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.
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.
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.
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