Cancelling life insurance policies: Instruction on cancellation is decisive Whether a life insurance policy can still be cancelled years later depends to a large extent on whether the policyholder’s possibilities of cancellation were properly explained to him.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: Within the space of a few weeks, the German Federal Court of Justice (BGH) twice had to rule on the right of withdrawal with respect to life insurance policies. A consequence of the BGH’s case law is that properly informing the policyholder is decisive in determining whether the insurance policy can still be rescinded after the actual cancellation period has expired.

Both cases in Karlsruhe dealt with life insurance policies that had been concluded between 1994 and 2007 in accordance with the so-called “policies model” (Policenmodell). The essence of this model was that the right of withdrawal expires no later than one year following payment of the first premium – even if the policyholder’s possibilities of withdrawal had not been properly explained to him. However, the BGH put an end to this arrangement with its judgment of May 7, 2014 (IV ZR 76/11), declaring the clause to be null and void on the basis that it also did not comply with European law. According to the case law of the BGH, the policyholder retains his right of withdrawal if his possibilities of cancellation have not been properly explained to him. In these cases, withdrawal is still possible if the policy has already been terminated.

In another case dated July 16, the BGH ruled in favour of the insurers. This time a policyholder wanted to withdraw from his life insurance policy, concluded in 1998 in accordance with the “policies model”, which had since been terminated. Pursuant to the “policies model”, it was typical for the entire documentation to be sent only after the contract had been concluded. The plaintiff took the view that the contract was null and void due to the delay in the provision of information and had to be rescinded. This view was not shared by the Karlsruhe judges. If the policyholder had been belatedly yet properly informed about his possibilities of cancellation, the policy could not be retrospectively cancelled. After the certificate of insurance was dispatched, the contract could have been cancelled within a period of 14 days. Furthermore, the BGH did not consider European law to have been breached.

If policyholders have not been properly informed about their possibilities of cancellation, they are still able to cancel their life insurance policies. A lawyer versed in the field of insurance law can examine whether cancellation is possible in individual cases.

Dismissal and termination of contract of a managing director In the context of dismissing and terminating the contract of a managing director, essential points have to be observed.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: The managing director is distinct from other employees in one essential aspect: a dual employment relationship exists. On the one hand, the managing director is appointed by the shareholders and, on the other hand, has an employment relationship with the company. Both legal relationships must be taken into account in the context of termination of contract and dismissal.

Dismissal of the managing director

In principle, the appointment of the managing director can be rescinded at any time. However, in most articles of association the managing director can typically only be dismissed where there are significant grounds. Significant grounds in this sense generally exist where the managing director has committed a gross breach of duty and the shareholders lose confidence in his ability to manage the company in an orderly manner. Significant grounds can, for example, be fraud, disregarding binding resolutions of the shareholders’ meeting, illegitimate withdrawals, refusing to comply with the obligation to disclose information, criminal offences or culpable failure to file for insolvency in due time. The decision to dismiss the managing director generally has to be taken by the shareholders’ meeting.

The fact that the managing director can only be dismissed where there are significant grounds must be set out in the articles of association. A corresponding provision in the managing director’s employment contract is not sufficient.

Termination of the employment contract

It is not enough for the managing director to be dismissed; his employment contract must also be terminated if an appropriate connection has not been agreed at the outset. However, at the same time, important clauses have to be considered, otherwise the contractual and statutory notice periods apply. Thus, until the termination of the employment relationship, the managing director still has to perform his executive role, yet this can be problematic following dismissal. It is therefore advisable to already have appropriate provisions agreed in the employment contract.

The dismissal and termination of contract of a managing director are therefore not comparable from a legal perspective with the termination of a “normal” employee’s contract. In order to avoid legal uncertainties with unforeseeable consequences, the agreements and the company’s articles of association should be as detailed as possible and clearly formulated. Lawyers competent in the field of company law can help with this. In order to avert unanticipated consequences, one should also not forego legal assistance in the case of a managing director’s dismissal.

Ship funds: World trade losing momentum World trade, important for merchant shipping and thus also those investing in ship funds, appears to be losing momentum. This is demonstrated by the current figures.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: Fondstelegramm reported that the container throughput index of the Rhineland-Westphalia Institute for Economic Research (Rheinisch-Westfälischen Instituts für Wirtschaftsforschung (RWI)) and the Institute of Shipping Economics and Logistics (Instituts für Seeverkehrswirtschaft und Logistik (ISL)) decreased in May from 122.6 to 121.3 points. They claimed this indicates that world trade is losing momentum.

Merchant shipping has been in a deep crisis for a few years now. One of the main reasons for this is that in the past overcapacities were created which in turn resulted in low charter rates. This also led to economic difficulties for several ship funds from various issuing houses. Investors felt the consequences: Dividend distributions lagged behind prospected expectations or were omitted entirely. A great deal of ship funds even had to go before an insolvency court. For many investors this meant the total loss of the money they had invested.

The latest figures show that the spring revival for container throughput in world harbours was weaker than usual. It seems that the shipping crisis has still not past and an end is not yet in sight. Investors in ship funds that are disappointed with the development of their capital investment can turn to a lawyer competent in the fields of banking and capital market law, who can review whether claims for damages may be asserted.

Experience has shown that erroneous investment counselling has more frequently been an issue when ship funds are brokered. Ship funds were regularly promoted as being a safe capital investment with high returns. However, shares in ship funds entail the acquisition of business shareholdings. These not only provide opportunities to make reasonable returns; they also involve a whole series of risks. These can include, inter alia, exchange rate fluctuations, long maturities or the complicated negotiability of shares in funds, but it is the risk of total loss which is particularly serious. In the course of receiving proper investment advice, the investors should have been comprehensively informed about these risks. The banks should equally have disclosed the commission they received for brokering services. If risks or commission payments were concealed, this may justify claims for damages.

Enforcing and repelling international jurisprudence in Germany Enforcing international jurisprudence in Germany is not always easy. The law firm GRP Rainer is experienced in enforcing claims beyond state borders.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: State borders also mark the end of the jurisdiction of courts. This can lead to problems if the matter is one of enforcing claims against foreign debtors.

There are many situations in which German and international law clash with each other and the jurisprudence varies from state to state. A traffic accident or the purchase of property abroad can give rise to serious problems when it comes to enforcing one’s claims. This, of course, also applies in these times of globalisation in particular to cross-border economic relations between businesses of different states.

In principle, foreign judgments are recognised in Germany, yet the legal consequences can vary significantly. While within the European Union member states are striving to harmonise jurisprudence, differences do still remain. Nonetheless, there are appropriate regulations between the states of the EU in order to simplify the enforcement of judgments. Outside the EU, it is considerably more difficult to enforce a foreign judgment in Germany.

Germany has concluded corresponding agreements with most, but not all, states. However, if no European regulations or other intergovernmental agreements are applicable, a judgment of a foreign court can only be enforced according to German procedural law if it has been declared admissible. This also means that claims which relate to a judgment from a foreign court are not automatically enforceable in Germany.

Globalisation has made jurisprudence and its enforcement across state borders increasingly important. In order to be able to actually enforce claims, those concerned should turn to lawyers who are familiar with international law and international litigation. The Cologne-based law firm GRP Rainer also works for this reason with international law firms in order to be able to enforce or repel claims before the relevant courts.

Company succession: A complex process with lots of room to manoeuvre If the proprietor of a firm retires, company succession must be arranged. Generally, there are two options: Sell or bequeath.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: Should the boss, that is to say the owner of a firm, wish to retire in the foreseeable future, the issue of company succession has to be settled – a complex process that raises many questions (including legal ones).

In the case of a family business, the successor is frequently sought from within the family, as the business should be passed on to a trustworthy pair of hands. The company can then be bequeathed. Those inheriting businesses are at present still able to benefit from considerable tax concessions, yet these could come to an end in the foreseeable future. It is currently being discussed whether those inheriting businesses are benefiting from excessive preferential treatment compared with private heirs and whether the principle of equality is thereby being infringed. A new arrangement is expected in autumn. It is conceivable that the tax concessions will then be substantially limited.

In order to protect the company’s assets in the case of inheritance, a lawyer experienced in the fields of inheritance and tax law ought to be consulted.

If the business is to be sold rather than bequeathed, there are two options. The firm switches owner in return for a one-off payment of an agreed purchase price or other payment arrangements are agreed upon, for example regular instalments or annuity payments. It is also conceivable to sell the firm to the existing management (management buy-out) or to the management of an external organisation (management buy-in). The organisational possibilities and tax consequences must be considered with every sale. For this reason, the sale of a company should always be well thought through and prepared.

Company succession touches on several legal fields. Issues pertaining to inheritance and family law must equally be considered as well as tax regulations. A team of experienced and highly competent lawyers and tax advisors from different legal fields can assist in arranging a smooth company succession to the satisfaction of all parties involved. They can accompany company succession from the outset, work out a suitable approach and exploit the room to manoeuvre for the benefit of those concerned.

International inheritance law: Particularities of inheriting and bequeathing in cases involving a foreign element All states have their own inheritance laws. In succession cases involving a foreign element, the question arises as to which inheritance law is applicable. In many cases, this is a complex matter.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: In lots of cases, the different national provisions on inheritance law clash with one another. There are basically three criteria that need to be observed here: the testator’s nationality, the testator’s last place of residence and assets abroad.

Private international law regulates which national inheritance law is applicable. In Germany, private international law is based on the testator’s nationality. If the testator was a German, then, e.g. concerning the matter of succession, German law would also apply. In this respect, it is insignificant whether the deceased had been living abroad for many years. However, if a foreign citizen leaves behind assets located in Germany, the inheritance laws of the respective nationality are applicable.

Other states regulate inheritance law differently. In this context, the deceased’s last place of residence can potentially be decisive. Things become complicated if the different national provisions clash with one another. Disputes can then emerge over which inheritance laws must be applied. If properties or plots of land located abroad are included in an estate then further additional provisions must be considered, since some countries subject landed property to their own laws as a matter of principle.

In order to avoid these kinds of exhausting and potentially costly arguments, appropriate agreements can be made during the lifetime of the testator. However, this requires solid expertise in international inheritance law. Those affected can therefore turn to lawyers experienced in the field of inheritance law, who ideally also cooperate with law firms abroad. They can ensure that inheritance issues are regulated as desired.

Tax also always plays a role in inheritance and bequeathing. The different legislative rules on tax can also be considered by lawyers and tax advisors competent in the field of inheritance law, so that there is no threat of trouble afterwards due to possible tax evasion or the state claims a large proportion of the inheritance for itself by means of inheritance tax.

Inheritance tax: Are tax concessions for businesses toppling? The German Federal Constitutional Court (Bundesverfassungsgericht) is currently dealing with inheritance and gift tax. The focus is the question of whether tax benefits for businesses are justified.

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London – conclude: Those inheriting companies can benefit from tax concessions. Whether these concessions are constitutional or contravene the principle of equality is the question which the Federal Constitutional Court has been grappling with since July 8, 2014. The Constitutional Court found itself confronted with this question as early as 2006. Back then it decided that the privileges for those inheriting businesses were legitimate if they served the wider common good. In doing so, it principally looked at the preservation of the company and thus jobs. Companies with more than 20 employees can benefit from this.

The German Federal Fiscal Court (Bundesfinanzhof) now sees an “over-privileging” of those inheriting businesses compared with heirs to private assets; in particular, it has not been demonstrated that inheritance tax puts the continuity of the business at risk. Moreover, private assets can be relatively easily converted to company assets so as to circumvent inheritance tax.

A ruling is not expected until autumn. However, it can be assumed that there will be changes to the special provisions on inheritance and gift tax. In order to still be able to benefit from the current tax concessions, company succession in businesses should be promptly planned.

In order to ensure that company succession is managed in a way that is optimal for tax purposes, those concerned can turn to experienced tax advisors and lawyers versed in tax law. They can see to it that neither the business nor the successor is subject to excessive taxation as a result of inheritance or a gift. It is conceivable that the tax burdens will increase following the ruling expected in autumn. In the context of company succession, this may result in a financial burden for businesses which, in extreme cases, could threaten their existence. It is therefore advisable that company succession in the businesses concerned be planned as soon as possible in order to still be able to benefit from the full tax concessions of between 85 and 100 per cent.


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