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Company reorganization: Commercial agents are entitled to compensation claim

Dec 21, 15 • Corporate LawNo Comments

The Federal Court of Justice decided that in cases of a company splitting the transferring company is liable as joint debtor for payment of the compensation claim to commercial agents in accordance with the Commercial Code.

Under the German Transformation Act, splitting is an option for a company reorganization where, for example, a company transfers part of its operations to another firm. The advantage of reorganizing under the German Transformation Act is that in general, most contracts with third parties can be transferred automatically, without requiring such third parties’ consent.

Company is splitting its sales department

In the case at issue, an insurance company (“Company A”) transferred a portion of its sales department to “Company B” by means of splitting. The plaintiff worked as a commercial agent for company A. His contract was transferred to company B and was subsequently terminated by company B.

The commercial agent sued company A for payment of the compensation claim to which he was entitled in accordance with Section 89b Commercial Code. The question was, however, whether the plaintiff even had a claim against the “old” company?

Companies should seek advice regarding compensation claims

According to the German Transformation Act, all parties involved in the splitting are jointly and severally liable for all liabilities established prior to the company splitting. The Federal Court of Justice decided that the compensation claim is such a liability. While it was correct that the compensation claim only arose due to the termination that was issued after the split, the binding legal basis for the claim was created in the commercial agency agreement and consequently the commercial agent cannot only demand payment from his current, but also from his previous contracting party.

Companies that intend to split up or reorganize should also seek advice with regard to possible future compensation claims.

Federal Court of Justice, August 13, 2015, VII ZR 90/14

Continue reading:
Reorganization – Which options are offered by transformation law?
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Thomas Schwab

Attorney Thomas Schwab mainly handles general contract, corporate, civil, commercial, inheritance and international business law matters.

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