The German federal supreme court (BGH) has for the first time expressly confirmed the prevailing view in legal literature that the joint and several liability of the transferor in the event of a division extends to any and all obligations arising from a continuing legal relationship, which was brought about before the division became effective. The joint and several obligorship follows from sec. 133 sub-sec. 1 sentence 1 of the German Transformation Act (Umwandlungsgesetz), which provides that for a period of five years from the division the transferor is liable, as a joint and several obligor together with the transferee, for any obligations which originate from before the time at which the division became effective.

Pursuant to the BGH, an obligation originates from before the division, if the legal basis for its occurrence was established prior to the division. Contractual obligations were invariably to be deemed to originate from before the division, if the underlying contract was entered into prior to the division. Therefore, it were to be concluded that also the basis for each single obligation arising from a continuing legal relationship was established prior to the division, irrespective of whether any additional prerequisites for the accruement of such single obligation were only satisfied after the division. The matter on which the BGH had to decide concerned the compensation claim of an insurance agent ensuing from the termination of the agency contract by the transferee. Although notice of the termination was only given, and thereby the compensation claim only came into existence, after the division became effective, the BGH held that the claim originated from before the division.

For the full text of the decision in the German language, please click here. If you are interested in further information on this topic, please do not hesitate to contact Christine Oppenhoff.