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te Solar Sprint II / III GmbH & Co.KG (UDI Solar Sprint Fixed Interest)

The UDI group of companies has been rumbling for a long time. Only last year eight investment companies went bankrupt. Now there are two new wobbly candidates. Things are not looking good at te Solar Sprint II GmbH & Co. KG and te Solar Sprint III GmbH & Co. KG.

Federal Financial Supervisory Authority orders the discontinuation of the deposit business and its processing

With a decision dated November 25, 2021, the Federal Financial Supervisory Authority (BaFin) instant the discontinuation of the deposit business as well as the instant Repayment of investor funds arranged. The background is that the companies have collected repayable investor money through loan agreements. In the opinion of BaFin, this type of transaction requires a license under the German Banking Act (KWG), which the companies did not have.

The notices are immediately enforceable, but not yet final. The societies can still take action against this.

The problem: subordinate clauses are probably ineffective

The companies had collected loans from investors through so-called subordinated loans. The purpose of these subordinated loans was to ensure that the loan funds were not ordinary loans, but loans that were intended to pursue all of society’s other demands. Only such forms of credit do not require BaFin approval if they are taken on a commercial basis.

The problem with these loans with a subordinate clause is that the case law now makes strict requirements on the transparency and thus the comprehensibility of these clauses. The Federal Court of Justice (BGH) had already expressed its views on this several times. It must be clear in which cases the subordination applies and how far it extends. This must be made sufficiently clear to the investor. If the subordinate clause in question does not meet these requirements, it is ineffective. If the subordinate clause is ineffective, then the subordinated loan is treated like a normal loan. For such loans you then need the permission of the BaFin.

The fact that BaFin has now ordered the companies to discontinue and repay them can ultimately only mean that BaFin is of the opinion that the clauses are not effective.

Since the notices are not yet legally binding, the companies can still have this checked by a court.

Investor monies must be repaid

Regardless of the fact that the notices are not yet legally binding, the investor monies must be paid back immediately. This follows from the fact that the notices are immediately enforceable. They must therefore be “complied with” before the deadline for appeal has expired. However, the companies have the opportunity to defend themselves against this in court by means of interim legal protection. Whether they do this remains to be seen.

Such judicial proceedings were unsuccessful in parallel proceedings by other companies in the UDI group of companies.

What happens if the repayments cannot be made because there is not enough money?

If legal proceedings to suspend enforcement are unsuccessful or not initiated, the funds must be repaid.

If societies can’t, there is a problem. Either you can find a solution with the investors to the effect that, in order to avoid a possible bankruptcy, regulations are made that only part of the money has to be repaid. If this does not succeed, a possible bankruptcy cannot be ruled out.

In parallel proceedings, the UDI group of companies tried to avoid this scenario through contracts with a specially founded company. One can be divided about the way and the result. Ultimately, you will always have to consider what is the best economic solution for the individual investor. The fact is, however, that the money must be paid back – either directly from the company or through an agreement with a third party.

What can you do now?

As stated, notices are immediately enforceable, but not legally binding. In theory, societies can still defend themselves against this. We assume that the companies will come to the investors or loan providers in the short term and inform them about the situation. Attached to this letter is a recommendation for action or a message on how things should now go on in concrete terms.

In the event of bankruptcy, claims must be made. This can be done either by yourself or with the help of a lawyer. The costs for this are manageable and are also covered by the legal expenses insurance if you have existing insurance.

Your specific situation can be clarified as part of an initial assessment. We know the situation at the UDI group of companies because we have already been and are active in parallel proceedings for investors. You can contact us using the contact form below or write an email to [email protected]. An initial assessment is free, but usually not free.

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