Typically, when economies falter, insolvency rates are going up. Domains can then often enhance a company‘s value and contribute to debt relief, if necessary.
Adding to Debtor’s Assets:
Claims Arising from Domain Contracts
In case an enterprise has to file a request for insolvency, in Germany, provisions of the Insolvency Code (InsO) shall apply. These stipulate to improve liquidity of the involved debtor's enterprise without delay, in order to satisfy the well-founded claims held by the creditor parties.
In addition to the early realization of physical assets forming part of the insolvency estate, insolvency practitioners generally try to cut down on debtor’s expenses as soon as they can, by reducing current liabilities to a minimum. As a result, it is also not uncommon for existing domain contracts of an insolvent company to be terminated by insolvency practitioners without further ado, after they went through registrar invoices.
This, however, may result in risks being taken or opportunities being missed.
Hasty Deletions May Take their Toll
Unless insolvency proceedings clearly aim at discontinuing its business by winding up an enterprise, deleting the company domain(s) harbors unwanted risks: Shutting down an online shop or disrupting e-mail communication would have an immediate detrimental effect on corporate operations. And what is more: Once deleted, there is hardly any chance of getting back domains that may have been established for many years, except where protected name or trademark rights can be legitimately claimed.
Otherwise, it is not unlikely that investors who are busy in the secondary market will become aware of such previously registered domains. They are following up on which domains become available, upon expiry or deletion, and register them for resale, to achieve the highest possible revenue. Their preferred investments cover such domains that until recently led to websites with regular traffic, via a large number of visitors, and having a high search engine visibility.
If the affected domains are not protected by name rights or trademarks, the previous domain holder will then be left open-handed, except where the insolvency practitioner will notice their mistake and revoke cancellation of the domains in good time within the so-called Redemption Grace Period (RGP). RGP is a 30-day cooling-off phase put in place by DENIC prior to final domain deletion, and enabling the last domain holder to restore the respective domains, by re-registering them on their own behalf.
If, on the other hand, insolvency proceedings clearly aim at closing down the debtor’s enterprise, then its domains may turn out to be an asset, possibly contributing to debt relief. Given the comparatively low registration costs incurred for individual domains or entire domain portfolios, these are often balanced by much higher potential sales proceeds, reflecting a commercial value resulting from supply and demand.
Therefore, rather than hastily cancelling existing contracts, it may make sense to first determine the affected domains‘ value and then, after careful consideration, make an informed decision upon selling or not selling them.
The same applies, of course, in the case of private insolvencies.
Data Disclosure:
Requirements to Be Met by Insolvency Practitioners
Insolvency practitioners licensed to take charge of the assets of a (presumed) domain holder may obtain information from DENIC about whether the respective debtor has effectively registered certain domain(s) in question.
For being provided information about domain holders within the scope of the applicable data protection regulations, insolvency practitioners need to file a request by submitting the following documents for review by DENIC:
- Dedicated application form for insolvency practitioners
- Letter of Appointment (digital copy) in accordance with Section 56 of Germany's Federal Insolvency Code or equivalent, in the case of non-domestic insolvency practitioners
Divulgence of holder data by DENIC requires the domain holder and the insolvent entity (i. e. the natural person or legal entity) indicated in the Letter of Appointment to be identical.
Should the respective domain(s) be registered in the name of a current or former director of the involved company and thus a natural person, all such domains would first need to be transferred to the enterprise’s insolvency estate.
