By Stephan Degen (Heuking Germany)
Five years after the German Wirecard AG announced in a disclosure of insider information that the Management Board “assumed” that the bank balances in trust accounts abroad amounting to approximately EUR 1.9 billion were "highly unlikely" to exist and filed for insolvency a few days later, the German Federal Court of Justice has now, in a ruling dated November 13, 2025 (Bundesgerichtshof – Federal Court of Justice, Ref. IX ZR 127/24) significantly weakened the rights of aggrieved shareholders.
The plaintiff, a German investment company, had purchased shares in Wirecard AG and, after the insolvency application was filed, asserted claims for damages under capital market law on the grounds that it would not have purchased the shares had it been aware of the balance sheet manipulation amounting to billions of euros. The insolvency administrator classified the claims as subordinate, with the result that the aggrieved investment company would come away empty-handed when insolvency quotas were distributed. The Federal Court of Justice has now essentially followed the insolvency administrator in a much-discussed ruling.
Under German insolvency law, the creditors of the insolvent company, including the shareholders, participate in the assets of the insolvent company in a specific order of priority, whereby a subsequent rank only receives proceeds if all senior creditors have been satisfied in full with their claims. The following ranking applies:
The insolvency court (with the costs of the proceedings) and the insolvency administrator (with his remuneration) have first priority.
This is followed by the liabilities incumbent on the insolvency estate, e.g., from legal transactions concluded by the insolvency administrator.
Next are the normal-ranking creditors, such as suppliers, with their insolvency claims that were established until the opening of the insolvency proceedings.
Shareholders are subordinate with claims for repayment of shareholder loans.
Shareholders are in last place of the ranking with their claims for the return of capital contributions.
In the legal dispute between Wirecard AG and the insolvency administrator, the question arose as to whether the capital market law claims for damages of the aggrieved shareholder are already subordinated due to the fact that the claims for damages are asserted by a shareholder of Wirecard. Since the assets of Wirecard AG are not expected to be sufficient to satisfy all creditors' claims, the ranking of the claims for damages determines whether the shareholder will receive at least partial compensation for his loss.
The German Federal Court of Justice has ruled that the shareholders' claims for damages under capital market law are subordinate. In the opinion of the Federal Court of Justice, the classification of claims for damages depends essentially on the position as a shareholder, and in that sense, according to the Federal Court of Justice, the shareholder is "always closer to the entrepreneurial risks than any creditor."
The ruling shows once again that shareholders bear much higher economic risks than "normal" creditors when their company is in crisis. Beyond the ruling of the Federal Court of Justice, the shareholder’s legal position in a crisis is worse than that of a non-shareholder in several respects: -
Shareholders are subordinate with their loan claims in insolvencies;
Loan repayments to shareholders within one year prior to the filing for insolvency are subject to insolvency claw back;
If collateral (mortgages, pledges, etc.) is granted to the shareholder within 10 years prior to the filing for insolvency, this is also subject to insolvency claw back;
If shareholders leave "normal" claims from intercompany deliveries outstanding, these also become subordinate.
Shareholders should therefore review their legal position as soon as their company's crisis becomes apparent and try not to take any risks or at least reduce them by taking appropriate steps in time.
*The article was originally published by Heuking Germany.