On 13 November 2025, the Bundesgerichtshof (Federal Court of Justice - FCJ) delivered its long-awaited judgment in the Wirecard insolvency proceedings (IX ZR 127/24), reversing the decision of the Oberlandesgericht München (Higher Regional Court Munich) that had previously offered hope to shareholders seeking recovery for capital markets fraud. The judgment represents a significant setback for investors who acquired shares based on fraudulent information and now find their damage claims relegated to the very back of the queue in insolvency proceedings.
The Background: A Landmark Victory That Has Now Been Overturned
As discussed in our previous article "Securing the Path to Fortune for Investors?", the Higher Regional Court Munich had ruled in September 2024 that capital markets-related damages claims of shareholders constitute ordinary insolvency claims under the German Insolvency Code (InsO). This decision had been welcomed by investor advocates as a breakthrough for shareholder protection, suggesting that defrauded investors could recover alongside other creditors rather than being pushed behind them.
The FCJ has now comprehensively reversed this position, holding that capital markets damages claims of shareholders do not enjoy the status of ordinary insolvency claims under German insolvency law. Instead, such claims must rank behind those of ordinary creditors and are to be satisfied from any surplus only, or, alternatively, at least in a subordinated rank.
The Higher Regional Court Munich's Reasoning: Arguments for Equal Treatment
The Higher Regional Court Munich's reasoning, which the FCJ has now rejected, rested on several key pillars.
The appellate court emphasised that prior FCJ jurisprudence had established that shareholders asserting damages claims stand opposite the company as third parties, not as equity participants. The court found no compelling connection between the damages claim and the shareholder status, noting that the claimant was not asserting membership rights but rather damages claims arising from the tortious conduct of the debtor's organs.
Crucially, the Higher Regional Court Munich reasoned that shareholders’ damages claims are "decoupled" from the shareholder position because they arise at the moment of the harmful act, before the investor actually acquires shareholder status. The damage materialises through the execution of the purchase agreement, creating an unwanted obligation, before the investor becomes a shareholder through the transfer of shares.
The Higher Regional Court Munich further identified what it considered to be significant systemic inconsistencies that would arise from subordinating such claims. In its view, damages claims capable of triggering insolvency would paradoxically be excluded from the insolvency estate. The Court further noted that these claims would have to be omitted from the balance sheet for determining over-indebtedness. It also questioned the rationale for applying subordination to investors who had already sold their shares before insolvency proceedings opened.
The FCJ's Reversal: A Focus on the Investment Decision
The FCJ took a fundamentally different approach, focusing on the purpose of the transaction and the investor's position within the insolvency hierarchy.
It emphasised that the Insolvency Code establishes a clear distinction between creditors whose claims are independent of any decision to participate in the debtor as an equity holder, and those whose claims arise from such participation. According to the FCJ, capital markets damages claims fall into the latter category because they are inextricably linked to the shareholder position, even if they are legally independent claims.
The FCJ held that what matters is not when the claim technically arises, but rather the purpose of the underlying transaction - namely, the acquisition of a shareholding - and the fact that the damages claim economically aims to restore to the shareholder the value they attributed to the shares at acquisition. In essence, the damages claim seeks to reverse the participation, placing the investor closer to equity holders than to ordinary creditors in the insolvency distribution hierarchy.
It rejected the argument that the regulatory purpose of capital markets liability requires equal ranking with ordinary creditors. The court reasoned that the deterrent effect of such liability operates ex ante - through the threat of damages claims - and is not dependent on actual satisfaction in insolvency proceedings.
Critical Assessment: A Persuasive Ruling?
While the FCJ's judgment now represents binding law, its reasoning is not beyond question. Upon careful examination, the decision appears to rest on value-based assessments that may not be as firmly rooted in the statutory framework as one might expect from Germany's highest civil court.
It is notable that the FCJ acknowledges the absence of any express statutory provision governing the ranking of capital markets damages claims in insolvency. The court asserts that it is "the task of the courts to harmonise the different regulations". However, this approach may be viewed as problematic given that the legislature had at least considered - and ultimately declined to enact - specific provisions establishing subordination of such claims. The judgment does not engage substantively with this legislative history.
Furthermore, the FCJ's reasoning may be seen as selectively drawing upon certain scholarly views while not fully addressing contrary positions. The court's ultimate conclusion that such claims rank behind ordinary creditors, yet it expressly declined to clarify the precise legal basis for that subordination within the insolvency framework. This hesitation may itself suggest that the existing structure does not sit entirely comfortably with the result the FCJ seeks to achieve.
It may also be observed that the judgment does not engage with earlier jurisprudence of the Reichsgericht (the predecessor to the FCJ) under the former Bankruptcy Code (Konkursordnung), which had reached a different conclusion on analogous questions. A thorough examination of this historical precedent might have strengthened the court's reasoning.
Implications for Investors
The practical implications of this ruling are significant. In the Wirecard insolvency, as in many large-scale corporate fraud cases, there is unlikely to be any meaningful recovery for claims ranked behind ordinary creditors. Shareholders who were induced to purchase shares through fraudulent disclosures will, in effect, bear the ultimate economic loss alongside (or indeed behind) those who held shares knowingly.
This ruling may prompt renewed calls for legislative intervention to clarify the ranking of capital markets damages claims in insolvency proceedings. Until such reform occurs, investors pursuing claims against insolvent issuers will face the reality that even valid fraud claims may yield no practical recovery.
Deminor will continue to monitor developments in the Wirecard matter closely, including any subsequent proceedings, related litigation strategies and potential reform initiatives. We remain committed to assessing all viable avenues for investor recovery in complex cross-border cases of this nature.
If you would like to discuss the implications of this judgment or explore potential next steps, please feel free to reach out to Stephan Klebes at: stephan.klebes@deminor.com
