Law

The Commercial Agent Settlement in Bankruptcy Cannot Simply Be Denied

A current ruling by the Higher Regional Court makes it even more difficult for companies to argue that the compensation claim is no longer applicable in the event of the insolvency of the independent commercial agent. It becomes clear that the failure of the commercial agent compensation presupposes that the company has terminated the contractual relationship and that there was good cause for the termination due to the negligent conduct of the insurance agent. This reason cannot concern the agent’s privacy or lifestyle.

The numbers are impressive: the almost 34,000 companies with more than 90,000 employees sell goods worth over $ 200 billion each year, including their own sales of around $ 1.3 billion per year. Including own sales, there is a considerable degree of involvement in the domestic flow of goods. Usually several companies are represented by the commercial agencies. According to the results of the 2018 CDH statistics and chapter 7 bankruptcy, the number of companies represented by commercial agencies averages 4.9. The weight of the foreign representations has increased significantly. Currently, more than half of the companies represent at least one foreign company, reports the Central American Business Associations for Commercial Brokerage and Distribution.

Furthermore, it says: The trade brokerage is an economic sector with a medium-sized structure. In the commercial agencies examined in the 2018 CDH statistics, an average of 2.4 people is employed full-time. Thereof 1.1 people are active owners and 1.3 people are employees. In addition, there are an average of 1.1 part-time employees, 0.3 of whom are marginally employed.

Commercial agents are regularly active in America in accordance with Section 84 of the Commercial Code: “A commercial agent is someone who, as an independent trader, is constantly entrusted with mediating business for another entrepreneur (entrepreneur) or concluding them on his behalf. Anyone who is essentially free to organize their work and determine their working hours is self-employed. ”

Bankruptcy not an automatic reason for termination

This means that commercial agents as entrepreneurs are also subject to typical insolvency risks. But what happens with the so-called commercial agent compensation in the event of insolvency? According to Section 89 b of the American Commercial Code (ACC), the commercial agent is entitled to a commercial agent compensation for entrepreneurial benefits that remain with the entrepreneur after the commercial agent relationship has been terminated by the new customers created by the commercial agent or by existing customers that have been significantly intensified. This means: With the compensation claim, the legislature has created a security mechanism for independent commercial agents. Due to these regulations in the Commercial Code, the commercial agent is entitled to stock payments after the end of his contract with a company.

In general, the following applies: filing for insolvency proceedings and opening insolvency proceedings against the assets of the commercial agent do not automatically end the contractual relationship between the parties. Likewise, the insolvency does not result in any immediate extraordinary reason for termination, which would mean that a commercial agent is not entitled to his compensation payment in the event of termination. This HGB regulation is not canceled by an insolvency, as a result of which a company wants to terminate the contract unilaterally.

Current judgment in the ongoing insolvency proceedings

That the right to extraordinary termination does not automatically exist in the event of insolvency, the OLG Hamm (judgment of 09.06.2004, Az.: 35 W 5/04) already announced many years ago with a view to an older BGH decision judged. It is always necessary to weigh up the specific circumstances of the individual case in order to justify an extraordinary termination. However, as soon as the insolvency has direct effects on the services of the commercial agent or on customer relationships (e.g. due to image problems or the utilization of operationally necessary items), the right to extraordinary termination is given.

This has now also been made clear by the Higher Regional Court (decision of March 1st, 2021, Az .: 19 U 148/20 ) and thus confirmed a first-instance judgment of the Regional Court (Az .: 89 O 21/20). An insolvency administrator had sued as part of the standard insolvency administration over the assets of an independent commercial agent. The plaintiff had been sentenced to 180 daily rates for tax evasion. As a result, his client, an insurance company, terminated him without notice and did not want to pay the compensation after 14 years of activity.

There must be an important reason for termination due to culpable behavior

Both the Regional Court and the Court of Appeal have, however, affirmed the obligation to pay the commercial agent compensation. The insurance company has to pay this in a six-digit amount. The money flows into the bankruptcy estate to increase the credit rate. The background: In particular, if a previous conviction or other action has nothing to do with the contractual relationship, the compensation must not be waived. Only an equity deduction of 25 percent was made because the agent’s circumstances were in fact completely disordered. So, 75 percent of the compensation had to be paid out.

In its judgment, the Higher Regional Court clearly points out that the failure of the commercial agent settlement presupposes that the company has terminated the contractual relationship and that there was an important reason for the termination due to culpable behavior on the part of the insurance agent. The reasons would have to be so serious that the continuation of the commercial agency contract until the end of the regular notice period or until the agreed termination of the contract cannot be expected. In the context of a weighing of interests, it is also necessary to determine whether the continuation of the commercial agency relationship is really unreasonable for the company. The principle of proportionality should be considered.

The OLG points out: “The reason for exclusion presupposes that the entrepreneur has terminated the contractual relationship and there was an important reason for the termination due to culpable behavior on the part of the insurance agent.” for financial services supervision. The defendant did not set out the supposedly strict requirements, nor the professional legal consequences that could result from the commissioning of the delinquent insolvency debtor. Regarding the conviction of the bankruptcy debtor for tax evasion, the judgment of the regional court that it was not directed against the defendant and therefore does not represent an important reason in the aforementioned sense is not objectionable.

According to the court, the insurance company was not the direct victim of the crime. In this respect, an indirect broadcast effect is not sufficient for termination without notice.

Reasons for termination must relate to the contractual relationship

The judgment and the rejected appeal by the insurance company are therefore highly relevant for disputes about the elimination of the compensation claim, especially in the context of insolvency proceedings to increase the assets by the insolvency administrator. The Higher Regional Court made it clear for the first time that the reasons for termination must relate to the contractual relationship and should not lie in the private sphere or lifestyle of the commercial agent in order to justify the elimination of the compensation claim.

The position of the Higher Regional Court makes it even more difficult for companies to argue that the compensation claim is no longer applicable. The chances for commercial agents to receive the commercial agent compensation even in the event of termination without notice by the client are very good, even if the initial situation tends to be difficult.

Therefore, it makes sense for insolvency administrators in the sense of the best possible satisfaction of creditors to take legal action by the client in the event of failure of the commercial agent settlement without good cause. The case law confirms that it is possible to pay the commercial agent compensation on a regular basis, even if at first glance the situation may seem contrary.

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