Investor Claims for Damages and in Insolvency Proceedings
DEGAG Bestand und Neubau 1 GmbH, DEGAG Kapital GmbH, and DEGAG WI8 GmbH issued profit participation rights in which investors collectively invested approximately 282 million euros. These investors now face significant financial losses, as all three companies are insolvent. The parent company, DEGAG Deutsche Grundbesitz Holding AG, is also affected.
On February 10, 2025, the Hamelin District Court opened preliminary insolvency proceedings for DEGAG Deutsche Grundbesitz Holding AG (Case No.: 36 IN 7/25 -4) and DEGAG Bestand und Neubau 1 GmbH (Case No.: 36 IN 8/25 -4). Although this has not yet occurred for DEGAG Kapital GmbH and DEGAG WI8 GmbH, both companies filed for insolvency on February 6, meaning that preliminary insolvency proceedings are expected to be opened soon.
Subordination in Insolvency Proceedings
Investors cannot yet register their claims with the insolvency administrator. This will only be possible once the insolvency proceedings have been officially opened. However, investors should not rely solely on an insolvency quota but should also have their claims for damages reviewed if they want to take action against the looming financial losses. This is especially important since, due to the agreed subordination, they may receive nothing in the insolvency proceedings, according to MTR Legal Rechtsanwälte, a law firm with extensive experience in capital markets law that consistently represents the interests of investors.
The financial difficulties at DEGAG became apparent in December 2024 when the companies failed to make due payments to investors. The fears of insolvency have now been confirmed for all three companies.
Investors Have Invested Around 282 Million Euros
At DEGAG Bestand und Neubau GmbH, approximately 2,900 investors participated in the profit participation rights “Degag Wohnkonzept 1” and “Degag Wohnkonzept 2,” investing around 164 million euros. Around 2,000 investors invested approximately 72 million euros in the profit participation right “Degag Wohninvest 8” at DEGAG WI8 GmbH. The profit participation rights of Series L and “Degag Wohninvest 7” were issued by DEGAG Kapital GmbH, attracting approximately 1,400 investors with a total investment of around 46 million euros. Following the insolvencies of the three companies, a total of approximately 282 million euros of investor funds are at risk.
This situation is particularly serious for investors because they will be treated as subordinated creditors in the insolvency proceedings. This means that the claims of all other creditors will be satisfied first. Investors will only receive a payout if there are any remaining insolvency assets, which means they could come away empty-handed. It is therefore essential to examine whether the subordination was validly agreed upon. In many cases, it is not, as the relevant clauses may not be transparent and comprehensible enough for investors.
Investors Must Be Informed About Risks
Regardless of the insolvency proceedings, potential claims for damages should also be examined. These could be particularly relevant against investment intermediaries or advisors. Investors are now acutely aware that profit participation rights are high-risk financial instruments, and this risk is further exacerbated by the subordination.
Investment advisors were required to inform investors about all key factors relevant to their investment decision. This includes clear disclosure of all risks, particularly the risk of total loss. If these risks were concealed or downplayed, the advisors may have breached their duties to provide information and clarification, making them liable for damages. This also applies if high-risk investments such as profit participation rights were recommended to investors with a preference for secure investments.
Additionally, investors should have been informed about the complex structures within the DEGAG group.
MTR Legal Rechtsanwälte has extensive experience in capital markets law and is happy to advise affected DEGAG investors on their legal options.
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