2019年8月6日

Shareholder loans in insolvency proceedings

In a recent decision, the German courts clarified the circumstances under which repayments on a loan not granted by a direct shareholder of an insolvent borrower could qualify as repayments on a shareholder loan, and therefore avoid being contested in insolvency proceedings.

Background

The German Insolvency Regulation (the Regulation) states that loan repayments by an insolvent borrower to a direct shareholder can only be contested in insolvency proceedings if made within one year before the insolvency petition. The Regulation clarifies that third parties (ie not direct shareholders of the debtor) may qualify as shareholders in certain circumstances.

For example, if the third party is a shareholder of the shareholder of the debtor (vertical affiliation), or if the third party is a shareholder of the debtor and is, to a "significant degree", a shareholder of the company granting the loan (horizontal affiliation). A significant degree of control exists if the shareholder is able to influence the decisions of the company to grant or withdraw the loan from the debtor/borrower making it akin to a loan granted by a direct shareholder.

Held

The court held that a loan granted by the majority shareholder of the defendant and the indirect shareholder of the borrower, who held a significant degree of control over the borrower, was equivalent to a shareholder loan.

Comment

Special caution must be exercised when assessing the risk of claw-back resulting from shareholder loans provided by directly or indirectly affiliated companies.

Bundesgerichtshof (BGH), 15.11.2018 IX ZR 39/18

 

Call To Action Arrow Image

Latest insights in your inbox

Subscribe to newsletters on topics relevant to you.

Subscribe
Subscribe

Related Insights

重组和破产

Treatment of reimbursement claims due to flight cancellations in German insolvency proceedings

2022年8月5日
Quick read

作者 Lisa Katrin Iwersen, LL.M. (Stellenbosch)

点击此处了解更多
重组和破产

New ruling reduces risk of clawback claims in a German restructuring

2022年7月7日
Quick read

作者 Tobias Rhode, LL.B.

点击此处了解更多
重组和破产

German court rules on managing directors' payments to employees of insolvent company

2022年6月9日
Quick read

作者 Marc Popovic, LL.M. (Stellenbosch)

点击此处了解更多