Wirecard insolvency: Federal Court of Justice confirms subordination of shareholder damages claims to all creditor claims in landmark insolvency ruling

In its much-anticipated judgment of 13 November 2025 the German Federal Court of Justice (FCJ) held that in insolvency proceedings, shareholders’ damages claims are not to be treated pari passu with claims of unsecured creditors. With this landmark ruling, the FCJ brings an end to years of legal uncertainty, resolving the long-standing dispute between shareholders and creditors of Wirecard in favour of the latter.

In 2022, the court of first instance had ruled that shareholder claims for damages in the Wirecard insolvency were subordinated to the claims of all other creditors (see our blog post here). In 2024 this decision was overturned by the appellate court. Both rulings were highly controversial and widely debated. 

Last week, on 13 November 2025, the FCJ brought the legal saga to a close, delivering the long-awaited judgment on the so-called “issue of rank”. In its ruling, the FCJ follows our line of argumentation and unequivocally affirms that shareholder claims for damages – even those arising from alleged fraud by the company which caused the shareholder to acquire the shares – do not rank pari passu with unsecured creditor claims. Such claims are so closely linked to the claimant’s shareholder status that, in insolvency proceedings, they are subordinated to those of ordinary insolvency creditors. 

Background: Wirecard insolvency, shareholder claims and the "issue of rank" 

The insolvency of Wirecard, formerly a prominent DAX30 payment provider, was triggered by the discovery of a €1.9bn gap in its balance sheet – assets that apparently never existed. Insolvency proceedings unveiled a complex network of alleged fraud and market manipulation, causing widespread financial losses. Shareholders saw the value of their investments evaporate virtually overnight.

In the wake of Wirecard’s collapse, many shareholders filed claims for damages against the insolvency estate, collectively demanding around €8.5bn. They argued that former Wirecard executives had intentionally violated capital markets laws, and that they purchased shares on the basis of false and misleading information.

However, the insolvency administrator and the joint representative of the creditors of a Wirecard bond objected to the registration of the shareholders’ damages claims as unsecured insolvency claims. Ultimately, an institutional investor took the insolvency administrator and the joint representative to court, seeking a judicial decision on whether these claims were valid – and where they should rank.

The dispute led to a crucial question in German insolvency law, often called the “issue of rank” (Rangfrage). The courts needed to decide whether shareholder damages claims should be treated as ordinary insolvency claims and rank equally with other unsecured creditors under Section 38 of the German Insolvency Code (InsO)—including bondholders, suppliers, and employees, or whether they were to be treated subordinated, in line with shareholder ranking. 

The outcome of this issue has major practical consequences. With creditor claims far outweighing Wirecard’s assets, ranking the damages claims by shareholders on an equal footing with other creditors would have significantly diluted the recovery rates for other creditors. The decision therefore reinforces Germany’s position as an attractive market for investment in distressed assets.

The differing approaches of the lower courts 

The decision of the FCJ was preceded by divergent rulings from the lower courts.

In its judgment of 23 November 2022, the Regional Court of Munich I largely adopted the arguments advanced by Freshfields and the insolvency administrator’s representative. The court held that (former) shareholders are not ordinary “third-party creditors” (Drittgläubiger). Their claims for damages are tied to their status as shareholders (mitgliedschaftliche Bindung). Under German insolvency law, creditor ranking is based on the difference between debt and equity, the latter being subordinated to all debt claims. Even if shareholders were misled about the value of their investment, they still acquired an equity position. Therefore, shareholders’ claims must be subordinated and can only receive a distribution if there is a surplus after all other creditors have been paid. Further, the court noted that the shareholders’ claims for damages essentially were trying to seek the reimbursement of equity by the backdoor, which is barred by the capital maintenance rules under the German Stock Corporation Act (AktG). While an exception to these rules applies in cases of fraud for solvent companies (as established in the FCJ’s famous EM.TV decision of 9 May 2005), the court held that this does not apply in an insolvency scenario. 

On 17 September 2024, the Higher Regional Court of Munich reversed the lower court’s decision. This caused concern among insolvency practitioners and investors as it disrupted the established understanding of ranking of claims in corporate insolvencies. The court’s main reasoning was that shareholders’ damages claim should be treated as ordinary third-party creditor claims, even in insolvency. According to the court, investment decisions made under deception affect investors’ “free will”, so claims should not depend on the type of investment. Consequently, the court held that damages claims from deceived shareholders are not tied to the shareholders’ membership status, since the alleged deception occurred before they became shareholders. Finally, the court concluded that current German insolvency law does not justify treating these claims differently in insolvency. Any change would need to come from the legislator.

The final word 

The FCJ now brought the legal saga to a close, delivering the long-awaited final judgment on the “issue of rank”. The FCJ ruled that capital markets law-based damages claims by shareholders are not ordinary insolvency claims under Section 38 Insolvency Code. Such claims are so closely linked to the shareholder status that, in insolvency proceedings, they are subordinated to those of ordinary insolvency creditors.

The Insolvency Code specifies both a distribution scheme and a ranking order for claims. According to the FCJ, the legislator ranks claims by shareholders behind the ordinary insolvency creditors if the claims are sufficiently linked to the shareholding in the company. This was the case here.

This does not mean that misled shareholders are barred from claiming damages. However, the claims by shareholders fundamentally differ from those of ordinary creditors: they arise solely on the basis of the shareholders’ participation and are necessarily linked to it. Economically, the damages claim compensates for the failed investment– due to deception – failed investment in the shareholders’ own business activity, namely that of the company in which the shareholders participate. It is not sufficient to consider only the deception of the shareholders in order to achieve pari passu ranking with ordinary insolvency creditors. The shareholder must bear the risks associated with his position.

What are the consequences of the judgment?

The landmark decision has a profound impact on German capital markets.

Good news for Germany’s competitiveness

The judgment is first and foremost good news for Germany’s competitiveness and the predictability of the credit system. Creditors can continue to rely on being paid ahead of shareholders in insolvency. Their recovery rates will not be diluted by shareholder claims ranking equally. This will likely have a positive effect on (debt) investors’ willingness to engage in the restructuring of distressed companies. Companies in crisis can therefore breathe a sigh of relief and do not have to prepare themselves for higher financing costs or struggling to obtain financing at all.

Clarity for shareholders

For shareholders, the judgment brings much-needed clarity on their rights in a company’s insolvency. It reinforces the incentive for shareholders to protect their investment by actively exercising their rights and ensuring effective oversight before the company becomes insolvent. This is a sensible position both from a legal and from a policy perspective.

Streamlining the insolvency process

The judgment also streamlines the administration of future large-scale insolvencies. By clarifying the allocation of investment risk, the judgment should prevent shareholders from attempting to evade the residual risk inherent in share acquisition through (potentially unsubstantiated) allegations of deception resulting from false and misleading capital market information. There will be no need to resolve alleged damages claims of supposedly defrauded shareholders in protracted legal proceedings. This facilitates a faster, more efficient, and more predictable insolvency process, thereby benefiting the entire body of creditors.

Outlook

The FCJ has brought clarity to one of the most contentious legal questions in German insolvency law arising from the Wirecard collapse reinforcing the foundational principle in German insolvency law that debt ranks senior to equity. For participants in the German capital markets, this decision is a cornerstone of legal certainty that will resonate for many years to come.

A Freshfields team, led by partners Lars Westpfahl and Patrick Schroeder, successfully represented the joint representative of the creditors of a Wirecard bond throughout the proceedings. 

Decisions by the courts

Federal Court of Justice, 13 November 2025 (case no. IX ZR 127/24, press release on FCJ-website)
Higher Regional Court of Munich, 17 September 2024, (case no. 5 U 7318/22 e, decision on Bavarian State Chancellery-website)
Regional Court of Munich I, 23 November 2022 (case no. 29 O 7754/21, decision on Bavarian State Chancellery-website)