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The German Property Group GmbH (GPG) was formerly known as Dolphin Trust. The GPG offered exposure to the German real estate market where unregulated loan notes were issued by special purpose companies in Ireland, the UK, Asia and elsewhere. These amounts were then loaned onwards to the GPG. The GPG’s task was to buy and renovate listed properties in Germany.

Irish investment

Irish investors were offered loan notes in two special purpose companies, called M.U.T. 103 Limited and M.U.T. 116 Limited. In total, €107 million was raised from 1,800 Irish investors, many of whom invested through their single member pensions. The annual return on the loan notes was as much as 15%, with security to be provided by way of a charge over the German properties.

A well-known Irish financial product provider and pensioneer trustee acted as administrator and distributor for the loan notes to Irish investors and their brokers. The initial loan note defaults began to occur in 2019. There were no further payments made by the GPG from that point on. In July 2020, the GPG went into court-appointed administration in Bremen.

The winding-up: In the Matter of M.U.T.103 Limited

On the basis of a petition made by an Irish investor, the High Court has made an order to wind-up M.U.T. 103 Limited. Due to non-payment of sums from the GPG, the company was shown to have assets of only €73,574, and outstanding loan notes of €41.3 million.

Mr Justice Brian O’Moore made the winding up order on the evidence before him and stated that M.U.T.103 Limited was “plainly insolvent”. Counsel for the company had suggested that the petition to wind-up should not be granted to allow for the outcome of an investor meeting. They also contended that the existing directors of the company could act as a single point of contact for the insolvency administrator of the GPG in Germany. The Judge did not agree with either of these assertions. He stated that there was no credible reason for dismissing the investor’s petition. Judge O’Moore added that “there is no suggestion that the appointment of a liquidator to the Company would disadvantage the investors in their dealings with that official.


Perhaps most worryingly for investors, the Judge noted a “stark difference” in the description of the status of the noteholders’ security between the administration company and the counsel it appointed to investigate the security. It appears that there may be an enforcement issue with the security, which is subject to ongoing fraud investigations in Germany. The Judge noted that for the purposes of enforcing the security it would be preferable for M.U.T. 103 Limited to come under the control of a liquidator supervised by the Court.

Unregulated loan notes & risk

There is no question that there are risks associated with unregulated loan notes that investors, whether private or pension, do not always consider before investing. It is crucial that the legal structure of any unregulated loan note investment is well understood. The investor and their broker should have a clear understanding of the entity issuing the loan notes and how investment proceeds will be utilised by that entity. Where the investment includes a cross-border element, it may be necessary for investors to instruct counsel in other jurisdictions to review the status and activities of the related entities there and to carry out due diligence. Where security is to be provided to noteholders, investors and their brokers should ensure that there are no barriers to or potential issues with its perfection.


Unregulated loan notes have been a popular option for single member pensions in recent times. A low interest rate environment has made it difficult to locate good returns and many investors are accepting a level of risk that they would not have contemplated in the past. Unregulated loan notes can also generate strong commissions for the brokerage industry. While many unregulated investments provide excellent returns and allow for the useful diversification of a portfolio, some have led to significant losses where investors failed to take appropriate advice before investing.

Pension or private investors should ensure that legal advice is taken before purchasing unregulated loan notes. This will allow for legal risks to be identified and focussed questions to be put to the product provider and their advisors.

For more information on utilising unregulated loan notes, contact a member of our Pensions team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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