Lycamobile Germany: The Case
Lycamobile Germany or “Amalasandan Dienstleistungen GmbH” has had difficulties with the German authorities over several years. The dispute started around 2016 when Geran authorities found irregularities regarding Lycamobile’s VAT payments on sales generated in Germany. The company believed that due to the presence of their relationship with an Irish-based sister company, they no longer had to pay VAT in Germany. However, this reasoning did not hold up in court battles with the tax authorities. Many court battles ensued, with a decision made by the Federal Fiscal Court in February 2021 proving to be particularly damaging.
With tax debts of around €70 million, Lycamobile Germany renamed itself Amalasandan Dienstleistungen GmbH on 7 May 2021 and filed for insolvency later that month. However, the insolvency administrator could not find the documents they were looking for when they visited the company’s business address. This office was empty of employees, as Lycamobile Germany (Amalasandan Diensleistungen GmbH) listed its CEO as the only employee.
With this background, Lycamobile Germany is facing significant legal difficulties, and creditors of the group need to be aware of how to respond to its bankruptcy. At Schlun & Elseven Rechtsanwälte, our insolvency experts are ready to provide legal support.
Filing Claims in Germany
Should the insolvency court find that a debtor is illiquid (unable to pay debts as they fall due (Zahlungsunfähigkeit) or that the debtor is over-indebted, final insolvency proceedings will be opened. Debtors can also present themselves as insolvent to German insolvency courts and can do so in the event of pending illiquidity. The process starts with filing an insolvency application under § 13 I InsO. Such an application must include one of the valid grounds for the commencement of proceedings of imminent or already occurring insolvency (§ 16 InsO). The competent court will examine the application and check all other conditions for the opening of proceedings.
If the grounds for opening insolvency proceedings are present, the debtor must assess their financial position. Should the company have illiquidity or over-indebtedness, they are obliged to file for insolvency. In this case, the company must file within three weeks of the occurrence of illiquidity or over-indebtedness. However, the company can pursue means to prevent insolvency if these options are available. Failure to file for insolvency or delay in its filing can lead to the potential criminal liability of the company’s management.
There is a distinction between negligent and intentional delay with delays in insolvency filing. This difference is important for determining the extent that criminal actions took place. Intentional delay indicates knowledge and intention on the part of the party, whereas the violating duties of care are sufficient for negligence. Therefore, it is unavoidable for the managing director to regularly inspect its economic situation to avoid the risk of a delayed petition. This distinction between wilful intent and negligence plays a critical role in determining the penalty to be imposed. In principle, in addition to a fine and imprisonment, the German court can prohibit the person concerned to act as managing director.
Creditors Rights during Insolvency in Germany
Different classes of creditors exist during insolvency cases, determining their rights as creditors. These groups consist of secured creditors, unsecured creditors and preferential creditors (Massegläubiger). Preferential creditors have a priority compared to unsecured creditors, whereas the situation for secured creditors will depend on the nature of their security rights. Often, secured creditors enter into “pool agreements” to improve their situation. Should a pool agreement be arranged, such secured creditors can proceed with reduced complexity and greater power.
Unsecured creditors are in a more difficult position. However, they should file their nonpreferential insolvency claims (Insolvenzforderungen) for registration with the insolvency claims schedule. This way, they may be able to receive some partial payment. At Schlun & Elseven Rechtsanwälte, our team of German insolvency law experts support creditors throughout the insolvency process.
Our Services as Insolvency Lawyers
The insolvency law team at Schlun & Elseven Rechtsanwälte comprises lawyers with backgrounds in different legal areas such as banking and financial services, litigation and dispute resolution, employment law, intellectual property law and corporate law. Due to the multidisciplinary approach of our firm, we can tailor our team to the individual needs of each client.
Our team members have considerable experience in the field of insolvency law and have worked with clients worldwide on all sides of disputes. We act for creditors, financial institutions, businesses in financial difficulties, their directors or trustees, and statutory bodies. As insolvency law experts, our service includes advising regarding protective shield proceedings, the German insolvency process, corporate restructuring, creditors’ meetings, entering into “pool agreements” as a creditor, private insolvency and matters concerning insolvency criminal law.
In times of crisis, our lawyers provide expert litigation support and pursue out-of-court should they be more suitable to our clients.