Risk of Clawback

A creditor risks a Clawback action if it has concluded transactions with the debtor in the past five years prior to the opening of bankruptcy proceedings that are knowingly disadvantageous to creditors in general, or for the benefit of individual creditors (fraudulent conveyance).

The creditor also risks a Clawback action if in the year prior to the debtor’s bankruptcy it has entered into transactions such as requiring a security for an unsecured debt without prior respective obligations, requiring satisfaction of a money claim other than by usual methods of payment, and seeking payment of claims that are not yet due, while the debtor was indebted. The transaction will not be set aside if the beneficiary can demonstrate that it neither knew nor ought to have known that the debtor was over-indebted.

Read more about Clawback here.

Set-Off Rights

In principle a creditor can set off claims against debts towards the debtor. There are, however, certain limitations: If the counterparty of the bankrupt company only becomes a creditor after the bankruptcy has been declared a set-off is excluded, except if the counterparty becomes a creditor as a result of executing prior obligations or if the creditor’s position is secured. Similarly, if the counterparty of the bankrupt company only becomes a debtor after the bankruptcy has been declared a set-off is also excluded. In other words, it is not admissible to acquire debts or credits after the bankruptcy has been declared merely to be in the position to declare set-off.