Rights of social security agencies must be strengthened

UM – 03/2023

The European Commission published a proposal for a directive on harmonising certain aspects of insolvency law at the end of last year. Its objective is to pursue harmonising the existing national insolvency regulations. This should result in a better capital markets union, increased security for investors, reduced costs and promoting cross-border investments.

Prefer social security funds

The European Commission's proposals also focus on standardising the conditions for annulment actions. They are also aimed at being able to declare legal acts null and void if they favour a creditor. But there are exceptions to this principle.

German Social Insurance (DSV) also claims such an exception for its sponsoring organisations for statutory health, pension and accident insurance in Germany: Their legal acts to satisfy or secure social security contributions should be exempt from being contested and should not be possible to declare them null and void. This is why DSV has submitted a proposed amendment.

Social security funds are forced creditors

The arguments for this are obvious. The claims from the social security institutions should not be equated with claims under private law during insolvency proceedings. Social insurance agencies cannot choose their contractual partners because of their statutory insurance and contractual obligations. They are forced creditors. Social security contributions are also part of wage and salary payments. It is contradictory that they are not to be given preferential treatment – unlike wage and salary claims.

Company restructuring from contribution funds

The current legal practice in Germany results in the social security system being deprived of funds through a bad debt in the event of insolvency or a claim against contributions that have already been paid. Funds whose use is stipulated by law to protect the insured and stabilise the systems. Money that is now deemed to be part of the insolvency estate will flow into the settlement fund for creditors under private law or into the restructuring of the insolvency debtor. This is handled differently in other member states, e.g. France.

Court of Justice of the EU

The European Court of Justice has its own view of things. It considers partial exemption from social charges to be an unlawful aid, depending on the effect of the measure (judgement of 17 September 2020 (case number C-212/19). The view of the German social security authorities and the view of the argumentation of the Luxembourg court is that the presumption of unlawful aiding and abetting would be close at hand if the contestability of social security contributions already paid were allowed.