was made in a manner open to contestation.
Classification of the Decision in the Context of Insolvency Law
The judgment is consistent with the principle codified in the Insolvency Code that all creditors must be treated equally and that preferential individual grants – regardless of their purpose – may, in principle, be reclaimed by way of contestation. In conjunction with Section 134 InsO, a payment of a monetary condition may be deemed a gratuitous act, unless it is offset by an equivalent return performance. Beyond the pure payment flows, it should also be taken into account that insolvency law issues regularly have cross-departmental relevance – such as with respect to the question of tax implications or potential liability risks at the management level.
Outlook and Room for Action for Parties
The current decision opens up further discourse on the future structuring of discontinuing proceedings with monetary conditions. In particular, demonstrating good faith on the part of the recipient is likely to play an important role in defending against contestation claims. It is also uncertain whether and to what extent case law will in future rely on Section 851(1) ZPO or similar norms to grant or regulate greater privileges for certain donations. In light of the ongoing need for clarification in individual cases, further developments should be closely monitored.
Note on the Legal Situation
Finally, reference should be made to the presumption of innocence applying in ongoing proceedings. The case described concerns a judicial decision on individual circumstances, the binding effect of which relates only to the specific facts in question. The judgment of the OLG Frankfurt can be viewed under the reference 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.)
Legal evaluations based on individual circumstances always require consideration of the specific facts. For questions regarding the treatment of discontinued proceedings with monetary conditions or related matters under insolvency law, the contacts at MTR Legal Rechtsanwalt can provide further information based on their extensive experience in national and international business law.
