GERMAN LAW JOURNAL
Review of Developments in German,
European and International Jurisprudence
Editors–in-Chief: Russell Miller; Peer Zumbansen
Editors: Gregor Bachmann; Nina Boeger; Gralf-Peter Calliess; Matthias Casper;
Morag Goodwin; Felix Hanschmann; Hans Michael Heinig; Florian Hoffmann;
Karen Kaiser; Alexandra Kemmerer; Malcolm MacLaren; Stefan Magen;
Ralf Michaels; Betsy Baker; Christoph Safferling;
Frank Schorkopf; Craig Smith; Cornelia Vismann
www.germanlawjournal.com
© Copyright 2000 - 2008 by German Law Journal GbR. All rights reserved.
Pages 1063-1188
Vol. 09 No. 09
01 September 2008
TABLE OF CONTENTS
Special Issue
Reform of Germany’s Private Limited Company (GmbH)
Special Issue Editors:
Gregor Bachmann & Matthias Casper
Gregor Bachmann
Introductory Editorial: Renovating the
German Private Limited Company - Special
Issue on the Reform of the GmbH
TABLE OF CONTENTS PAGE I
1063-1068
TABLE OF CONTENTS
Michael Beurskens and Ulrich Noack
The Reform of German Private Limited
Company: Is the GmbH Ready for the 21st
Century?
1069-1092
Jessica Schmidt
The New Unternehmergesellschaft
(Entrepreneurial Company) and the Limited –
A Comparison
1093-1108
Dirk A. Verse
Shareholder Loans in Corporate Insolvency –
A New Approach to an Old Problem
1109-1126
Matthias Casper
Liability of the Managing Director and the
Shareholder in the GmbH (Private Limited
Company) in Crisis
1127-1142
Christian Altgen
The Acquisition of GmbH Shares in Good
Faith
1143-1156
Jochen Vetter and Christian Schwandtner
Cash Pooling Under the Revised German
Private Limited Companies Act (GmbHG)
1157-1178
Sebastian Barry and Hannes Bracht
The Implementation of the MiFID into the
WpHG
1179-1190
TABLE OF CONTENTS PAGE II
GMBH – SPECIAL ISSUE
Introductory Editorial: Renovating the German Private
Limited Company - Special Issue on the Reform of the
GmbH
By Gregor Bachmann*
A. The German MoMiG - A Small Corporate Law Revolution
On 28 June 2008, the German Bundestag (Federal Parliament) passed a bill on the
reform of German corporate law. Known as the Gesetz zur Modernisierung des
GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG – Law for the
Modernization of the GmbH and to Stop its Misuse) the bill is a milestone, the
single most important reform of the most commonly used German corporate form.
The reform will bring about major changes. Among other things the reform will
make it possible to establish a GmbH with a share capital of nothing more than € 1
EURO (previously, € 25,000 had been required) and to establish a GmbH that has
no active business in Germany but solely operates abroad. Although the bill still
has to be approved by the Bundesrat (Federal Council of the States), which will
probably vote on this matter on 19 September, experts have little doubt that the
reform easily will pass this last hurdle and enter into force as soon as 1 November.
The editorial board of the German Law Journal believes that this revolutionary bill is
worth more than a brief notice. This special issue is devoted to the MoMiG and will
analyze some of its most important features. With this effort the German Law Journal
continues a tradition engaging with corporate law issues that are of interest to more
than German lawyers and scholars. From an international lawyer's perspective the
modernized GmbH might be a corporate form that offers attractive legal conditions
for taking on business in Germany while securely limiting the risk of personal
liability. Also, the "new" GmbH may become a creature more often encountered
outside its natural habitat.
From an academic's perspective the reform also is interesting because it may be
viewed as a further step towards convergence of corporate legal regimes.
Lehrstuhl für Bürgerliches Recht, Handels- und Wirtschaftsrecht sowie Zivilprozessrecht, Universität
Trier. Email: bachmann@uni-trier.de.
*
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GERMAN LAW JOURNAL
[Vol. 09 No. 09
For both of these reasons we are pleased to have gathered a group of excellent
authors, including leading scholars and renowned attorneys, to scrutinize the
reform, especially to test whether it delivers on its proponents’ promises.
An introduction to the contributions to this special issue follows a brief comment
on the reform’s background. What is the GmbH, and why was it necessary to
overhaul its structure after 112 successful years?
B. The German GmbH - A Success Story
To understand the GmbH, it is necessary to understand the German corporate
system. Unlike the U.K. and the U.S., Germany (and the countries following its
model) does not have a single corporate form that may be used either in an "open"
form (like the plc) or in a "closed" version (like the Ltd.). Germany offers two
different corporate forms, each regulated in a complete and separate code, one
being the Aktiengesellschaft (AG – stock corporation) and the other being the
Gesellschaft mit beschränkter Haftung (GmbH – private limited company). The AG is
the older variant. Like its counterparts, the British plc or the French Société Anonyme
(S.A.), the AG took up its modern form in the early nineteenth century when the
industrial revolution made it necessary to attract large groups of small investors
and to shield them from personal liability in order to finance projects such as
railway systems.
Later, it became apparent that small businesses also were increasingly interested in
limited liability. Realizing that the complex and intensively regulated AG was not
quite fit for a private company not seeking access to the capital markets, the
German legislature designed a completely new corporate form, the GmbH, which
was introduced in 1892 by a special statute known as the Gesetz über die
Gesellschaften mit beschränkter Haftung (GmbHG – Law Concerning the Private
Limited Companies). The concept proved to be so convincing that the new legal
form was not only eagerly adopted by entrepreneurs all over the country but also
was copied by many other nations. Consequently, when the GmbH celebrated its
100th anniversary in 1992, Professor Marcus Lutter, a leading German corporate law
scholar, discovered only “a few white spots” on the GmbH-map, notably in the
English speaking world.1
What are the features that make the GmbH such an attractive corporate form, and
why didn't the U.K. and the U.S. adopt this model? The most striking advantage of
1 Marcus Lutter, Die Entwicklung der GmbH in Europa und in der Welt [The development of the GmbH in
Europe and in the world], in 100 JAHRE GMBH-GESETZ 49, 55 (Marcus Lutter ed., 1992).
2008]
Introductory Editorial
1065
the GmbHG is the fact that it takes heed of the idea “think small first.”2 The
GmbHG consists of only 87 paragraphs, which gives much leeway to statutory
freedom and leaves many questions simply unregulated (many of which have been
answered by the highly specialized Second Civil Senate of the Bundesgerichtshof
[Federal Court of Justice]).3 Path dependence probably explains why the U.K., the
U.S. and other English-speaking countries stuck to their concept of a single, onesize-fits-all company statute. Recent developments, however, demonstrate that a
simple and easily accessible corporate form increasingly is desired in those
countries too.4
The GmbH’s success gave little reason to consider reform. The GmbH-model was
the subject of serious scrutiny on only two occasions over the last century. First,
when the Nazis gained power in 1933, some argued that honest “Aryan”
entrepreneurs should not hide behind an artificial entity and pleaded for the
abolition of the GmbH. This proposal was never realized. Second, in the wake of
the regulatory enthusiasm of the 1960s and early 1970s, the government as well as a
group of younger scholars pursued reform-proposals that would have more than
quadrupled the number of paragraphs of the GmbHG, adapting it more or less to
the Aktiengesetz (AG – Stock Corporation Law). Luckily, those proposals remained
in the drawer. Of the minor reforms that have been realized, only two are worth
mentioning. In 1980 the minimum share capital was raised from 20,000 Deutsche
Mark (€ 10,000) to 50,000 Deutsche Mark (€ 25,000). At the same time new rules
providing for the subordination of shareholder loans given at a time when a GmbH
was in financial distress were introduced.
2 More than 100 years after the “invention“ of the GmbH, this very idea governed the reform of British
Company Law by the Companies Act 2006: "Although the vast majority of companies are small,
company law has been written traditionally with the large company in mind. The provisions that apply
to private companies are frequently expressed as a tailpiece to the provisions applying to public
companies. ... The Government intends that the Bill should reset the balance and make the law easier for
all to understand. ... This policy runs as a thread through the drafting of all the provisions of the new
Bill." See DEPARTMENT OF TRADE AND INDUSTRY, COMPANY LAW REFORM, 2005, Cm. 6456, at 13, 29.
3 The 2nd Senate of the Bundesgerichtshof (Federal Court of Justice) deals exclusively with corporate and
commercial law cases. It has thus gained an expertise in corporate law matters which equals that of the
Delaware Courts.
4 See COMPANY LAW REFORM, supra note 2 (providing an example of recent developments in Great
Britain). In the U.S., many states have introduced a Limited Liability Company (LLC).
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[Vol. 09 No. 09
C. The "Invasion" of the British Ltd. and Its Consequences
This peaceful picture was disrupted in 1999 when the European Court of Justice
(ECJ) delivered a landmark-decision interpreting the freedom-of-establishment
clause of the European Community Treaty. In the famous Centros case the ECJ
decided that a businessperson may legally incorporate his or her business
anywhere in the European Union, even if this happens for the sole reason of
avoiding a stricter national corporate regime.5 This judgment came as a shock to
Germany and many other European countries. Although heavily attacked by
politicians and legal scholars, the ECJ confirmed the Centros rule and even widened
its range.6 Now anyone willing to do so can establish a U.K. Ltd. and conduct
business anywhere in Europe, even if the company is operating only outside the
U.K. The reason why this option was considered a threat by German scholars and
politicians (and welcomed by clever “Go Limited!”-service agencies) is simple:
Although the Ltd. legal regime by no means is more transparent or accessible than
the GmbH legal regime (or comparable European corporate forms) it can be
established much faster and – most of all – does not require any minimum share
capital.
In a first reaction many German scholars advocated an extension of the second EC
corporate law directive, which imposes a minimum share capital, but is only
applicable to the stock corporation (plc, AG, S.A. etc.). Since the U.K. and Ireland
never would have consented to this extension, the proposal was moot in the first
place. Instead the German government decided to move in the opposite direction
and to make the GmbH a more serious competitor for the Ltd. Of the many changes
that were discussed and envisaged during the last years, the most hotly debated
topic was the financial structure. The most radical proposal was to abolish the
required minimum share capital altogether, others suggested a reduction, and
another camp strongly opposed any deregulation of the financial regime. In the end
the government came up with the compromise briefly described in the following
section of this introductory editorial.
5
Case C-212/97, Centros Ltd. v. Erhvervs-og Selskabsstyrelsen, 1999 E.C.R. I-1459.
6 See Christian Kersting & Clemens Philipp Schindler, The ECJ's Inspire Art Decision of 30 September 2003
and
its
Effects
on
Practice,
4
GERMAN LAW JOURNAL 12
(2003),
available
at
http://www.germanlawjournal.com/article.php?id=344; Killian Baelz & Teresa Baldwin, The End of the
Real Seat Theory (Sitztheorie): the European Court of Justice Decision in Ueberseering of 5 November 2002 and its
Impact on German and European Company Law, 3 GERMAN LAW JOURNAL 12 (2002), available at
http://www.germanlawjournal.com/article.php?id=214.
2008]
Introductory Editorial
1067
Culture explains why the issue of the legal capital is so sensitive. The German
business tradition differs significantly from the Anglo-American tradition. Faced
with the regulatory choice of either spurring entrepreneurial spirit or protecting the
interests of potential creditors, continental legal systems prefer the second option.
Realizing that a fixed minimum capital threshold cannot prevent insolvency and
may deter innovative but penniless entrepreneurs, continental regulators typically
consider it better to ask every possible start-up for a serious equity contribution
before granting limited liability. From an economist’s point of view this may turn
out to be less efficient than a more liberal regime. But the utilitarian standpoint
never was part of the continental legal tradition.
D. The Reform and its Coverage in this Special Issue
The reform-bill, known by its acronym MoMiG, will bring about several changes,
the most important of which are covered in this special issue. It starts off with an
article by Michael Beurskens and Ulrich Noack who highlight major points of the
reform bill and put it into a broader context. Next, Jessica Schmidt examines newlyminted opportunity to establish a GmbH with an arbitrary amount of
Unternehmergesellschaft (stated capital). This may be the reform’s most controversial
component. This opportunity is tied to an obligation to retain any future profits
until the amount of the legal share capital is reached. Schmidt, in the issue’s third
article, comes to the conclusion that the U.K. Ltd. still offers more financial
flexibility. The issue whether the complicated rules governing shareholder loans
should be deregulated was also controversial. Dirk Verse analyzes the new regime
and compares it to the abandoned statutory provisions as well as the
supplementary court-created rules that will also be abolished by the reform.
As its name indicates, the MoMiG is not only intended to make the GmbH more
competitive but also aims to prevent its abuse by dubious persons. For that reason
both the liability of directors as well as the responsibility of shareholders has been
tightened by the reform. Although this aspect was less disputed, it is an important
foundation-stone if one wants to combine flexibility with ethical soundness. Details
are discussed in the article by Matthias Casper. Proposals to allow for good-faithacquisition of shares in a GmbH, however, speak to the deregulatory flavor of the
reform effort. While there was broad consensus that such an acquisition should be
made possible, it turned out that a workable rule that would also take into account
the legitimate interests of those who opposed it was difficult to design. Christian
Altgen presents the solution that was finally achieved on this point and he explores
its boundaries. Finally, Jochen Vetter and Christian Schwandtner devote their
attention to a problem of enormous practical importance. The legal protection of the
stated capital made it difficult for a German GmbH to participate in a so called
cash-pool, a method of finance quite common in (international) corporate groups.
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GERMAN LAW JOURNAL
[Vol. 09 No. 09
The amended law tries to strike a balance between the GmbH’s interest in liquidity
and the group’s interest in saving financing costs. The authors, both lawyers in one
of Germany’s largest law firm, put the new rule to careful scrutiny.
There is no article on the reform of the choice-of-law rules that will allow the
GmbHG to operate solely outside Germany. This reform is part of a larger
codification project that is still under way and will mainly be realized in a different
statute. Once that reform has reached its final stage the German Law Journal will
cover it too.
GMBH – SPECIAL ISSUE
The Reform of German Private Limited Company: Is the GmbH
Ready for the 21st Century?
By Michael Beurskens and Ulrich Noack*
A. The GmbH: A Role Model for Privately Held Companies World-Wide
The Gesellschaft mit beschränkter Haftung (GmbH - Private Limited Company) is the
most popular organizational form for businesses in Germany – numbering almost
one million entities in 2007.1 The GmbH is not only popular for entrepreneurs, but
also serves a role in corporate groups and can be more or less easily upgraded to
an Aktiengesellschaft (AG - public corporation). Nevertheless, few changes have
been made since its inception in the late 19th century,2 leading to complex case law
that would most certainly put a smile on the face of any corporate lawyer.3 The
Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen
(MoMiG - Law for the Modernization of the GmbH and to Combat its Abuse),4 the
Dr. Michael Beurskens [Michael.Beurskens@uni-duesseldorf.de], LL.M. (University of Chicago), LL.M.
(Intellectual Property Law/Düsseldorf); Prof. Dr. Ulrich Noack, Professor for Civil Law and Commercial
and Corporate Law, Center for Business and Corporate Law, Heinrich-Heine University Düsseldorf,
[Ulrich.Noack@uni-duesseldorf.de].
*
See Udo Kornblum, GMBH-Rundschau, 99 GMBHR 19 (2008) (estimating a little less than a million
companies in 2007).
1
KLAUS J. MUELLER, THE GMBH - A GUIDE TO THE GERMAN LIMITED LIABILITY COMPANY 32 (2006). This is
in stark contrast to the law of corporations, which was not only fundamentally revised in 1937 and 1965,
but has also been undergoing a “permanent reform” (Wolfgang Zöllner, Aktienrechtsreform in
Permanenz - Was wird aus den Rechten des Aktionärs?, 330 (1994)) since 1994 (“Gesetz für kleine
Aktiengesellschaften und zur Deregulierung des Aktiensrechts”), 1998 (“Gesetz zur Kontrolle und
Transparenz im Unternehmensbereich”), 2001 (“Gesetz zur Namensaktie und zur Erleichterung der
Stimmrechtsausübung“); 2002 (“Gesetz zur weiteren Reform des Aktien- und Bilanzrechts, zu
Transparenz und Publizität im Unternehmen“); 2005 (“Gesetz zur Unternehmensintegrität und
Modernisierung des Anfechtungsrechts“).
2
3
The number of treatises, journals, and the steady stream of new decisions aptly illustrate this point.
4 Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG – Law for the
modernization of Limited Liability Companies Act and for combating abuses), (BGBl. reference not yet
available at time of editorial deadline); draft law reference: BRDrucks. 354/07; See also the Bericht des
Rechtsausschusses (report of the Committee on Legal Affairs), BTDrucks 16/9737, available at the website
of the German Federal Ministry of Justice, http://www.bmj.bund.de/media/archive/1236.pdf.
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[Vol. 09 No. 09
most fundamental reform of the German GmbH, tries to replace much of that case
law with statutory rules, while also eliminating certain formalities.
It is hard to underestimate the significance of the GmbH on the German economy,
but also its historic influence on company law worldwide. Unlike the AngloAmerican legal system, the German “Aktiengesellschaft” was not designed for small
businesses.5 By introducing the “Gesellschaft mit beschränkter Haftung” (GmbH), the
legislature of 1896 reconciled the difference between smaller privately held
companies and larger publicly traded enterprises by creating the GmbH. The
GmbH combines the basic structure of partnership law with the benefits of limited
liability.6 Insofar, German Law differs significantly from the British and traditional
US-American systems, where private limited companies are largely subject to the
same rules as a public or listed companies.7 In the past 112 years, the GmbH has
not only proven its value domestically, but has also become Germany’s most
appreciated legal export.8
Nevertheless, the GmbH was always subject to abuse, especially in bankruptcycases, on one hand9 and criticism for its relatively strict formalities, as compared to
the British Private Companies (limited by shares) on the other hand.10 The
5
RUDOLF B. SCHLESINGER ET. AL., COMPARATIVE LAW 801 (5th ed. 1988).
6 Ingrid Lynn Lenhardt, The Corporate And Tax Advantages Of A Limited Liability Company: A German
Perspective, 64 U. CIN. L. REV. 551 (1996); admittedly rules and ideas from one corporate form are often
drawn upon to close gaps in the regulation of the other, e.g. regarding the voidability of decisions at
shareholder meetings (skeptical WOLFGANG ZÖLLNER in ADOLF BAUMBACH & ALFRED HUECK, GMBHGESETZ (18th ed. 2006) or groups of companies.
A general overview is provided by KLAUS J. MÜLLER, THE GMBH - GESELLSCHAFT MIT BESCHRÄNKTER
HAFTUNG - A GUIDE TO THE GERMAN LIMITED LIABILITY COMPANY (2006); Ulrich Seibert, The Law
Governing Capitalized Corporations in the Federal Republic of Germany (the AG and GmbH), in BASICS OF
GERMAN COMMERCIAL AND ECONOMIC LAW (1994).
7
8 See Marcus Lutter, Zur Entwicklung der GmbH in Europa und in der Welt, 96 GmbHR 1 (2005), and the
essays in MARCUS LUTTER, 100 JAHRE GMBH-GESETZ (1992); Schlesinger, in MARCUS LUTTER, 100 JAHRE
GMBH-GESETZ 830 (1992); BURKHARDT W. MEISTER & MARTIN H. HEIDENHAIN, THE GERMAN LIMITED
LIABILITY COMPANY 24 (5th ed. 1988); Jan Thiessen, Transfer von GmbH-Recht im 20. Jahrhundert - Export,
Import, Binnenhandel in VANESSA DUSS, ET. AL., LEGAL TRANSFER IN HISTORY 446 (Martin Meidenbauer
Verlagsbuchhandlung, ed. 2006); see also HANDBUCH DES INTERNATIONALEN GMBH-RECHTS (Rembert
Suess & Thomas Wachter eds., 2006) (providing comparative documentation).
9 See Ulrich Seibert, Die rechtsmissbräuchliche Verwendung der GmbH in der Krise - Stellungnahmen zu einer
Umfrage des Bundesministeriums der Justiz, in FESTSCHRIFT FÜR VOLKER RÖHRICHT 585-88 (Georg Crezelius
et al. eds., Cologne, Schmidt 2005).
10 Volker Triebel & Sabine Otte, 20 Vorschläge für eine GmbH-Reform - Welche Lektion kann der deutsche
Gesetzgeber vom englischen lernen? 27 ZIP 311 (2006).
2008]
Is the GmbH Ready for the 21st Century?
1071
criticism reached an all-time high when a series of recent ECJ-decisions11 allowed
German entrepreneurs to freely choose a Limited as an alternative to the GmbH.
While the numbers have been debated extensively,12 there is a significant amount of
“pseudo foreign corporations” registered in Great Britain,13 while being entirely
owned by German shareholders and operating exclusively in Germany.14
Furthermore, the recovery rate in bankruptcy was alarmingly low;15 and it had
become a popular business practice to “professionally bury” GmbH’s in crisis by
transferring shares to third parties, moving offices to new locations, and appointing
naïve, yet insolvent persons as directors.16
The international demise of the GmbH as a role-model is also aptly illustrated by
the example of Japan:17 In 1940, following the example of the German statute, Japan
adopted the y!gen kaisha (
) as a special organizational form for small and
medium sized enterprises. However, in 2006 that form was abolished in favor of a
new entity modeled after the U.S. Limited Liability Corporation (L.L.C.), the g"d"
kaisha (
). Interestingly enough, all existing “GmbH’s” were automatically
converted to public corporations (kabushiki geisha). Simultaneously, the minimum
capital requirement was dropped, making it is possible to incorporate with as little
as 1 Yen (less than U.S.$ 0.01 !).
11 C-167/01 Kamer van Koophandel en Fabrieken voor Amsterdam/Inspire Art, 2003 E.C.R. I-10155; see
also C-208/00 Überseering BV v. Nordic Construction Company Baumanagement, 2002 E.C.R. I-9919; C212/97 Centros Ltd. v. Erhvervs-og Selskabsstyrelsen, 1999 E.C.R. I-1459.
12 According to a parliamentary inquiry, 23,496 new GmbHs were formed in 2005, while only 3,195
subsidiaries of English Limited companies entered the public registers, BTDrucks 16/283.
13 Ironically, “simplification” was also one of the core goals of the UK Company Law Act 2006. UK
Department of Trade and Industry, Companies Act 2006 – A summary of what it means for private
companies (February 2007) available at http://www.dti.gov.uk/files/file37956.pdf.
14 While Udo Kornblum, Bundesweite Rechtstatsachen zum Unternehmens- und Gesellschaftsrecht, Stand
01.01.2006, 98 GmbHR 25 (2007), estimates only 7.000 registered subsidiaries in Germany, one has to take
into account a huge number of entrepreneurs who are unaware of, or simply ignore, their duties under
the Eleventh Council Directive 89/666, 1989 O.J. (L 395), see Horst Eidenmüller, Die GmbH im Wettbewerb
der Rechtsformen, 36 ZGR 168, 170 (2007).
15 Specifically, in 2004 more than half of the GmbHs in crisis did not even have sufficient funds to initiate
bankruptcy proceedings, JUSTUS MEYER & JUDITH HERMES, GMBHR 807, 809 (2005).
16
The practice is aptly called “burying“ the GmbH.
17 The Company Law of the People’s Republic of China still requires a minimum capital for both the
“GmbH” and the Corporation, although the amount is significantly less than in Germany (RMB
30,000/US$ 4,100 for a “GmbH,” and RMB 5 Million/US$ 697,412for a stock corporation). Both sums
were significantly reduced in 2006. Previously these minimum amounts were RMB 500,000 and RMB 10
Million respectively.
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GERMAN LAW JOURNAL
[Vol. 09 No. 09
The German government initially decided to go forward with a reform in 2004,
following on the heels of the United Kingdom which finally completed a
groundbreaking reform in 2006.18
The first German attempt, the
“Mindestkapitalgesetz”19 only proposed a reduction of the minimum capital to €
10,000, while requiring disclosure of the registered capital in all written documents.
This draft failed due to re-elections and heavy criticism from both scholars and
practitioners.
The following reform schedule was often delayed. The first draft from 2006,20
followed by an official government draft in May 2007,21 was considered by the
Bundesrat (the representatives of the German state governments in legislative
proceedings) in July 2007,22 and then forwarded to parliamentary proceedings.
After a first plenary discussion in September 2007, the Bundestag (German
parliament) delegated the draft (as is customary) to parliamentary committees. A
hearing on the reform bill in the parliament’s legal committee took place in January
2008. The final plenary discussion and vote in the Bundestag took place on 26 June
2008. The MoMiG was scheduled to be discussed again in the Bundesrat in
September. It then has to be signed by the Bundespräsident (Federal President - but
without any veto-right) and published in the Federal Gazette. Unless something
entirely unexpected happens, it will enter into force in November.
18 See the official Internet site at www.dti.gov.uk/bbf/co-act-2006/index.html; detailed description in
ALISTAIR ALCOCK, JOHN BIRD & STEVE GALE, COMPANIES ACT 2006: THE NEW LAW (2007); see also critical
comments (especially regarding the size of the reform, containing approximately 1, 300 sections and 16
schedules) by David Bennet, The Companies Act 2006 - A Megalosaurus in Holborn?, 83 Bus. L.B. 1 (2006);
Sandy Shandro & Paul Sidle, Reforms To English Company Law, 26 Am. Bankr. Inst. J. 34 (2007); Andrew
Harvey, The Director's Cut, 104 L.S.G. 31 (2007).
19
Gesetz zur Bekämpfung von Missbräuchen, zur Neuregelung der Kapitalaufbringung und zur
Förderung der Transparenz im GmbH-Recht (Law to combat abuses, to re-structure raising of capital,
and to strengthen transparency in the law of private limited liability companies), November 30, 2004.
20 See Referentenentwurf eines Gesetzes zur Modernisierung des GmbH-Rechts und zur Bekämpfung
von Missbräuchen (MoMiG) of 29 May 2006, available at http://www.bmj.bund.de/files//1236/RefE%20MoMiG.pdf.
21 See Regierungsentwurf eines Gesetzes zur Modernisierung des GmbH-Rechts und zur Bekämpfung
von Missbräuchen (MoMiG) of 23 May 2007, available at
http://www.bmj.bund.de/files//2109/MoMiG-RegE%2023%2005%2007.pdf.
22
See
Bundesrats-Drucksache
Nr.
354/07,
available
at
http://www.bmj.bund.de/files/1d854d9273a0aaff04db3f2a2caf9b61/2602/Stellungnahme%20Bundesra
t%20MoMiG_Beschluss.pdf.
2008]
Is the GmbH Ready for the 21st Century?
1073
The strong influence of academia in the reform process is noteworthy. While US
scholars are generally ignored by both legislators and judges, German professors
tend to find the ears of elected representatives. This is aptly illustrated by the fact
that five university professors (out of a total of twelve experts) were asked their
opinions during the draft’s debate in committee.23 It seems a bit worrisome,
however, that this created the impression that the current statute was “not fully
thought out,” or even “experimental,” and would endanger the GmbH’s hardearned reputation.24
B. Of Traditions and Change
The drafters of the reform bill faced a tough challenge: While any change was
subject to strict scrutiny by legal scholars and practitioners, 25 the pressure to
“modernize” was similarly compelling.
Opinions were wide and varied,
comparable to the situation during the reform of the civil code (Buergerliches
Gesetzbuch) in 2001. The goal of balancing these conflicting interests, to uphold the
established principles, while introducing more or less radical changes, is evident in
every single line of the draft.
While the most significant changes affect the
financial structure and will be discussed in detail below, many other wellestablished features have been abolished and replaced by rules leaning in the
opposite direction.
I. Formalities – Especially Formation
Formation of a GmbH (at least occasionally) proves to be a long and tedious
process. It involves the drafting of the corporate charter/articles of incorporation26
by a legally trained notary public (usually a highly qualified lawyer), the filing of
these articles, and a number of assurances by the future directors, as well as proof
of provision of the necessary minimum capital and possible state licenses27 for the
23
See
Rechtsausschuss
Stellungnahmen
der
Sachverstandigen
available
at
http://www.bundestag.de/ausschuesse/a06/anhoerungen/28_MoMiG/04_Stellungnahmen/index.ht
ml.
24
See DYCKMANS: Mangelhafte Gesetzgebung be GmbH nicht hinnehmbar, available at
http://www.fdp-fraktion.de/webcom/show_websiteprog.php/_c-649/_lkm-84/_nr-9763/bis-/i.html.
25
As evidenced in the decisions of the 2007 meeting of legal professionals (Deutscher Juristentag).
26 Unlike most LLC-statutes in the US, German Law does not distinguish between the bylaws and
articles of organization. A single document discussing both the core elements and the details of internal
structures (“Satzung“) is filed with the state and published according to the 1st Directive.
27 Required e.g. for handcraft, car repairs or operation of an inn, cf. Sect. 1 para. 1 Handwerksordnung
(Trade Regulation); sec. 2 para. 1 Gaststättengesetz (Law on the regulation of inns and pubs).
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future business. Before registration, these documents require full review by the
court keeping the register28 before registration may occur. This could take up to
half a year in complex cases. However, since the GmbH as such does not exist
before registration, directors and/or shareholders will be personally liable for any
losses incurred before registration. In a modern society the requirement for limited
liability might arise very early in business operations.29 Waiting for half a year
might prove unacceptable under those circumstances.
Thus, the reform act tries to ease some of the long standing formal requirements30 in
order to speed up registration of “standard case” enterprises.
One way to speed up formation is the use of Internet forms and/or emails. A
radical change would eliminate the necessity for notarization and instead rely on
online-registration. The government draft, however, did not dare to go that far. As
a compromise it provided model articles which were to be agreed upon in written
form, but required verification of the identity of the signatories by a notary public.
The benefit of this “simplification” was questionable at best, since cost-savings
were minimal and a trip to the notary public was still unavoidable; thus eliminating
any possible time savings. Still, even that change did not pass scrutiny by the
parliamentary committee. The final reform bill requires the notary to fully notarize
the agreement (i.e. not only verify the identity of the parties, but inform them of the
risks), but provides a sample document to be used for this purpose (necessary for
cost-savings).
Two simplifications passed parliamentary proceedings, however: Under the new
law, no review of public licenses is necessary,31 and the review of asset provision by
shareholders is limited to cases which appear suspicious to a reasonable person.32
There is also good reason to assume that the introduction of electronic registers in
2007 has led to a significant acceleration of the registration procedure. Some
acceleration may also be attributed to the introduction of electronic registers in
28 In fact, a proposal shifting the burden of review upon the notaries was clearly declined at the 2007
meeting of legal professionals (Deutscher Juristentag).
29
Namely to avoid personal liability for the statutorily required contractual warranties.
See Ulrich Seibert, Close Corporations – Reforming Private Company Law: European and International
Perspectives, 8 EBOR 83 (2007) (also emphasizing this point).
30
31
Sect. 8 para. 1 No. 6 GmbHG (Act on limited liability companies—GmbHG) is repealed.
32
Sect. 8 para. 2 GmbHG expressly states the limitation.
2008]
Is the GmbH Ready for the 21st Century?
1075
early 2007.33 While this is unlikely to provide a competitive advantage vis-à-vis
other European entities,34 it certainly eliminated some delays. Still, a review (with
regards to form as well as to substance) remains necessary, as does the involvement
of a notary public. Thus, even though some requirements have been eased,
formation of a GmbH is not as easy as formation of a corporation in most U.S.
states. The costs of formation were also slightly reduced. Registration in public
registers, filing of documents,35 and certification of the corporate charter by a
notary public amount to only 300 € in actual costs. Since the traditional
requirement to publish the registration in newspapers will finally be abandoned in
2009, no further costs apply. In comparison, a German employing a service
provider to form a British Limited36 will generally be required to pay
approximately 260 €, plus annual service fees of a similar amount for running a
registered office in Great Britain.37 Additional costs also arise from filing annual
reports and for the possible filing of tax documents. Furthermore, the German
“branch” of the Limited must be registered in Germany,38 causing costs comparable
to registration of a German entity. Formation within a day or less is still factually
impossible.39
II. Handling of Shares and Membership Rights
Under previous law, the “shareholder”40 of a GmbH holds a part of the
Geschäftsanteil (company capital) in an amount divisible by 50 €, and totaling at
33
Gesetz über elektronische Handelsregister und Genossenschaftsregister sowie das
Unternehmensregister (EHUG), BGBl. I 2006, 2553 (“Act on electronic registers of trade and co-operative
societies and the company register”).
34 As all member states are required to provide such electronic registers under Directive 2003/58/EC of
July 15, 2003 amending Council Directive 68/151/EEC of April 9, 2003, 2003 O.J. (L 221) 13 as regards
disclosure requirements in respect of certain types of companies.
35 In accordance with First Council Directive on coordination of safeguards which, for the protection of
the interests of members and others, are required of companies (Directive 61/151/EEC) (as amended by
directive 2003/58/EC), thus similar to the other European Union Member States.
36
See only www.go-limited.de, www.Limited24.de, www.limited4you.de.
37
www.go-limited.de/preise/preise-und-agb.html.
38
As required by the Eleventh Council Directive (EEC) No. 89/666 of December 21, 1989.
39 This was and is the core argument for the introduction of the new SLNE in Spain. See Fernando JuanMateu, The Private Company in Spain – Some Recent Developments, 1 ECFR 60-70 (2004).
40 The GmbHG speaks of “Gesellschafter,” which might be better translated as “member” or “partner,”
as it is the same term used for partners in a German partnership.
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least 100 €.41 To further complicate things, a shareholder may not hold more than
one of these capital parts at the time of formation.42 Dividing existing shares is
subject to special and complex rules;43 and voting is pro rata. However, The reform
bill changes these requirements to make the “membership rights” more closely
conform to shares of a corporation. Under the reformed statute, every shareholder
may hold as many shares as he wants and the value of each part can be freely
determined (in multiples of 1 €).44
Unlike most US states,45 Germany does not require shareholders to be registered,
but allows for bearer shares even in public corporations. In the GmbH, on the other
hand, share certificates may not be issued, but there is no share register in the
traditional sense either. However, the directors are required to file a “list of
shareholders” with the register. Even though that list is available online46 to
anyone willing to pay 4.50 €,47 it has no legal relevance regarding the relationship
between a shareholder and the GmbH, or a shareholder and a potential purchaser
of his shares. Under the new law, only shareholders on the official list are
recognized as possessing rights.48 Therefore, until the list has been updated and
filed with the public register, the purchaser of membership rights is treated as a
non-shareholder. This once again transfers an idea from the AG to the GmbH.
Finally, the transfer of shares has been improved. Under both previous and
reformed law, a notary public is required to create an obligation to transfer shares
and to perform that transfer.49 The articles may, and often will, provide for further
requirements, especially consent of all shareholders or compliance with rights of
41
Sect. 5 para. 1, 3 GmbHG.
42
Sect. 5 para. 2 GmbHG.
43
Sect. 17 GmbHG.
44 By eliminating the aforementioned rules regarding formation in sect. 5 GmbHG, and simplifying the
procedure for splitting shares in sect. 17 GmbHG.
45
See e.g. Sect. 158 DGCL, sect. 185 CalCC, sect. 508 (c) (2) NYBCL.
46 Central search mechanism of the commercial registers administered by the German States (Länder):
<www.handelsregister.de>; Central federal register, providing access to the commercial registers:
<www.unternehmensregister.de>.
47
Sect. 7b JVKostO in connection with part 4 of the attached fee schedule.
48
Sect. 16 para. 1 GmbHG as amended by the reform bill.
49
See sect. 15 paras. 3 and 4 GmbHG.
2008]
Is the GmbH Ready for the 21st Century?
1077
first refusal.50 However, the reform bill tries to protect a good faith purchaser, who
relies on the shareholders list.51 An inaccurate list may prove a basis for reasonable
reliance. However, reliance is only considered reasonable if the shareholder list
was incorrect for at least three years before the transactions, or if the erroneous list
is somehow attributable to the true owner. Finally, it is also possible to file an
objection in advance to prevent a loss of rights.52 Whether these amended rules
really benefit the practice of mergers and acquisitions is questionable.53
III. Internal Organization of the GmbH
Matters of internal organization are left largely unchanged. This is easy to explain:
Unlike the AG,54 the GmbH has always been one of the most flexible entities in
Europe – requiring no “secretary” or annual meetings, and granting the
shareholders almost infinite options in structure (including e.g. the choice to create
a supervisory board).55 The internal structure is largely left to the shareholders.
Furthermore, the shareholders may exercise direct control over the management, as
well as discharge them without cause.56
IV. Moving to a Better Place
Finally, and perhaps most importantly, the reform bill seeks to open the GmbH to
off-shore operations. Under traditional law, it was (debatably) impossible to run a
GmbH without any “real” business connection to Germany.57 Thus, even a German
corporation may not employ a GmbH for subsidiaries exclusively conducting
50
See Sect. 15 para. 5 GmbHG.
51
Sect. 16 para. 3 GmbHG as amended by the reform bill; see in detail Altgen (in this issue).
52 Sect. 16 para. 3, 2nd alternative GmbHG – evidently trying to copy the idea of the real estate registers
(Grundbuch).
53 See Martin Schockenhoff & Andreas Höder, Gutgläubiger Erwerb von GmbH-Anteilen nach dem MoMiG:
Nachbesserungsbedarf aus Sicht der M&A-Praxis, 27 ZIP 1841 (2006) (discussing a previous draft).
54
Sect. 23 para. 5 AktG prohibits deviations from the statute unless expressly allowed.
55 Such a board may be constituted voluntarily (Sect. 52 GmbHG), or may be required for codetermination of over 500 employees (see Drittelbeteiligungsgesetz, MitbestG, MontanMitbestG,
MitbestErgG), or due to special investors’ needs (Sect. 5 para. 2 InvestmG).
56 In the AG, decisions by the shareholders meeting on management issues are expressly prohibited, Sect.
119 para. 2 AktG.
57
See s. 4a sect. 2 GmbHG, requiring the seat to be the place of actual operations.
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business in the United States.58 This also appears to be in line with ECJ case law, as
it is easy to prevent entities from leaving their home country under the EC Treaty.59
However, the German GmbH appears to be at a competitive disadvantage since
Germany must accept other states’ organizational forms under ECJ case law 60 or
international treaties - which most modern corporate laws expressly allow.61
Furthermore, forming GmbH’s with their registered seat in Germany will also lead
to international jurisdiction of German courts.62 Whether this is an advantage, as it
would be an additional forum to the place of the registered office, is subject to
debate.63
There are two issue that arise, and each is handled separately. A GmbH or AG
could previously only be registered at its “real seat,”64 (i.e. the place where
corporate headquarters are located and decisions are made).65 This place has to be
in Germany, as only German registers allow for “proper” registration of German
associations. The MoMiG eliminated these rules (which were only added in 1998)
and thereby separated the corporate seat from the place of registration. One
necessary modification for such “de-localized” companies is the new requirement
58 See Ulrich Noack & Dirk Zetzsche, Germany’s Corporate And Financial Law 2007: (Getting) Ready For
Competition, available at http://papers.ssrn.com.
59 See ECJ, Case 81/87 The Queen v. H.M. Treasury and Commissioners of Inland Revenue, ex parte
Daily Mail
and General Trust plc., 1988 E.C.R. 5483 (“Articles 52 and 58 of the Treaty cannot be interpreted as
conferring on companies incorporated under the law of a Member State a right to transfer their central
management and control and their central administration to another Member State while retaining their
status as companies incorporated under the legislation of the first Member State.”).
60 See Kilian Baelz & Teresa Baldwin, The End of the Real Seat Theory (Sitztheorie): the European Court of
Justice Decision in Ueberseering of November 5, 2002 and its Impact on German and European Company Law, 3
GERMAN L. J. (2002).
61 Art. XXV No. 5 Sent. 2 of the Treaty Of Friendship, Commerce And Navigation Between The United
States Of America And The Federal Republic Of Germany, U.S. - Germany, July 14, 1956, 7 U.S.T. 1839.
62 See Council Regulation 44/2001, Jurisdiction and the Recognition and Enforcement of Judgments in
Civil and Commercial Matters, Art., 2000 J.O. (1) 60.
63 See Horst Eidenmüller, Die GmbH im Wettbewerb der Rechtsformen, 36 ZGR 168, 206 (2007) (showing
skepticism).
64 Sect. 4a para. 2 GmbHG, Sect. 5 Aktiengesetz and also e.g. RGZ 7, 69 f; 88, 55; 107, 97; BGHZ 19, 105;
BGHZ 29, 328.
65 See Nicola Preuß, Die Wahl des Satzungssitzes im geltenden Gesellschaftsrecht und nach dem MoMiG Entwurf, 98 GMBHR 57 (2007).
2008]
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of a registered office within Germany, where service of court actions against a
company may be filed.66
The other, more fundamental change will be part of a different reform bill.67
Germany will finally give up the “real-seat theory” and follow the “incorporation
theory.” A discussion of the consequences of this change is sadly beyond the scope
of this article.
C. The Fixed Capital System in Reform
I. Understanding the Fixed Capital System
One of the most fundamental ideas in German corporate law is that unlike
partnerships, corporations require (1) certain minimum funds, (2) to be provided in
full by the incorporators, (3) with certain limits on distributions to the shareholders.
If these requirements are met, neither shareholders nor directors will generally be
held liable for the debt of the corporation.
Even under the old law, the directors had a duty to file for bankruptcy if the
company was unable to meet its obligations, or its debts exceeded the available
assets.68 This duty remains intact. If the directors do not act immediately they will
become liable for any losses caused thereby.69 Beyond that, there is no need for a
“solvency test,” no “wrongful trading,” no “piercing of the corporate veil,” and no
“directors duties towards third parties.” Thus, as a rule: “form governs substance”
in financing.
This system was codified on a European level in the second Company Law
Directive for public corporations, while EU member states remain free to
implement their own system of creditor protection for privately held businesses.
However, the European Parliament’s recommendations on a European private
company statute also provide for a fixed capital system (with additional
66
Sect. 4a para. 1 GmbHG as amended by the reform bill.
67 Referententwurf eines Gesetzes zum Internationalen Privatrecht der Gesellschaften, Vereine und
juristischen
Personen
of
7
January
2008,
http://www.bmj.de/files/2751/RefE%20Gesetz%20zum%20Internationalen%20Privatrecht%20der%20Gesellschaften,%20Vereine
%20und%20juristischen%20Personen.pdf.
68
Sect. 64 GmbHG.
69
See BGHZ 29, 100, 102 ff.; BGHZ 138, 211, 214.
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safeguards).70 While the debate71 regarding reform of the second directive has
come to an end, at least for now, the discussion of the capital system in private
companies is still raging on.
It might be useful to compare the German capital protection system to the system
implemented in the corporate laws of most U.S. states:
1. With regards to the first requirement – the “capital” – most states have abolished
any minimum capital requirement,72 but do accept the notion of a “stated
capital,”73 which can be determined far more freely than in Germany. Some states74
have even abolished that last remainder of the fixed capital system.
2. The payment of the shares by the founders, or later shareholders, is guaranteed
in only a very limited manner. For shares with par value, any distribution below
that value is prohibited.75 However, unlike the GmbH, corporations in most states
may issue shares without par value and freely determine the consideration to be
paid for them.76
3. The final requirement, the limitations on distribution to the shareholders, seems
to present the largest differences. Unlike the German static system, most states base
their limitations on an (in)solvency test – i.e. distributions are allowed unless they
would render a company unable to pay its debt. Some states add a balance surplus
test which is more comparable to the German system: distributions are limited to
the difference between total assets and total liabilities insofar as they exceed the
stated capital. For example, Delaware allows for “nimble dividends” to be paid out
of the profits of the current or preceding business year. California, on the other
hand, follows a different limitation on distribution. Distributions may only be
made out of retained earnings (sect. 500 (a) CalCC) or meet a “net asset test” (sect.
500 (b) CalCC) requiring assets to be at least 125% of the debt and liquid assets (i.e.
cash and assets immediately realizable in cash) to be at least equal to debt. Under
70
T6-0023/2007 of 01/02/2007.
71
See LEGAL CAPITAL IN EUROPE (Marcus Lutter, ed. 2006).
With the exception of South Dakota, Texas, and the District of Columbia, which require a minimum
capital of $ 1,000.
72
73
See e.g. sect. 124 DGCL; Sect. 102 (a)(12) NYBCL.
74
E.g. California.
75
Sect. 153 (a) DGCL; § 504 (c) NYBCL.
76
California does not provide for par value anymore.
2008]
Is the GmbH Ready for the 21st Century?
1081
California law,
directors are jointly and severally liable for prohibited
distributions, but may seek indemnification from bad faith recipients.
It is noteworthy that the capital-system implemented for the GmbH differs in a
number of important ways from the law for public corporations. The GmbH
requires a lower minimum capital to be raised, which is half the amount necessary
for a public corporation (AG).77 Similarly, there are fewer restrictions on
distributions of assets to the shareholders.78 Since the shareholders in a GmbH are
much closer to management, their limited liability is also subject to certain
reservations.79
While it has been criticized that “competing” systems have to rely on complex
instruments such as liability for wrongful trading, fraudulent trading or even
“shadow directors,” German courts have consistently eroded the privilege of
limited liability to prevent abuse. For example, the road to personal liability by
shareholders and/or directors is open in the following cases:
1. Personal liability vis-à-vis third parties is imposed on any person acting on
behalf of the company before its registration (however, as soon as the company is
registered, only the company will be liable).80
2. Directors are liable to the company (and not to third parties or shareholders) for
breaches of their duties of care and duty of loyalty.81
3. Shareholders are liable to the GmbH if they do not pay the par value of their
share82 or if they receive distributions causing the capital to drop below the stated
77 See Sect. 5 para. 1 GmbHG; see also John Armour, Legal Capital: An Outdated Concept?, 7 EBOR 6-27
(2006); HORST EIDENMÜLLER, BARBARA GRUNEWALD & ULRICH NOACK, MINIMUM CAPITAL IN THE SYSTEM
OF LEGAL CAPITAL IN LEGAL CAPITAL IN EUROPE (Marcus Lutter, ed. 2006).
78
Compare Sect. 30 GmbHG to Sect. 57 AktG.
According to Sect. 31 para. 1 a distribution to any shareholder lowering assets below the stated capital
leads to a duty to return such distributions immediately. Furthermore, the other shareholders (even if
they were in good faith) are liable according to Sect. 31 para. 3 if the beneficiary is unable to perform that
obligation. Furthermore, under Sect. 24, GmbHG shareholders are also liable for the full payment of the
registered share capital by their co-investors, although their liability is only subordinate.
79
80
Sect. 11 GmbHG.
81
Sect. 43 GmbHG; cf. sect. 64 para. 2 GmbHG, sect. 30 GmbHG.
82
Sect. 9, 9a GmbHG.
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capital.83 It is worth noting that the director will be liable as well in those cases. If
neither the director nor the recipient are able to return the withdrawn funds, all
other shareholders will be held liable.84 If a contribution in cash was agreed upon,
but something else was provided (i.e. something which would have been
considered a “contribution in kind”), the provision of assets is considered invalid.
Similarly, circumventions of the required formalities for contributions in kind
(including an express agreement in the articles which will be published by the
register and a report by the shareholders regarding the value of the item, which are
all subject to full review by the courts) is subject to nullity of the whole transaction.
Thus, a shareholder who agreed to pay 10,000 € and provided his automobile worth
20,000 € will still be liable to the GmbH for 10,000 € (though he has a claim for the
return of his automobile).
4. If a director continues to conduct business even though there is either an excess
of debts over assets or the company is unable to pay its debts (i.e. is “insolvent”), he
will be liable to any new creditors for their losses in full.85
5. Shareholders will be directly liable to third parties if they do not sufficiently
separate their private funds from company capital, so-called “commingling” (e.g.
by keeping separate accounts).86
6. Finally, under recent case law, shareholders will be liable to the GmbH for
causing “intentional damage against public policy” (sect. 826 Buergerliches
Gesetzbuch - German Civil Code) if they knowingly cause insolvency by
withdrawing funds.87 The limits of that rule are yet to be explored.
Thus, German company law was never a purely formalistic “capital maintenance
system.” This also forms the basis for the critique of the minimum capital/capital
maintenance system which seems to provide a superfluous additional level of
protection. However, even today, personal liability of shareholders or directors is
an extreme exception under German law.
83
Sect. 30 GmbHG.
84
Sect. 24, 31 GmbHG.
85
BGHZ 126, 181; BGHZ 138, 211; see also Sect. 64 para. 2 GmbHG.
86
BGH, ZIP 2006, 467; BGHZ 125, 366 , 368 f.; BGHZ 95, 330.
87
See (most recently) BGH case no. II ZR 3/04 of 16 July 2007 - TriHotel.
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II. The Reform
All three elements of the fixed capital system were changed considerably under the
reform bill. In addition, responsibility of management was strengthened by
requiring higher qualifications and stricter liability rules.
1. Minimum Capital and Unternehmergesellschaft
The whole reform debate started with the heavily advocated reduction of the
minimum capital from € 25,000 (of which only 12,500 € must be provided
immediately at incorporation) to € 10,000 (of which only 5,000 must be made
available from the get-go).88 This was alleged to be the “European average.”89 Just
for comparison: The amount of 25,000 Reichsmark required in 1892 was sufficient
to buy a luxury home or employ ten teachers for a whole year.90 It was only the
huge inflation in the early 20th century that caused the GmbH’s dramatic rise in
popularity. The change was only intended to remove psychological disincentives.
Strangely enough, the change that started it all does not appear in the final reform
act, causing some critics to announce the failure of the whole reform project.
However, keeping the amount the same is reasonable in light of the fact that these
assets can be freely used in business-operations.91
The true revolution of the MoMiG is hidden in sect. 5a GmbHG: By forming an
Unternehmergesellschaft (haftungsbeschränkt),92 (UG - entrepreneur company (limited
liability)) - the peculiar and ugly addition in brackets may not be abbreviated or left
88 See sect. 5 para. 1 GmbHG of the MoMiG-government proposal; previously introduced in the proposal
for a Mindestkapitalgesetz in 2004.
Seibert, supra note 30, at 87; it is also identical to the amount proposed for the EPC by the European
parliament in its Resolution with Recommendations to the Commission on the European Private
Company Statute, T6-0023/2007 of 01/02/2007; however, the proposal by the Commission only requires
a minimum capital of 1 €.
89
90 See Hans-Joachim Priester, Mindestkapital und Sacheinlageregeln, in Die GmbH-Reform in der
Diskussion, VGR (Hrsg.) (Cologne, Otto Schmidt 2006).
Wolfgang Zöllner, Konkurrenz für inländische Kapitalgesellschaften durch ausländische Rechtsträger,
insbesondere durch die englische Private Limited Company, 1 GMBHR 5 (2006); Wilhelm Happ & Lorenz
Holler, Limited statt GmbH?, 730 DSTR 732 (2004); Rüdiger Wilhelmi, Das Mindestkapital als Mindestschutz
- eine Apologie im Hinblick auf die Diskussion um eine Reform der GmbH angesichts der englischen Limited, 13
GMBHR 21 (2006).
91
92 The reform was influenced in a draft bill of March 2007 suggested by Member of Parliament, Jürgen
Gehb, see <www.gehb.de/positionen/ugg/Arbeitsentwurf-UGG.pdf>.
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out - it is meant to “warn” third parties that this is nowhere near as well established
as a full GmbH; calling the company “UG” is thereby expressly prohibited - even
when operating outside Germany) it is possible to achieve GmbH-style limited
liability with a minimum capital of € 1.00. There are indeed a few caveats: First, the
name of the firm must include the “unhandy” part, Unternehmergesellschaft
(haftungsbeschränkt), or its abbreviation, UG (haftungsbeschränkt) (not merely “UG”!).
Secondly, every share with a minimum par value of 1 € must be paid up in full and
in cash before registration, contributions in kind are not allowed. Finally, a UG
(haftungsbeschränkt) has to save 25% of its annual profits. These may not be
distributed to the shareholders, but instead will be accumulated.
As soon as the shareholders increase the stated capital to € 10,000, the UG will turn
into a “real” GmbH and there will be no need for mandatory savings. Apart from
these three modifications, the “UG (haftungsbeschränkt)” is a fully grown
GmbHwith the rules of the GmbHG applying directly and without any restriction.
It is noteworthy that there are no specific liability rules or other precautions
involved. Even under the different name “UG (haftungsbeschränkt),” the protection
provided to creditors is no different from the rules associated with a “grown-up”
GmbH.93
The drastic departure from the GmbH’s minimum capital requirement shows that
the days of such requirements are already running out.. By giving entrepreneurs a
choice between the two forms and allowing a UG to eventually grow into a GmbH,
German corporate law opens itself to a future freed of a minimum capital.
2. Rules on Raising Capital
Under the GmbH’s capital maintenance system, each shareholder must provide the
agreed-upon contribution (or at least half of the agreed amount) in liquid assets to
the free disposal of the company. Contributions in kind require a special report
regarding their value and must be published.94 If there is only one shareholder,
payment must be in full, or guarantees must be provided for the remaining sum.
Finally, those requirements are subject to full review by the courts before
registration.
This can lead to a considerable delay. If any assets are lost (e.g. due to operating
the business or natural de-valuation) between the date of the organizational
contract agreement and the date of registration, the shareholders are personally
93
Compare Schmidt [in this issue] for more details on the UG.
94
Sect. 5 para. 4 GmbHG; Sect. 9c para. 1 sent. 2 GmbHG.
2008]
Is the GmbH Ready for the 21st Century?
1085
liable to the GmbH for the specified amount.95 Furthermore, as stated above, the
persons acting on behalf of the company before registration can be held personally
liable – a situation which makes the GmbH unattractive if an early start of business
operations is desired.
The reform bill will not completely eliminate those slowdowns in the registrationprocess; however, some simplifications were enforced:
1. Registration of a GmbH may only be declined if there is a “significant”
difference between the alleged and the actual value of contributions in kind.96
Furthermore, the court may only request proof of the full provision of assets if there
are “significant” doubts.97
2. The guarantees required for the formation of single-person entities was
abolished,98 insofar that the requirements were lowered to the minimum level
allowed for by the Twelfth Directive.99
3. A new rule allows for the immediate return of assets provided to the GmbH, as
long as there is a legally and economically valid claim for their return.100 This new
system corresponds, in essence, to the same approach one would take on a balance
sheet: The actual form of assets is irrelevant as long as the GmbH receives a benefit
of the agreed-upon value. A claim is sufficient, as long as it is enforceable in the
full amount.
4. The idea that contributions in kind are an exception which have to be agreed
upon, evaluated, published, and reviewed is preserved.101 However, if payment in
cash or other liquid assets were agreed upon and other valuables are provided
instead, (i.e. a contribution in kind), liability is limited to the difference in value (if
any) between the provided items and the agreed upon sum.102
95
Since BGH case no. II ZR 54/80 of 3 September 1981.
96
Sect. 9c GmbHG.
97
Sect. 8 para. 2 sent. 3 GmbHG.
98
Sect. 7 para. 2 will be completely eliminated.
99 Twelfth Council Company Law Directive 89/667/EEC of 21 December 1989 on single-member private
limited-liability companies, 1989 O.J. (L 395) 40.
100
Sect. 19 para. 5 GmbHG.
101
Sect. 19 para. 4 GmbHG.
102
Sect. 19 para. 4 GmbHG.
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3. Capital Maintenance
Under traditional law, any distributions were prohibited without exception if they
reduced the company’s assets below the stated capital.103 The reform bill relaxed
that requirement significantly.
As long as there is a valid counterclaim or a corporate group as defined by German
Law, a director may distribute assets back to the shareholder.104 Since the sum on
the balance sheet does not change, the transaction is considered irrelevant with
regards to corporate assets and, therefore, legal.
The new law is meant to benefit the practice of “cash-pooling” in corporate groups:
A parent company will often “pool” liquidity from subsidiaries by transferring all
debt and assets to a central depository company (the “pool”). Thereby effectively
reducing the available assets of the subsidiary, while retaining a claim against the
“pool” in return. This allows the entire process to be cost neutral in theory.
Nevertheless, the German Federal Supreme Court questioned such actions on the
basis of the general prohibition of distribution to shareholders (including the parent
company) or related persons if they lower the total amount of assets below the sum
of the stated capital and obligations.105
A new level of protection, however, has been implemented. While the traditional
capital maintenance system was only concerned with numbers on the balance sheet,
the amended law also takes liquidity into consideration. Thus, the reform bill
inflicts personal liability on the directors for any payment which will cause the
inability to pay dues, unless such payments would have been made by a
“reasonable businessman.”106 This is comparable to the Anglo-American Law
(in)solvency test explained above,107 but not quite a “wrongful trading rule.” In case
of doubt, the manager might even be required to leave office in order to evade the
all but impossible choice of not following theoretically binding orders or violating
the duty to protect the GmbH’s assets in favor of its creditors. This conduct103
Sect. 30 para. 1 GmbHG.
104
Sect. 30 para. 1 GmbHG as amended by the reform.
105
BGH case no. II ZR 171/01 of 24 November 2003.
106
Seibert, supra note 30, at 92.
107 However, replacing the strict formal rule of sect. 30 GmbHG, which prohibits any distribution which
would lower available assets below the stated capital with a flexible solvency test, is not planned and
was actually voted down by a strong majority at the 2007 meeting of legal professionals (Deutscher
Juristentag).
2008]
Is the GmbH Ready for the 21st Century?
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oriented protection, like those used in the U.S., is supposed to complement the
well-established fixed capital maintenance system.108
Nevertheless, the new system is not entirely consistent. If it is possible to return
assets to shareholders as long as a valid claim remains, the whole process of raising
and maintaining capital becomes merely an unnecessary formality. What happens
behind the curtains of the seemingly intact traditional system is in fact the
acceptance of capital provision by mere guarantee. Put in simple words: As long as
a shareholder is actually able to provide funds, his word should be deemed
sufficient; and the shareholder will remain liable for (and be able to provide) the
promised amount to the company. The system implemented by the reform act
complements this aspect with liability of the directors and the requirement to
“show” the assets at least once. It is highly questionable whether this approach is
really “future-proof.”
4. Shareholder Loans109
As explained above, the GmbH is based on the idea of a fixed minimum capital,
which is available at the sole discretion of the managers and may not be returned to
the shareholders. And the shareholders are generally required to provide real
funds, i.e. equity to the GmbH.
Nevertheless, it is certainly possible (and general practice) to finance a GmbH by
debt - agreeing upon loans for cash or renting necessary operating assets. As long
as the shareholders have performed their duties, (provided the agreed-upon
contributions up to (at least) the amount of minimum capitals), it is generally
possible to start a business.
However, a regulatory challenge may arise in times of crisis. If one treats
shareholder loans in the exact manner as third party loans, the GmbH would be
required to return the funds in full, or at least provide the full quota in case of
bankruptcy. This might seem inefficient insofar as the shareholders should have
known of the solvency issues and might have properly liquidated the company.
Thus, the Federal Supreme Court (Bundesgerichtshof) considered returning loans to
shareholders in times of crisis when a breach of the manager’s duty to protect the
stated capital may result in a loss to the shareholders.110
See Eidenmüller, supra note 68, at 182 (assuming two strictly alternative systems without any reason to
combine the two).
108
109
See Verse [in this issue].
110
Supra.
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If the shareholders had not provided capital to the GmbH when a proper
businessman would have done so, their loans are treated as part of the stated
capital. In the 1980’s, the legislature created special rules for such loans,111which
were connected to the difficult-to-determine requirement of a “crisis.”
The reform bill replaces these rules with a rule of subordination in bankruptcy
law.112 If a shareholder grants the company a loan, he will not be treated like a
third-party-creditor in bankruptcy. Instead, the company’s obligation to him will
be subordinated to other creditors, since canceling the loans will achieve a payout
before a move for bankruptcy, which does not actually protect the shareholders.
Any payments on such loans within one year must be returned to the GmbH in
case of insolvency.113
A last minute amendment allows the insolvency
administrator to require the loaned assets to remain with the company for one year
in return for proper compensation.
Pulling these rules out of the specifics of GmbH-law and putting them into the
general bankruptcy law will make them equally applicable to all entities with
limited liability, including foreign companies that have their center of business in
Germany.114
Special exceptions are provided for minority shareholders holding less than 10% of
the membership rights and shareholders entering the company in order to save it
(“Sanierungsprivileg,” the “privilege to ensure financial restructuring”).
5. Further safeguards
Two measures complement the aforementioned changes and partially compensate
for the reduction in state court review:
1. First, since review of the provision of assets by the state courts is significantly
reduced, a reasonable basis for reliance upon the directors is of utmost importance.
To that end, the requirements imposed upon directors increased, including
111
Sects. 32a, 32b GmbHG.
112
Sect. 39 para. 1 no. 5 Insolvenzordnung (bankruptcy code).
113
Sect. 135 Insolvenzordnung as amended by the proposal.
114
See Seibert, supra note 30, at 91.
2008]
Is the GmbH Ready for the 21st Century?
1089
disqualifying a potential candidate for criminal law violations on foreign soil.
This rule is also applicable to subsidiaries of foreign entities as well.115
2. Second, the reform bill also imposed new duties upon the shareholders of a
GmbH.116 Specifically, each and every shareholder (independent of the amount of
shares held) has a duty to file for bankruptcy if, and only if, there is no
management available.117 Furthermore, it is up to each shareholder to prove that he
did not know of either the insolvency or the lack of a manager who could be
reached. These rules are complemented by general provisions assigning the
responsibility of receiving legally binding statements to the shareholders when
managers are absent (Sect. 35 para. 1 sent 2 et seq. GmbHG).
D. Summary and Outlook
While it is widely accepted that competition of regulators,118 like any kind of
competition, is beneficial to the market-participants,119 there are equally good
reasons to assume that drastic changes might deter investors by eliminating the
advantages of previous case law, treatises, and other literature. Recent studies
suggest that small and medium sized enterprises select organizational forms solely
on the basis of formation costs, ignoring both operating costs and structural
advantages.120 Thus any reform faces the challenge of endangering a wellestablished system, that is supported by strong case law, legal writing, and
expertise.
115
Id. at 92.
116 Since the rule is implemented in the bankruptcy code (Insolvenzordnung) it will similarly apply to the
Aktiengesellschaft and any other legal entity operating in Germany.
117
Sect. 15a Insolvenzordnung (bankruptcy code) as introduced by the reform bill.
118 Christian Kirchner et. al., Regulatory Competition in EU Corporate Law after Inspire Art: Unbundling
Delaware’s Product for Europe, 3 ECFLR 159 (2005); Harm-Jan de Kluiver, Inspiring a New European
Company Law? – Observations on the ECJs Decision in Inspire Art from a Dutch Perspective and the Imminent
Competition for Corporate Charters between EC Member States, 2 ECFLR 121 (2004).
119 See Marco Ventoruzzo, "Cost-Based" And "Rules-Based" Regulatory Competition: Markets For Corporate
Charters In The U.S. And In The E.U., 3 N.Y.U. J. L. & BUS. 91 (2006) (including detailed analysis).
120 Marco Becht et. al., Where Do Firms Incorporate?, ECGI - Law Working Paper No. 70/2006 (Sept. 2006),
available at http://ssrn.com/abstract=906066.
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Germany joins other European countries in the reform of private limited
companies.121 Most recently, the European Commission introduced its own
proposal into the competition: The “Societas Privata Europea” (SPE), a European
Private Company.122 The time for change seems better than ever, but can the
reform bill really deliver on that promise?
While arguably not participating in a potential “race to the bottom,”123 the financial
structure of the GmbH will change completely.124 Specifically, the MoMiG
constitutes a visible step towards the demise of the minimum capital
requirement.125 On the other hand, while a lot of window-decorating126 is bound to
happen, the core elements of the GmbH’s organization will remain unchanged.127
Even after the reform, formation will remain complex and expensive. However,
these deficiencies have been compensated for by the high flexibility in operation.
The established system of creditor protection, combined with the planned
improvements, will guarantee a certain level of trust exceeding many foreign
entities. And the lowered entry “price” of limited liability might attract new small
and medium enterprises.
Furthermore, the reform bill tried to ensure consistency. Thus, some changes are
not limited to the GmbH, but also apply to the public corporation – and, according
to the government’s reasoning, also to bankruptcy of foreign entities.128
See Thomas Karst, Die GmbH französischen Rechts, NotBZ 119 (2006) (France, Sweden and Spain as
examples); Malcolm Wiberg, Sweden: Company Law – Reform, 21(3) J.I.B.L.R. N19 (2006); Carl Sverniov,
Sweden: Company Law – Reform, 15(6) I.C.C.L.R. N55-56 (2004).
121
122
<http://ec.europa.eu/internal_market/company/docs/epc/proposal_de.pdf>.
123
See Seibert, supra note 30, at 85 (“If you can’t beat them – join them.”).
For more details on the current capital structure of the GmbH, see FRANK DORNSEIFER, CORPORATE
BUSINESS FORMS IN EUROPE 311 (Frank Dornseifer, ed., 1st ed., 2005); it is only slightly more flexible than
the system for public corporations under the Second Directive which was largely modeled after German
public corporation law.
124
Specifically supra * on the “Unternehmergesellschaft (haftungsbeschränkt),” a special type of GmbH with
a minimum stated capital of 1 €; on the general debate cf. the essays in MARCUS LUTTER, LEGAL CAPITAL
IN EUROPE (2006) (dealing with public corporations) and the essays in 7 EBOR (2006).
125
126 Including the elimination of superfluous articles, rephrasing of certain parts of the statute and the
addition of official headings.
127
See Seibert, supra note 30, at 84.
Including the incompatibility-rules regarding managers (infra *), international mobility (infra *),
increased management liability for distributions to members/shareholders (infra *), and rules regarding
loans by members/shareholders (infra *).
128
2008]
Is the GmbH Ready for the 21st Century?
1091
The reform is heavily debated.129 For some, it appears “overly rushed” and “farreaching,”130 while others criticize the “lack of vision” and the “inconsistent
compromises.”131 The “Unternehmergesellschaft (haftungsbeschränkt)” is a direct
result of that debate.132 Since it was politically impossible to completely eliminate
the minimum capital requirement, a “re-labeling-approach” was taken. Therefore,
the legislature could focus on optimizing the GmbH and avoid internal
competition.133
Nowadays, the label “GmbH” seems to be a seal of quality - even though at the
time of its inception it was called a “limited respectability company.”134 Both
lawyers and the public in general know little, if anything, about foreign entities.
Following their natural tendency to avoid the unknown, many parties will refuse to
deal with unknown entities and lawyers will advise against “strange”
organizational forms.135
Was the reform a success? Were the changes sufficient to put the 112 year-old
GmbH on a level playing field with modern organizational forms like the proposed
European Private Company (SPE)? Or was the modernization overly hampered by
traditions and lobbying efforts? Only time will tell. But a closer look shows that
most of the changes concern only details. The sole fundamental change is the
introduction of the “Unternehmergesellschaft (haftungsbeschränkt)” Without any legal
See Marcus Lutter, Für eine Unternehmer-Gesellschaft (UG) - Zur notwendigen Erweiterung der geplanten
GmbH-Reform, BB-Spezial Nr. 7/1006 2 (illustrating the pro side); Karsten Schmidt, Brüderchen und
Schwesterchen für die GmbH? Eine Kritik der Vorschläge zur Vermehrung der Rechtsformen, 59 DB 1096 (2006)
(illustrating the contra side).
129
130
Specifically the statements at the parliamentary hearing regarding the reform bill, supra.
131
See Triebel & Otte, supra note 10, at 311 (voicing skepticism).
132
See Seibert, supra note 30, at 92 (questioning this topic).
Horst Eidenmüller, Die GmbH im Wettbewerb der Rechtsformen, 36 ZGR 168, 181 (2007); Karsten
Schmidt, Brüderchen und Schwesterchen für die GmbH? Eine Kritik der Vorschläge zur Vermehrung der
Rechtsformen, 59 DB 1096 (2006).
133
134 As translated by Ingrid Lynn Lenhardt, The Corporate And Tax Advantages Of A Limited Liability
Company: A German Perspective, 64 U. CIN. L. REV. 551, 553 (1996).
This is also an often-quoted reason for the lack of importance of the CISG in legal practice. See John
E. Murray, Jr., The Neglect of CISG: A Workable Solution, 17 J. L. & COM. 365 (1998): “Reflecting on the
experience under CISG, we now face the reality that it suffers from neglect, as well as ignorance and
even fear.”
135
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capital, its success (or failure) will probably determine the future of German, if not
European, company law.
Maybe the perspective of flat-out competition among all legal forms and legislators
is altogether erroneous. If the Darwinian theory of evolution prevails,136 legislators
might do best to seek specific niches for their entities, instead of trying to
accommodate everyone’s needs, by allowing the GmbH to fill t he gap between
expensive, complex public entities and cheap, entry-level entities. At the current
time, however, the race is on to an unknown destination.
136 “Survival of the fittest“ originally meant that the creature best suited for a certain situation will
prevail under those conditions – leading to a distribution of numerous beings and not a single dominant
species.
GMBH – SPECIAL ISSUE
The New Unternehmergesellschaft (Entrepreneurial
Company) and the Limited – A Comparison
By Jessica Schmidt*
A. Introduction
One of the probably most groundbreaking – and at the same time also most
contentious – issues of the German reform of private limited companies by the
Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen
(MoMiG – Law for the Modernization of the Private Limited Companies Act and to
Combat its Abuse)1 is the introduction of the Unternehmergesellschaft (UG –
Entrepreneurial Company). This new sub-type of the Gesellschaft mit beschränkter
Haftung (GmbH – Private Limited Company) is specifically designed for
entrepreneurs and has already unofficially been dubbed the “Mini-GmbH” and
“GmbH light”. It can be seen as the centerpiece of the legislator’s overall aim to
facilitate and accelerate the formation of companies and the underlying motive of
increasing the international competitiveness of the German GmbH.
The main competitor of the GmbH in the regulatory competition of company laws is
undoubtedly the British private limited company (UK Limited). Metaphorically
speaking, the new UG can therefore be seen as “Germany’s answer”2 to the
enormous number of UK Limiteds which have been set up by Germans during the
Dr. iur., LL.M. (Nottingham), research associate at the Friedrich-Schiller-University Jena. E-Mail:
jessica.schmidt@uni-jena.de.
*
1 Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG – Law for the
modernization of Private Limited Companies Act and for combating abuses), (BGBl. reference not yet
available at time of editorial deadline); draft law reference: BR-Drucks. 354/07; See also the Bericht des
Rechtsausschusses (report of the Committee on Legal Affairs), BT-Drucks 16/9737. For an overview in
English see Ulrich Noack & Michael Beurskens, Modernising the German GmbH ! Mere Window Dressing or
Fundamental Redesign?, EUROPEAN BUSINESS ORGANIZATION LAW REVIEW (EBOR) 97–124 (2008); Jessica
Schmidt, German Company Law Reform: Makeover for the GmbH, a new “Mini-GmbH“ and some important
news for the AG, 18 INTERNATIONAL COMPANY AND COMMERCIAL LAW REVIEW (ICCLR) 306–311 (2007);
Frank Wooldridge, Proposed Reforms of the German GmbH, 28 COMPANY LAWYER (CO LAW) 381–383 (2007).
2 See Die deutsche Antwort (The German Answer), FRANKFURTER ALLGEMEINE ZEITUNG (FAZ), 24 May
2007, 13; Robert Freitag & Markus Riemenschneider, Die Unternehmergesellschaft – “GmbH light“ als
Konkurrenz für die Limited?, ZEITSCHRIFT FÜR WIRTSCHAFTSRECHT (ZIP) 1485 (2007).
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last few years.3 However, the British legislator has not been idle either: The UK
Limited has recently been subject to a major reform. Notably, some of the main
objectives of the new Companies Act 2006 (CA 2006),4 which will be fully
implemented by 1 October 2009,5 are also to “ensure better regulation and a ‘Think
Small First’ approach” as well as “to make it easier to set up and run a company.”6.
The most important reforms of the UK Limited include the abolition of the need for
a company secretary (Sec. 270(1) CA 2006), the simplification of the rules on
meetings, capital reductions, accounts and reports and the abolition of the
prohibition of financial assistance.7 Furthermore, the Secretary of State plans to use
his powers under Sec. 19 CA 2006 to prescribe separate model articles for private
companies, catering to their specific needs.8
With this new “improved Limited” the bar for the success of Germany’s new
entrepreneurial company has been raised even higher. This article will undertake a
comparison and attempt to analyze whether the new “Mini-GmbH” will have a real
chance to compete effectively against the “improved UK Limited” of the CA 2006.
B. Outline of the Central Features of the New Unternehmergesellschaft (UG)
The quintessential feature of the new UG is the waiver of the traditional German
minimum capital requirement by the new § 5a (1) GmbHG. This is also the main
demarcation line between the UG and the “regular” GmbH, for which the MoMiG
retains the minimum capital requirement of € 25,000 (cf. § 5 (1) GmbHG).
3 In 2006, nearly one in four private limited companies set up by Germans was not a GmbH but a UK
Limited. See in detail and with more data Horst Eidenmüller, Die GmbH im Wettbewerb der Rechtsformen,
ZEITSCHRIFT FÜR UNTERNEHMENS- UND GESELLSCHAFTSRECHT (ZGR) 168, 173 (2007).
4
Companies Act 2006 (CA), ch. 46.
Some of the provisions are already in force. However, a large part of the Act will only enter into force
on
1
October
2009;
the
final
implementation
timetable
is
available
at
http://www.berr.gov.uk/files/file46674.doc.
5
6
See Companies Act 2006, Regulatory Impact Assessment, January 2007, 1, available at
http://www.berr.gov.uk/files/file29937.pdf.
7 For a comprehensive outline of the reforms brought about by the CA 2006 see ALAN STEINFELD ET AL.,
BLACKSTONE’S GUIDE TO THE COMPANIES ACT 2006 (2007).
8
See the draft for The Companies
http://www.berr.gov.uk/files/file45533.doc.
(Model
Articles)
Regulations
2008,
available
at
2008]
The New Unternehmergesellschaft
1095
Yet the UG will not be an entirely new form of company,9 but actually only a new
kind of sub-type of the well-tried GmbH. Except for the special provisions set out in
the new § 5a GmbHG,10 the UG will be subject to the same rules and regulations
which are applicable to the “regular” GmbH.11 Thus, the UG will make it possible
to “start small” and then gradually expand the business to a “full-grown” GmbH
without the need for re-registration (cf. the new § 5a (5) GmbHG).12 In fact, both the
MoMiG and the explanatory notes convey the notion that, to a certain extent, the
legislator seems to perceive the UG as a kind of “interim solution” for
entrepreneurs on their way to a “genuine” GmbH.13 Yet, the MoMiG does not
contain any kind of “time limit” for the UG14 or any other indirect means which
would force the shareholders to raise the registered share capital later on.15 But as
long as the registered capital stays below the threshold value of € 25,000 for a
GmbH, the UG must comply with the special requirements set out in § 5a (1) – (4)
GmbHG.
The first, and outwardly most apparent, of these special requirements for the UG is
the obligation to trade under the designation “Unternehmergesellschaft
(haftungsbeschränkt)” [Entrepreneurial company (with limited liability)] or the
abbreviation “UG (haftungsbeschränkt)”, which is laid down in the new § 5a (1)
GmbHG (discussed in detail infra at section C.I. of this article). Further special
provisions applicable only to the UG are the prohibition of non-cash contributions
and the requirement to pay up the entire amount of the registered share capital
before registration (cf. the new § 5a (2) GmbHG; discussed in detail infra at section
C.II. of this article). In addition, a UG will be required to set up a reserve equal to a
quarter of the annual surplus minus the accumulated deficit of the preceding year
(cf. the new §5a (3) GmbHG; discussed in detail infra at section C.VIII.1. of this
article). Finally, the new § 5a (4) GmbHG requires a general meeting to be called
9 The idea of establishing a completely new form of company, which was promulgated in particular by
Jürgen Gehb, a member of the Bundestag (German parliament), did not prevail. The Gehb draft law is
available at www.gebh.de.
10
Gesetz betreffend die Gesellschaften mit beschränkter Haftung (GmbHG – Private Limited Companies Act).
11 See Begründung zum Regierungsentwurf (Begr Reg) (legislator’s explanatory notes), BR-Drucks 354/07,
71.
12
Id. at 71–72.
13
See Detlev Joost, Unternehmergesellschaft, Unterbilanz und Verlustanzeige, ZIP 2242, 2245 (2007).
14
See Begr Reg, supra note 11, at 72.
15
See infra C. VIII. 1.
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forthwith in case of an imminent inability of the UG to pay its debts (discussed in
detail infra at section C.VII.2. of this article).
C. The New Entrepreneurial Company in Comparison to the UK Limited Under
CA 2006
I. Company Name
The first important difference that catches one’s eye when comparing the UG with
the UK Limited is the requirement imposed on the UG to trade under the
designation “Unternehmergesellschaft (haftungsbeschränkt)” or the abbreviation “UG
(haftungsbeschränkt)” (cf. the new § 5a (1) GmbHG). The purpose of this special
transparency obligation is to make it clear for the public that one is dealing with a
company which is potentially endowed with very little capital.16
For a small UK Limited there is no comparable special transparency requirement;
section 59(1) CA 2006 only provides that the name of a UK Limited must –
regardless of the amount of its share capital – end with “limited” or “ltd.” There are
some commentators who believe that the mandatory special company name of the
UG may actually be a marketing advantage.17 However, it seems a lot more likely
that the mandatory special company name will actually turn out to be a “stigma”18
carrying a negative connotation of financial weakness which will ultimately reduce
the attractiveness of the UG for incorporators and business partners.19 In addition,
the designation “Unternehmergesellschaft (haftungsbeschränkt),” as promulgated by
the MoMiG, seems per se not be a very lucky choice and has already been heavily
criticized as being both misleading and unsuitable.20 However, even if the final law
16 Begr Reg, supra note 11, 71. See further Ulrich Seibert, Der Regierungsentwurf des MoMiG und die
haftungsbeschränkte Unternehmergesellschaft, GmbHR 673, 675 (2007).
17
See Volker Römermann, MoMiG: Regierungsentwurf mit “Überraschungs-Coups“, GMBHR R193 (2007).
18 See Ulrich Noack, Der Regierungsentwurf des MoMiG – Die Reform des GmbH-Rechts geht in die Endrunde,
DER BETRIEB (DB) 1395, 1396 (2007).
See Thomas Wachter, Die neue Drei-Klassengesellschaft im deutschen GmbH-Recht, GmbHR R209, R 210
(2007); and the expert opinion of Michael Hoffmann-Becking for the Committee on Legal Affairs of the
Bundestag
(BT
–
Federal
Diet),
available
at
http://www.bundestag.de/ausschuesse/a06/anhoerungen/28_MoMiG/04_Stellungnahmen/Stellung
nahme_Prof__Hoffmann-Becking.pdf, p. 2.
19
20 See Hoffmann-Becking, supra note 19, at 2; Handelsrechtsausschuss des DAV, Stellungnahme zum
Regierungsentwurf eines Gesetzes zur Modernisierung des GmbH-Rechts und zur Bekämpfung von
Missbräuchen (MoMiG), NEUE ZEITSCHRIFT FÜR GESELLSCHAFTSRECHT (NZG) 735, 736–737 (2007);
Rüdiger Veil, Die Unternehmergesellschaft nach dem Regierungsentwurf des MoMiG. Regelungsmodell und
2008]
The New Unternehmergesellschaft
1097
had substituted another designation ! for example the term “Gesellschaft mit
beschränkter Haftung (ohne Mindestkapital)” / “GmbH (o.M.)” (“limited liability
company (without a minimum capital)”) as suggested by the Bundesrat21 or the
term
“Gründer-GmbH”
(founder
company)
as
suggested
by
the
Handelsrechtsausschuss (Committee for Commercial Law) of the Deutscher
Anwaltverein (DAV – German Lawyers’ Association)22 ! the requirement of a
special company name imposed on the UG would still have put it at a disadvantage
in comparison to the UK Limited.
II. Minimum Capital and Capital Contributions
As already mentioned, one of the prime features of the UG is that it does not have a
minimum capital requirement of € 25,000 like a “regular” GmbH (cf. the new § 5a
(1) GmbHG). The only constraint applicable to the UG is the new § 5 (2) GmbHG,
which provides that the nominal amount of each share must be at least 1 Euro.
Thus, a UG can be set up with only 1 share of 1 Euro.23 In terms of minimum capital
therefore, the UG (almost) measures up with the UK Limited (which can even be
established with a share capital of only 1 pence24 ! but 1 Euro or 1 pence should not
really make a difference in practice!).
However, in terms of the provisions on the payment for shares, the rules applicable
to the UG are a lot stricter than those for the UK Limited. First of all, the new § 5a
(2) sentence 1 GmbHG provides that the share capital of the UG must be fully paid
up before registration. By contrast, English law does not provide any fraction of the
share capital of a UK Limited to be paid up before registration.25 Furthermore, the
new § 5a (2) sentence 2 GmbHG specifically prohibits non-cash contributions. Here
again, the UK Limited offers a lot more freedom: English law not only allows for
both cash and non-cash contributions (or a mixture of both); in fact, a UK Limited
may even accept a promise to do work or perform services for the company or for
Praxistauglichkeit, GmbHR 1080, 1082 (2007); Jan Wilhelm, “Unternehmergesellschaft (haftungsbeschränkt)“ –
Der neue § 5a GmbHG in dem RegE zum MoMiG, DB 1510, 1511 (2007).
21
Statement of the Bundesrat, BR-Drucks 354/07, 4–5.
22
Handelsrechtsausschuss des DAV, supra note 20, at 736.
23
See Seibert, supra note 16, at 675; Wilhelm, supra note 20, at 1510.
24
See CA 2006, Explanatory Notes, n. 835.
25
S. 586 CA 2006 (shares to be at least one-quarter paid up) is only applicable to public companies.
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GERMAN LAW JOURNAL
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any other person as a contribution26 (which is prohibited even for the “regular”
GmbH27 and thus also for the UG). The explanatory notes to the MoMiG argue that
part payment or non-cash contributions are not necessary for the UG since the
incorporators are completely free to choose the amount of the share capital (and can
thus set it at an amount which they are able to pay up in cash).28 While this
argument may be valid in most cases, it is certainly not unassailable. There may be
incorporators for whom the option of a non-cash contribution (even in the
relatively small amount of € 1,000) may be essential and for whom the UK Limited
would thus seem much more attractive. In addition, it is somewhat unclear
whether the German doctrine of the “verdeckte Sacheinlage” (hidden non-cash
contributions) will apply in case of the UG.29
III. Constitution
Despite the recent reforms of the law on the constitution of English companies, the
UG and the UK Limited also exhibit differences with regard to the company
constitution. English law traditionally pursued the approach of a “two-document
constitution,” consisting of the memorandum of association and the articles of
association.30 Under the new CA 2006, however, the company’s constitution
consists only of the articles (and certain resolutions, see Section 17 CA 2006), while
the memorandum merely serves the rather limited role of evidencing the intention
of the subscribers to form a company.31 In this respect, English and German law
26 Id. s. 585, Argumentum e contrario e (which specifically prohibits these forms of contributions for public
companies).
27 § 27 (2) of the Aktiengesetz (AktG) (German Stock Corporation Act) by way of analogy; See Marcus
Lutter & Walter Bayer, § 5, in GMBH-GESETZ. KOMMENTAR, margin number 17 (Marcus Lutter & Peter
Hommelhoff eds., 16th ed. 2004).
See Begr Reg, supra note 11, at 71; See also Joost, supra note 13, at 2244; Seibert, supra note 16, at 676;
Veil, supra note 20, at 1081.
28
29 With respect to this problem see in detail the expert opinion of Tilman Götte for the Committee on
Legal
Affairs
of
the
Bundestag,
available
at
http://www.bundestag.de/ausschuesse/a06/anhoerungen/28_MoMiG/04_Stellungnahmen/Stellung
nahme_Prof__Goette.pdf, 5; Michael Bormann, Die Kapitalaufbringung nach dem Regierungsentwurf zum
MoMiG, GMBHR 897, 901 (2007); Joost, supra note 13, at 2244–2245; Eckhard Wälzholz, Das MoMiG
kommt: Ein Überblick über die neuen Regelungen, GMBHR 841, 843 et seq. (2008).
30
See PAUL L. DAVIES, GOWER AND DAVIES’ PRINCIPLES OF MODERN COMPANY LAW 57 (2003).
See CA 2006, Explanatory Notes, n. 32; BLACKSTONE’S GUIDE, supra note 7, at 3.10 and 4.05; DEREK
FRENCH, STEPHEN W. MAYSON & CHRISTOPHER L. RYAN, MAYSON, FRENCH & RYAN ON COMPANY LAW
2.2.1.3 and 3.3.2 (2007–2008).
31
2008]
The New Unternehmergesellschaft
1099
have converged because German company law has always only provided for one
single Satzung (constitution).
But there are still rather significant differences with respect to the formal
requirements. Whereas Section 18(3) CA 2006 only stipulates that the articles must
be in a single document and that they are to be divided into paragraphs numbered
consecutively, § 2 (1) GmbHG requires the constitution to be notarized and signed
by all shareholders. Yet, the law is also converging in this respect ! at least to some
extent. In fact, the government’s original proposal for the MoMiG had even
provided for the possibility of incorporation only by way of an (unnotarized)
constitution in written form. However, after fierce criticism from both scholars and
practitioners,32 the final law now generally retains the notarization requirement.
But the new § 2 (1a) GmbHG at least provides for a simplified incorporation
procedure (available not only to the UG, but to every GmbH) by use of the
Musterprotokoll (sample statutes) in the new annex 1 to the GmbHG. For German
law, the instrument of sample statutes, which has a long tradition in English law,33
is an absolute novelty. But, unlike the very comprehensive sample statutes of
English law, which cover virtually all aspects of the “life” of a company,34 the
sample statutes in the new annex 1 consist of only 7 paragraphs. The legislator
expressly wanted to limit the use of this “Gründungs-Set”35 (“incorporation kit”) to
uncomplicated “standard cases” where special legal advice was deemed to be
Very critical e.g. Freitag & Riemenschneider, supra note 2, at 1486–1487; Heribert Heckschen, Die
GmbH-Reform ! Wege und Irrwege, DEUTSCHES STEUERRECHT (DStR) 1442–1444 (2007); Peter Ulmer, Der
“Federstrich des Gesetzgebers“ und die Anforderungen der Rechtsdogmatik, ZIP 45, 46 et seq. (2008). For a
restriction to one-member-companies: Walter Bayer, Thomas Hoffmann & Jessica Schmidt,
Satzungskomplexität und Mustersatzung, GmbHR 953, 958 (2007); Fredrik Karsten, Kann man eine GmbH auf
einem Bierdeckel gründen?, GmbHR 958, 966–967 (2007); Marcus Lutter in his expert opinion for the
Committee
of
Legal
Affairs
of
the
Bundestag,
available
at
http://www.bundestag.de/ausschuesse/a06/anhoerungen/28_MoMiG/04_Stellungnahmen/Stellung
nahme_Prof__Lutter.pdf, 4. But see for a generally positive view the expert opinions of Eckart Sünner of
the BDI and Barbara Grunewald for the Committee on Legal Affairs of the Bundestag, available at
http://www.bundestag.de/ausschuesse/a06/anhoerungen/28_MoMiG/04_Stellungnahmen/Stellung
nahme_Dr__S__nner.pdf, 3–5.
32
33 They date back to the Joint Stock Companies Act 1856, see MAYSON, FRENCH & RYAN, supra note 31, at
3.3.1.
34 Table A CA 1985 consists of 118 clauses, the draft for the new separate model articles for private
limited companies under CA 2006 consists of 54 very detailed clauses (The Companies (Model Articles)
Regulations 2008, supra note 8).
35
Seibert, supra note 16, at 674.
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unnecessary.36 Thus, the sample statutes allow for only 1 director (§ 4) and a
maximum of 3 shareholders (cf. the new § 2 (1a) GmbHG), who may only be natural
persons or bodies corporate (but not partnerships). In addition, the incorporators
can only specify the company name and the registered office (§ 1), the share capital
and the amount of the shares to be taken up by the first shareholders (§ 3), and the
objects of the company (§ 2). But at least the restriction to three standard types of
objects (“trading in goods”, “production of goods” and “services”),37 which the
original draft law had envisioned and which had been severely criticized, has
fortunately not been included into the final law after all. Nevertheless, if the
incorporators wish to have statutes which are only slightly more sophisticated than
those set out in annex 1 and/or tailor-made for their specific needs (e.g. even if they
only wish for a standard clause restricting the transfer of shares),38 the cost-saving
simplified incorporation procedure will not be available.
All in all, the new option of a simplified incorporation procedure by use of sample
statutes is therefore de facto restricted to a rather small array of cases.39 And even
where this new option is applicable, there is still the need for notarization, so the
formal requirements are still more onerous than those for the formation of a UK
Limited.
IV. Speed of Incorporation
The different formal requirements are also among the main factors for the
differences in the speed of incorporation. Companies House (the offical UK
government register of UK companies) not only offers the option of an electronic
36 See Begr Reg, supra note 11, at 61; Bericht des Rechtsauschusses (report of the Committee on Legal
Affairs), BT-Drucks 16/9737, 93. See also J. Schmidt, supra note 1, at 307; Bayer, Hoffmann & Schmidt,
supra note 32, at 953.
37 See Oliver Schröder & Klaus Cannivé, Der Unternehmensgegenstand der GmbH vor und nach dem MoMiG,
NZG 1, 3 et seq. (2007).
38 Almost 75% of the statutes of GmbHs currently contain clauses restricting the transfer of shares, see
Bayer, Hoffmann & Schmidt, supra note 32, at 955.
39
See J. Schmidt, supra note 1, at 307; Bayer, Hoffmann & Schmidt, supra note 32, at 593.
2008]
The New Unternehmergesellschaft
1101
incorporation,40 but for an additional fee it is even possible to opt for a same day
incorporation, either in paper (£ 50) or in electronic form (£ 30).41
Despite the conversion of the Handelsregister (German register of companies) to
electronic form by the Gesetz über das elektronische Handelsregister und
Genossenschaftsregister sowie das Unternehmensregister (EHUG – Law on the
Electronic Register of Companies and the Electronic Register of Cooperatives as
well as on the Register of Businesses)42 and the reforms brought about by the
MoMiG ! in particular the decoupling of registration and regulatory licenses43 ! the
new UG will not be able to compete even if the new model articles are used.
Notwithstanding the recommendations of renowned scholars,44 the legislator has
not provided for the use of online forms for incorporation. Moreover, some experts
doubt that the reforms brought by the EHUG and MoMiG will lead to any
significant acceleration in the speed of incorporation.45 And even if the optimistic
predictions of some experts that incorporation times will generally be reduced to a
few days46 come true, there will still be no “same-day-service” like in the UK.
V. Number and Qualification of Shareholders
The MoMiG does not stipulate a special minimum number of shareholders for the
UG. It can therefore be incorporated as a single-member company, just like any
“regular” GmbH (cf. § 1 GmbHG). The same is true for the UK Limited (Section 7(1)
CA 2006).47
40 As of 1 January 2007, The Companies Act (Commencement No. 1, Transitional Provisions and Savings)
Order 2006, SI 2006/3428, brought in force ss. 1068(5), 1078 CA 2006, requiring the Registrar of
Companies to provide for the possibility of electronic delivery of the constitutional documents.
41
Price
List
available
http://www.companieshouse.gov.uk/toolsToHelp/productPriceListCompare.shtml.
at
42 Gesetz über elektronische Handelsregister und Genossenschaftsregister sowie das Unternehmensregister
(EHUG) of 10 November 2006, BGBl. I, 2553.
43
See in more detail J. Schmidt, supra note 1, at 307.
44
Eidenmüller, supra note 3, at 199; Noack, supra note 18, at 1398.
45 See Eidenmüller, supra note 3, at 198–199; Noack & Beurskens, supra note 1, at 108. The BDI even
complains that at many register courts incorporations take even longer (!) than before. See Sünner, supra
note 32, at 5.
46
See Heckschen, supra note 32, at 1447.
47
The equivalent provision in CA 1985 was s. 1(3A).
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In principle, there is also no maximum number of shareholders for either the UG or
the UK Limited, nor are there any special legislative requirements in respect to the
shareholders. However, if the UG is to be incorporated by use of the simplified
procedure with model statutes (cf. the new § 1 (2a) GmbHG and annex 1) there
may, as already noted above,48 only be three shareholders, who, moreover, may
only be natural or legal persons (but not partnerships).
VI. Internal Structure
With regard to the internal structure, in principle both the UG and the UK Limited
give entrepreneurs a lot of leeway. Since the new § 5a GmbHG does not stipulate
any special rules for the management of the UG, the general rules of §§ 35 et seq.
GmbHG apply.49 Hence, the UG is managed by one or more Geschäftsführer
(directors), who must be natural persons (§ 6 (2) sentence 1 GmbHG). If there is
more than one director, they are empowered to represent the UG jointly (§ 35 (2)
sentence 2 GmbHG), but the constitution may provide for a different mode of
representation.50 However, if the UG is to be incorporated using the simplified
procedure and the model statutes in the new annex 1, it may only have one director
(discussed in detail at infra section D.III. of this article).
The UK Limited is managed by one or more directors, who – in contrast to the
directors under German law ! may also be legal persons.51 However, section 155(1)
CA 2006 now provides that at least one director must be a natural person. The
management powers of the directors are governed by the articles; the model articles
provide that the directors are to act collectively, but may delegate any of their
powers to such persons as they think fit.52 Under the new CA 2006, private limited
companies no longer need to have a company secretary, although they still may opt
to have one (section 270(1) CA 2006).
Overall, both the UG and the UK Limited thus offer incorporators a lot of flexibility
with regard to management structure, particularly since the UK Limited no longer
48
See supra C. III.
49
In respect of the character of the UG as merely a subtype of the GmbH. See supra B.
50
See Lutter & Bayer, supra note 27, at margin notes 26 et seq.
51
Re Bulawayo Market and Offices Co Ltd (1907) 2 Ch 458.
See the rr. 3, 5 and 7 of the draft model articles supra note 8; MAYSON, FRENCH & RYAN, supra note 31,
at 15.8.1. See Table A CA 1985, supra 34, rr. 70 and 72.
52
2008]
The New Unternehmergesellschaft
1103
needs a company secretary. However, only the UK Limited offers the possibility of
legal persons as directors. In addition, the general flexibility of the UG is
significantly curtailed if the incorporators wish to make use of the option of the
simplified incorporation procedure with model statutes provided by the new § 2
(1a) GmbHG.
VII. Shareholder Decision-making
1. General
The new § 5a GmbHG also does not stipulate any special rules on shareholder
decision-making. Hence, the general rules in §§ 45 et seq. GmbHG apply. Paragraph
48 (1) GmbHG provides that resolutions are to be passed at the meetings of the
shareholders. However, § 48 (2) GmbHG dispenses with the requirement of a
meeting if all shareholders consent to the resolution or to voting in writing. In
addition, the constitution may provide for different forms of decision-making, for
example even for a “virtual shareholder meeting”, telephone conferences or voting
by e-mail.53
For the UK Limited, the new CA 2006 has significantly simplified the rules on
decision-making.54 The previous requirement for an annual general meeting
(section 366(1) CA 1985) has been abolished. Section 281(1) CA 2006 now allows for
resolutions of the members to be passed either at a meeting or as a written
resolution. The term “written” resolution is understood in a very wide sense in this
context: section 299 CA 2006 provides that the company may send the resolution to
a member by means of a website and section 298 offers the members the option to
signify their consent by electronic means if the company has provided an electronic
address. Hence, although both the UG (and the GmbH in general) as well as the UK
Limited offer the possibility of very informal forms of shareholder decisionmaking, English law is actually even somewhat more liberal because there is no
need for a special provision in the statutes in order to allow voting by electronic
means.
2. In Particular: New § 5a (4) GmbHG
53 See Lutter & Hommelhoff, § 48, in GMBH-GESETZ. KOMMENTAR, margin number 12a (Marcus Lutter &
Peter Hommelhoff eds., 16th ed. 2004).
54 For a detailed account of the new rules see BLACKSTONE’S GUIDE, supra note 7, at 12.03, 12.07 et seq.;
MAYSON, FRENCH & RYAN, supra note 31, at 14.5, 14.7.1.
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As mentioned above, one special feature of the UG is the requirement laid down in
the new § 5a (4) GmbHG to call a general meeting forthwith in case of an imminent
inability of the UG to pay its debts. This constitutes a significant deviation from the
general rule in § 49 (3) GmbHG, which requires a general meeting to be called
forthwith only if there is a loss of half of the registered share capital. But, due to the
lack of a minimum capital requirement, the legislator believed that this requirement
would not make much sense in case of the UG and therefore designed the special
rule in § 5a (4) GmbHG in order to ensure that a general meeting is convened in
time for the shareholders to take the steps they consider necessary.55
For the UK Limited, CA 2006 does not contain a comparable provision. In UK law,
a special duty to call a general meeting in case of a serious loss of capital only exists
for public companies (section 656 CA 2006, implementing art. 17 of the 2nd
directive).56 Since the Act expressly limits this duty to public companies, it is also
more than doubtful whether one could generally construct the failure of the
directors of a UK Limited to call a meeting in such circumstances to be a breach of
their duty to promote the success of the company.57
VIII. Maintenance of Capital
1. Distributions
Restriction of distributions is actually one of the areas where English law is in some
respects stricter than German law.58 A company may only make distributions out of
profits available for this purpose (section 830(1)) and section 830(2) CA 2006
provides that the profits available for distribution are only the accumulated,
realized profits, so far as not previously utilized by distribution or capitalization,
55 See Begr RegE, supra note 11, at 72. See also Handelsrechtsausschuss des DAV, supra note 20, at 737;
Joost, supra note 13, at 2247–2248; Seibert, supra note 16, at 676; for a rather critical assessment see Veil,
supra note 20, at 1083.
56 Second Council Directive of 13 December 1976 on coordination of safeguards which, for the protection
of the interests of members and others, are required by Member States of companies within the meaning
of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability
companies and the maintenance and alteration of their capital, with a view to making such safeguards
equivalent, (1977) O.J. L 26/1.
57
However, this seems to be the interpretation of Joost, supra note 13, at 2248.
58 See generally Wilhelm Happ & Lorenz Holler, “Limited“ statt GmbH – Risiken und Kosten werden gern
verschwiegen, DStR 730, 733 (2004); Wolfgang Kessler & Rolf Eicke, Die Limited – Fluch oder Segen für die
Steuerberatung?, DStR 2101, 2102 (2005); Joost, supra note 13, at 2246.
2008]
The New Unternehmergesellschaft
1105
less the accumulated, realized losses, so far as not previously written off in a
reduction or reorganization of capital duly made.
By contrast, § 30 (1) GmbHG, which ! absent any special provisions to the contrary
! is also applicable to the UG, only prohibits the distribution of assets which are
necessary to maintain the registered share capital. However, in addition to this
general rule applicable to all GmbHs, the assets available for distribution by a UG
are further restricted by the new § 5a (3) GmbHG, which requires an UG to include
in its annual accounts a reserve equal to a quarter of the annual surplus minus the
accumulated deficit of the preceding year. Sentence 2 expressly provides that this
reserve may only be used for purposes of § 57c GmbHG (i.e. for a capital increase
from the company’s own resources, i.e. by way of commuting reserves into
registered capital) or for offsetting an annual loss or a loss carried forward from the
preceding year. The purpose pursued by the legislator with this reserve is to ensure
that companies incorporated with a relatively small amount of registered capital
will reach a higher equity base within a few years by retaining profits.59 This
corresponds with the legislator’s apparent perception of the UG as a kind of
“interim solution” for entrepreneurs on their way to a “genuine” GmbH.60 Yet, as
already briefly indicated above,61 the MoMiG does not force a UG to convert itself
to a GmbH by commuting the reserve into registered share capital once it reaches
the GmbH-threshold of € 25,000. Rather the shareholders are free to keep the
registered share capital below the threshold (and thus be subject to the special
requirements of § 5a (1) – (4) GmbHG) indefinitely. This has been a major point of
criticism during the legislative process.62 Moreover, the reserve clause can easily be
circumvented by relatively simple “creative” accounting arrangements, for example
by reducing profits by fixing unrealistically high salaries for shareholderdirectors.63
Nevertheless, compared to the restrictions imposed on distributions by a UK
Limited by section 830 CA 2006, the legal framework for the UG is (despite the
special mandatory reserve) still a lot less strict.
59 See Begr RegE, supra note 11, at 71–72. See further Christoph Schärtl, Unternehmergesellschaft
(haftungsbeschränkt) – innovatives Konzept oder “typischer Kompromiss“?, GmbHR R305 (2007).
60
See Joost, supra note 13, at 2245.
61
See supra B.
62
See Bormann, supra note 29, at 899; Handelsrechtsausschuss des DAV, supra note 20, at 737.
63 See Detlef Kleindiek, Die Unternehmergesellschaft (haftungsbeschränkt) des MoMiG – Fortschritt oder
Wagnis?, BETRIEBSBERATER (BB), Die erste Seite, issue 27 (2007); Veil, supra note 20, at 1083.
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2. Eigenkapitalersatzrecht
One of the major disadvantages of German GmbH law cited by critics in the past
has always been the infamous German Eigenkapitalersatzrecht (law on shareholder
capital substitution). But ! as Prof. Dirk Verse lays out in detail in his article in this
Special Issue of the German Law Journal ! this complex and burdensome area of the
law has been radically restructured and simplified. Nonetheless, the new
subordination provisions in § 39 of the Insolvency Code ! despite their comparative
simplicity in relation to the old “legal tangle” ! still have no (not even an
approximate) counterpart in English law.64 So, in this respect, the new UG – or the
GmbH in general – can still not measure up with the Limited.
D. Conclusion
It goes without saying that the preceding attempt at comparing the new UG and
the UK Limited had to be focused on the most important and ostensible points and
is certainly not exhaustive.
Given that in the past the prime incentive to opt for a UK Limited instead of a
GmbH certainly seems to have been the possibility of incorporation without any
minimum capital, the UG prima facie probably has a great appeal for entrepreneurs.
This apparent attractiveness will be further increased by the new simplified
incorporation procedure by use of sample statutes. Limitation of liability “for free,”
simplified incorporation procedure, no need for translations, the comparatively less
strict German rules on distributions (albeit with the “UG-twist” of the mandatory
reserve) – what more could an entrepreneur want?
However, if one takes a closer look, the advantages of this new subtype of the
GmbH must be put in perspective. First of all, there is the mandatory special
company name ! a “stigma” the UK Limited does not require. Second, there is the
prohibition of non-cash considerations and the need to pay up the registered share
capital in full. In case of a relatively small share capital this will (at least in most
cases) not appear to be a significant burden. Nonetheless, the upshot again is: the
UK Limited knows no such restrictions. Furthermore, although both the UK
Limited and the UG give entrepreneurs a lot of flexibility with respect to the
64 English law only knows two instances where a subordination of debts owed to shareholders may
occur: ss. 74(2)(f), 215 Insolvency Act 1986. See also JESSICA SCHMIDT, “DEUTSCHE“ VS. “BRITISCHE“
SOCIETAS EUROPAEA (SE) – GRÜNDUNG, VERFASSUNG, KAPITALSTRUKTUR 464 (2006); JAN-PHILIPP HOOS,
GESELLSCHAFTERFREMDFINANZIERUNG IN DEUTSCHLAND UND ENGLAND: RISIKEN UND HAFTUNG, 145 et
seq. (2005).
2008]
The New Unternehmergesellschaft
1107
internal structure, the number of shareholders and shareholder decision-making,
this is only true as long as the UG is not incorporated by means of the simplified
procedure with model statutes, which drastically limits the options available.
Moreover, despite the recent conversion of the commercial register to electronic
form, German law still does not offer same-day incorporation and the practice of at
least some of the registry courts seems to be (yet) far off from the goals envisioned
when the EHUG came into force.
On the other hand though, one should also not forget that the UK Limited !
especially if it is incorporated by Germans for the sole purpose of doing business in
Germany ! also has its drawbacks. Among these disadvantages, which have been
the subject of extensive discussion in German literature,65 are especially the costs
for translations, the fact that the reputation of the UK Limited has been somewhat
tainted because of some well-publicized cases of abuse, the need for German tax
accounts in addition to the accounting duties under English law, the legal
uncertainty concerning the applicability of a variety of German liability rules, etc.
Plus, there is always the threat of the UK Limited being struck off the register if it
does not fulfill its filing obligations – a hazard which has already been painfully
experienced by many “German” Limiteds, as two recent cases have colorfully
demonstrated.66
All in all therefore, the preceding synopsis shows that the UG will undoubtedly not
be a kind of “magic bullet” against the “invasion”67 of the UK Limited. However, at
least for a certain category of incorporations, it may be an attractive option,
especially if the drawbacks of operating a UK Limited in Germany are taken into
account.
65 See Jochen Dierksmeier, Die englische Limited in Deutschland – Haftungsrisiko für Berater, BB 1516 (2005);
Happ & Holler, supra note 58, at 730 et seq.; Kessler & Eicke, supra note 58, at 2101 et seq.; Klaus J. Müller,
Die englische Limited in Deutschland – für welche Unternehmen ist sie tatsächlich geeignet?, BB 837 (2006);
Volker Römermann, Die Limited in Deutschland – eine Alternative zur GmbH?, NEUE JURISTISCHE
WOCHENSCHRIFT (NJW) 2065 (2007).
66 See the decisions of the Oberlandesgericht (OLG) (Higher Regional Court) Jena of 22 August 2007, 6 W
244/07, ZIP 1709 (2007) and of the OLG Nürnberg of 10 August 2007, 13 U 1097/07, GmbHR 41 (2008).
For a detailed discussion of these cases and the legal concept of the “Restgesellschaft” (“relic company”)
see Stefan Leible & Matthias Lehmann, Auswirkungen der Löschung einer Private Limited Company auf ihr in
Deutschland belegenes Vermögen, GmbHR 1095 (2007); Jessica Schmidt, case note on OLG Jena of 22
August 2007, ZIP 1712 (2007); Rüdiger Werner, case note on OLG Nürnberg of 10 August 2007, GmbHR
43 (2008).
67
See Torsten Koller, The English Limited Company – ready to invade Germany, 15 ICCLR 334 (2004).
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GMBH – SPECIAL ISSUE
Shareholder Loans in Corporate Insolvency – A New
Approach to an Old Problem
By Dirk A. Verse!
A. Introduction
The treatment of shareholder loans in corporate insolvency is a controversial issue
in many jurisdictions. On both sides of the Atlantic, lawmakers and courts have
struggled to answer the question if and under what circumstances shareholder
loans should be treated differently from loans granted by outsiders. In particular,
the difficulties turn on three issues: (i) whether shareholder loans should rank pari
passu with the claims of outside creditors or whether they should be subordinated;
(ii) whether the repayment of shareholder loans should be subject to specific
restrictions, particularly in the vicinity of insolvency; and (iii) whether specific
restrictions should apply to secured shareholder loans.
In the U.S., the first issue is addressed by the doctrine of equitable subordination
and, more recently, by the doctrine of recharacterization of shareholder loans.1 The
second and third issues are addressed by the general provisions on preferences and
fraudulent transfers. In Germany, the answers to all three issues are contained in
the rules on Eigenkapitalersetzende Gesellschafterdarlehen (equity substituting
shareholder loans) or, more generally, Eigenkapitalersatz (equity substitution).
According to these rules in their current form, a shareholder loan or an act
equivalent to a shareholder loan is deemed to “substitute for equity” if it was
granted or not immediately terminated at a time when the company was in a
financial “crisis”. In this case the loan will be subordinated in the case of insolvency
as if it were equity. In addition, repayments of such equity substituting loans are
subject to tight restrictions, and the same applies to the grant of security interests.
!
Professor Dr. Dirk A. Verse, M.Jur. (Oxford), University of Osnabrück, Faculty of Law, email:
dirk.verse@uos.de.
1 See, e.g., James H.M. Sprayregen, Jonathan P. Friedland, Jo Ann J. Brighton, & Salvatore F. Bianca,
Recharacterization of Debt to Equity: An Overview, Update and Practical Guide to an Evolving Doctrine,
ANNUAL SURVEY OF BANKRUPTCY LAW (2004); David Skeel, Jr. and Georg Krause-Vilmar,
Recharacterization and the Nonhindrance of Creditors, 7 EUROPEAN BUSINESS ORGANIZATION LAW REVIEW
(EBOR) 259 (2006).
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Similar to the development in the U.S.,2 in Germany these rules were initially
judge-made law developed and refined in a long line of cases dating back to the
late 1930s.3 In 1980, in an attempt to codify the existing case-law, the parliament
intervened and introduced several provisions in the Private Limited Companies
Act (GmbH-Gesetz, §§ 32a, b GmbHG) and the insolvency legislation. These
provisions were meant to replace the previous case-law, but the Bundesgerichtshof
(BGH – Federal Supreme Court) soon held that they were to be construed as a mere
supplement to the judge-made rules.4 Since then there have been two competing
sets of rules that have a common core but are nonetheless different. This is one of
the reasons why this area of the law is notorious for its complexity.
In the wider context of a general reform of the law governing the Private Limited
Company (GmbH - Gesellschaft mit beschränkter Haftung),5 the German parliament
now has undertaken a second attempt to codify the rules on shareholder loans. This
time the reform is aimed at all companies with limited liability, and not just at the
GmbH.6 The reform bill provides for a fairly radical change and simplification of
the current rules. Since shareholder loans are very popular in practice, it is fair to
say that the amendments in this area belong to the most important issues of the
whole GmbH reform.
This paper seeks to outline the new rules brought before the Bundestag (Federal
Parliament) on 26 June 2008.7 If the new law passes the Bundesrat (Federal Council
of States) as expected, it will enter into force in late 2008. Part B of this paper will be
devoted to the issue of subordination, while Part C will focus on repayments of
shareholder loans and their potential avoidance. The particular rules for secured
shareholder loans will be considered in Part D. Finally, part E will address the
increasingly important issue of whether the rules on shareholder loans also apply
to foreign companies operating mainly or exclusively in Germany.
2
See Taylor v. Standard Gas & Electric, 306 U.S. 307 (1939) (on equitable subordination).
Reichsgericht (RG— Court of the German Empire), 67 JURISTISCHE WOCHENSCHRIFT (JW) 862 (1938);
Reichsgericht, 68 JURISTISCHE WOCHENSCHRIFT (JW) 355 (1939). The precedent in the jurisprudence of the
BGH is ENTSCHEIDUNGEN DES BUNDESGERICHTSHOFS IN ZIVILSACHEN (BGHZ) 31, 258.
3
4
BGHZ, 90, 370.
5 Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG — Act
to Modernize the Law Governing Private Limited Companies and to Combat Abuses).
6 E.g., stock corporations (AG), limited partnerships which do not have an individual as their general
partner (GmbH & Co. KG) and foreign companies operating mainly in Germany. On the latter, see infra
Part E.
7
The final version is published in BTDrucks 16/9737.
2008]
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B. Subordination of Shareholder Loans
While some legal systems, such as the U.K. and France, provide for no specific
regulations on shareholder loans to distressed companies, many other jurisdictions
(including the U.S., Italy, Spain, Austria and Germany) have specific rules, which,
under certain circumstances, provide for the subordination of shareholder loans to
the claims of other creditors.8 Despite this fact, the current rules in Germany on the
subordination of equity substituting shareholder loans have increasingly come
under attack in recent years. While some authors have pleaded for narrowing down
the scope of the existing rules,9 others have gone so far as to call for abolishing
subordination in general.10 The reform, however, takes neither of these routes. It
extends the scope of subordination to (almost) all shareholder loans.
I. The Current Law: Subordination of Loans Deemed to “Substitute Equity”
In order to fully understand the reform, it is necessary briefly to recall the German
position. Under the current law, a shareholder loan will be deemed to “substitute
for equity” and hence be subordinated in the insolvency of the company if it was
granted in the course of a “crisis” of the company.11 The same applies to a
shareholder loan granted before the onset of a crisis if the shareholder did not
withdraw the loan as soon as the crisis began.12 Both cases have in common that the
8 For a comparative overview, see Martin Gelter, The subordination of shareholder loans in bankruptcy, 26
INTERNATIONAL REVIEW OF LAW AND ECONOMICS 478, 479-482 (2006); Martin Gelter and Jürg Roth,
Subordination of Shareholder Loans from a Legal and Economic Perspective, 5 JOURNAL FOR INSTITUTIONAL
COMPARISONS 40, 40-45 (2007); Ulrich Huber and Mathias Habersack, Special Rules for Shareholder Loans:
Which Consequences Would Arise for Shareholders if the System of Legal Capital Should be Abolished?, in LEGAL
CAPITAL IN EUROPE, 308, 308-321 (Marcus Lutter ed., 2006).
9
See, e.g., Gelter, supra note 8, at 479-482; Gelter and Roth, supra note 8, at 40-45.
See, e.g., Andreas Cahn, Equitable Subordination of Shareholder Loans?, 7 EUROPEAN BUSINESS
ORGANIZATION LAW REVIEW (EBOR) 287 (2006); Peter O. Mülbert, A Synthetic View of Different Concepts of
Creditor Protection, or: A High-Level Framework for Corporate Creditor Protection, 7 EUROPEAN BUSINESS
ORGANIZATION LAW REVIEW (EBOR) 357, 397-399 (2006); Horst Eidenmüller, Gesellschafterdarlehen in der
Insolvenz, in 2 FESTSCHRIFT FÜR CLAUS-WILHELM CANARIS 49 (Andreas Heldrich ed., 2007); SIMON M.
BECK, KRITIK DES EIGENKAPITALERSATZRECHTS (2006). For a contrasting view, see Karsten Schmidt, Vom
Eigenkapitalersatz in der Krise zur Krise des Eigenkapitalersatzrechts?, 96 GMBH-RUNDSCHAU 797 (2005).
10
11 Gesetz betreffend die Gesellschaften mit beschränkter Haftung (GmbHG — Private Limited Company
Act) § 32a (1); Insolvenzordnung (InsO – Insolvency Code) § 39 (1) n. 5. Until 1998, GmbHG § 32a (1)
even provided that the claim be disallowed.
For details, see Mathias Habersack, §§ 32a, b, in GMBH GROSSKOMMENTAR, margin numbers 43-51
(Peter Ulmer ed., 2006).
12
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shareholder makes a decision to financially support the company despite the crisis,
whether by actively granting a loan or by abstaining from withdrawing it. A
company is deemed to be in crisis if it is either insolvent (illiquid or overindebted)
or at least “unworthy” of credit, meaning that a third party other than a
shareholder would not grant a loan such as the one actually given.13
In contrast to the equitable subordination doctrine in the U.S.,14 German law does
not require proof of any kind of inequitable conduct on the part of the shareholder
towards the company or its creditors. The mere fact that the shareholder has
granted (or has not withdrawn) a loan in a situation where a third party would not
have taken a similar risk is considered sufficient for subordinating that
shareholder’s claim. Furthermore, different from the recharacterization doctrine in
the U.S.,15 subordination under German law also applies if it is properly
documented and perfectly unambiguous that the parties intended to agree on a
loan rather than an equity contribution.
II. The New Approach
1. Subordination of All Shareholder Loans
In contrast to the current rules, the new law will no longer turn on the distinction
between equity substituting shareholder loans and other shareholder loans. Rather,
subject only to the two exceptions explained below, the subordination will
automatically apply to all shareholder loans.16 The inquiry whether or not the loan
was granted (or not withdrawn) in the course of a crisis of the company will thus
become redundant. This approach is apparently inspired by the position of a
Spanish law that also subordinates all shareholder loans.17 A similar automatic
13
Id. at margin numbers 62-66.
See the three-prong test developed in In re Mobile Steel Co. 563 F.2d 692, 700 (5th Cir. 1977), requiring
(1) inequitable conduct, (2) injury to creditors or an unfair benefit to the challenged claimant, and (3) that
subordination may not conflict with other provisions of the Bankruptcy Code.
14
15 According to the analysis in In re Autostyle Plastics, 269 F.3d 726, 750 (6th Cir. 2001), courts should
consider eleven factors when deciding on recharacterization. The first three of these factors focus on
whether or not the loan was properly documented. See Skeel and Krause-Vilmar, supra note 1, at 277, 279
(noting that “[i]f the loan is properly documented, courts are loath to interfere”).
16
InsO § 39 (1) n. 5, as amended.
17 See Huber and Habersack, supra note 8, at 315-316 (discussing the Spanish position). The new law
borrows heavily from the ideas of these two authors, as is apparent from a proposal submitted by them
in early 2006; see Ulrich Huber and Mathias Habersack, GmbH-Reform: Zwölf Thesen zu einer möglichen
Reform des Rechts der kapitalersetzenden Gesellschafterdarlehen, 61 BETRIEBS-BERATER (BB) 1 (2006).
2008]
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subordination rule was considered in the U.S. in the 1970s, but was not enacted by
Congress.18
There are two exceptions which already exist under the current law19 and will
continue to apply under the new rules.20 The first exception relates to shareholders
who (i) are not directors of the company and (ii) do not hold more than 10 % of the
registered capital.21 The subordination is thus confined to shareholders who, at
least typically, have a significant influence on the management of the company.
This is designed to help companies receive financial support in situations where a
lender, for instance a bank, holds a small number of shares in the company. The
second exception applies in the course of a rescue attempt by an investor who
previously did not hold shares in the company (or only held a small number which
fell under the first exception). If such an investor acquires shares in order to rescue
the company from a crisis, any loans granted by him or her before or in connection
with the acquisition of the shares will not be subordinated.22 This exception shall
serve as an incentive for rescue attempts from outside investors.
2. Practical Consequences
The new approach is based on the idea that its application in practice will be
simpler than the current law, as the exact determination of when the company’s
crisis began will no longer be required. The official notes on the new rules further
argue that the practical consequences of the new approach will not materially differ
from the current position, since under the current law shareholder loans
outstanding at the date of the insolvency filing already were regarded as equity
substituting loans in the vast majority of cases.23 Indeed, as we have seen,
shareholder loans are already deemed to substitute for equity as soon as the crisis
begins if the shareholder does not immediately withdraw the loan. Therefore, since
virtually every insolvency is preceded by a crisis, a shareholder loan still
outstanding at the date of the insolvency filing will, in almost all cases, be regarded
18
See ROBERT C. CLARK, CORPORATE LAW 69 (1986).
19
See GmbHG § 32a (3) n. 2-3.
20
In the future they will be found in InsO § 39 (4), (5), as amended.
21 InsO § 39 (4), as amended. Note that the 10 % threshold will henceforth not only apply to the GmbH,
but also to a stock corporation (AG). Up to now, the relevant threshold in an AG was 25 % of the
registered capital.
22
InsO § 39 (5), as amended.
23
BTDrucks 16/6140.
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as an equity substituting loan and will be caught by the subordination. The only
(rather theoretical) exception would be the case of a formerly prosperous company,
as a result of an exogenous shock, falling into insolvency so suddenly that the
shareholder did not have time to react to the crisis prior to the insolvency filing. In
this exceptional case, the shareholder did not make a financing decision while the
company was in crisis, so his loan would not be regarded as an equity substitute
under the current rules. In contrast, under the new approach, this would be
irrelevant and the loan would be subordinated nonetheless. Leaving this case aside,
the results of the new approach to subordination will indeed be no different from
those under the current law.24
3. A New Theoretical Basis?
The question remains, of course, how such a wide-reaching subordination of
shareholder loans can be explained on policy grounds.
The rationale for the current rules was explained by the Federal Supreme Court as
follows:25 When a company is facing a financial crisis shareholders have to make a
decision whether they wish to liquidate the company or maintain it by granting
financial support. If a shareholder chooses the latter option and thereby enables the
precarious business to continue, then he or she must be prevented from speculating
at the expense of the creditors. A shareholder could easily speculate at the expense
of the creditors if he or she could act in the belief that, due to his or her insider
status, he or she will be able to withdraw the loan early enough before the
insolvency. In order to avoid this, the loan is treated as equal to equity with the
twofold effect that (i) it may not be withdrawn until the financial difficulties have
been resolved26 and (ii) it will be subordinated in the insolvency of the company.
The same is sometimes summarized by saying that the shareholder shall bear the
full responsibility for the consequences of his or her financing decision made while
the company was experiencing a crisis (Finanzierungsfolgenverantwortung).
While it is sometimes contended that the same rationale underlies the new
approach,27 the better view is, arguably, this is not the case. As we have seen, in the
24 Note, however, that the new approach triggers considerable practical consequences in other areas,
particularly as regards the repayment restrictions on shareholder loans; see infra Part C.
25
BGHZ 90, 381, (388-389).
26
For details see infra Part C.
27
Reinhard Bork, Abschaffung des Eigenkapitalersatzrechts zugunsten des Insolvenzrechts?, 36 ZEITSCHRIFT
250, 257-258 (2007).
FÜR UNTERNEHMENS- UND GESELLSCHAFTSRECHT (ZGR)
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future the subordination will also apply to cases where a shareholder never made
any financing decisions while the company was in crisis. Under those
circumstances, it will be impossible to base subordination on the rationale
described above.28
It follows that a new rationale is required to explain and legitimize the new rules.
Such an explanation is, however, not easy to find. The most plausible explanation
that has been offered so far is that subordination of all shareholder loans will
simply ensure that the shareholders adequately participate in the entrepreneurial
risk of the company. This, in turn, will prevent the shareholders from taking
excessive risks to the disadvantage of the creditors. It is argued that the rules on
raising capital and capital maintenance, taken on their own, are insufficient to
accomplish that aim since the registered capital is often very low. Therefore, these
rules need to be supplemented by a rule that extends the entrepreneurial risk of the
shareholders to the whole amount of financial support granted by them to the
company regardless of whether it was granted as equity or debt.29
This explanation, however, is controversial. As stated above, the current rules are
subject to fierce criticism. A fortiori, the same objections are now raised against the
new approach. In particular, the argument has been made that subordination may
deter shareholders from granting loans in situations where loans would be used for
projects that are ex ante efficient (projects that have a positive present value).
Subordination should therefore be restricted to shareholder loans that fail this ex
ante efficiency test.30 An obvious objection to this approach is, however, that courts
are ill-equipped to make these calculations and their judgment would probably be
prone to hindsight bias.31
A second, possibly more convincing, argument against subordination is that the
fear of excessive risk-taking at the expense of the creditors is already sufficiently
counteracted by prohibiting the repayment of loans during a certain period prior to
insolvency. If a shareholder is unable to withdraw the loan in the vicinity of
insolvency and thus bears the risk of only receiving the insolvency quota, that
28 For a concurring view, see Mathias Habersack, Gesellschafterdarlehen nach MoMiG: Anwendungsbereich,
Tatbestand und Rechtsfolgen der Neuregelung, ZEITSCHRIFT FÜR WIRTSCHAFTSRECHT (ZIP) 2145, 2146-2147
(2007); Ulrich Huber, Finanzierungsfolgenverantwortung de lege lata und de lege ferenda, FESTSCHRIFT FÜR
HANS-JOACHIM PRIESTER 259 (Peter Hommelhoff, Peter Rawert & Karsten Schmidt eds., 2007).
29
Huber, supra note 28, at 275-278.
30 Gelter, supra note 8; Gelter and Roth, supra note 8; Ulrich Haas, Das neue Kapitalersatzrecht nach dem
RegE-MoMiG, ZEITSCHRIFT FÜR DAS GESAMTE INSOLVENZRECHT (ZINSO), 617, 624-625 (2007).
31
Skeel and Krause-Vilmar, supra note 1, at 271; Cahn, supra note 10, at 294.
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shareholder already has a strong incentive to avoid excessive risks and to make a
careful assessment of the chances of the company’s survival before granting the
loan. This argument is supported by insolvency quotas for unsecured creditors in
Germany, which are notoriously low.32 In more than 40% of all company
insolvencies, proceedings are not even commenced because the assets are
insufficient to cover the expenses.33 If rules are in place to ensure that shareholders
are barred from abusing their insider status to withdraw loans in the vicinity of
insolvency, shareholder loans are subject to the same risks as unsecured third-party
loans. Against this background, there is much to be said for the view that
shareholder loans should rank pari passu with the claims of other unsecured
creditors.34 Be that as it may, the lawmakers’ decision is clearly to the contrary. The
mere fact that the shareholder-lenders are “closer to the business” of the company
will suffice to make them bear a higher risk than the ordinary creditors.35
C. Repayment of Shareholder Loans
Shareholders will often be the first to know if and when the company is
approaching insolvency. In this situation, they will be inclined to terminate the loan
and cause the company’s directors to effect its repayment. To allow such behavior
would, however, enable shareholders to speculate at the expense of the creditors.
Moreover, allowing shareholders to exploit their insider status in order to recover
their loan in full, while loans from outside lenders will only be satisfied in the
amount of the insolvency quota undermines the basic principle of par condicio
creditorum. For these reasons, different from the controversial issue of
subordination, it is clear that the law should impose certain restrictions on the
repayment of shareholder loans in the vicinity of insolvency.36
32 Empirical data from 1994-1998 suggests that, on average, unsecured creditors receive quotas of less
than 5 % in the insolvency proceedings; see Joachim Bauer, Ungleichbehandlung der Gläubiger im geltenden
Insolvenzrecht, DEUTSCHE ZEITSCHRIFT FÜR WIRTSCHAFTS- UND INSOLVENZRECHT (DZWIR) 188, 189 n. 21
(2007).
For details, see Jürgen Angele, Insolvenzen 2006, WIRTSCHAFT UND STATISTIK 352, 355 (2007). This figure
used to be even higher in the past (up to 75 %).
33
34 Cahn, supra note 10, at 295-298, 299-300. For further arguments against subordination, see Mülbert,
supra note 10, and Eidenmüller, supra note 10, at 57-60 arguing, inter alia, that the risk for creditors does
not stem from the loan as such but rather from wrongful management decisions taken by the directors in
the vicinity of insolvency. Therefore, Eidenmüller argues that liability should be strengthened in the
latter respect rather than penalizing shareholder loans by way of subordination.
35
Habersack, supra note 28, at 2147.
36 See, e.g., Cahn, supra note 10, at 296-298; Mülbert, supra note 10, at 397; Eidenmüller, supra note 10, at
61-62.
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In the U.S., this would be a case for the general provisions on preferences and
fraudulent transfers. In Germany, rules specifically designed for the repayment of
shareholder loans apply. The reform considerably modifies these existing
repayment restrictions. Compared to the existing rules, the new rules are partly
stricter and partly more lenient for shareholders.
I. The Current Law: Repayment Restrictions only for Loans Deemed to “Substitute
Equity”
The current repayment restrictions on shareholder loans are found both in the
statutory law and the judge-made rules developed by the Federal Supreme Court.
Both sets of rules have in common that only the repayment of loans which are
deemed to substitute for equity is subject to restrictions.
The statutory regulations provide that any repayment of equity substituting loans
made within a one-year period prior to the filing for insolvency is subject to
avoidance by the insolvency administrator.37 As a consequence of avoidance, the
full amount of the repayment must be reimbursed to the company.38 If no
insolvency proceedings are commenced, then the right to avoid the repayment can
be exercised by the creditors themselves.39
Further restrictions are contained in the judge-made rules. Courts developed these
rules by drawing an analogy to the statutory provisions on capital maintenance.40
The capital maintenance regime prohibits distributions made by the company to its
shareholders for as long as the net assets of the company are lower than the
company’s registered capital. This barrier is also applied to repayments of
shareholder loans deemed to substitute for equity. As a result, if the company’s net
assets fall short of the registered capital, the repayment of the loan is barred to the
extent of such shortfall.41 If the repayment is made nevertheless, the shareholder is
liable to reimburse the barred amount.42 This liability is of considerable practical
37
InsO § 135 n. 2.
38
InsO § 143 (1).
39
AnfG §§ 6 n. 2, 11 (1).
40
GmbHG §§ 30, 31.
41 Example: The company has assets totalling 300 and liabilities (including the equity substituting loan)
totaling 285, hence the net assets amount to 15. If the registered capital is 25, the repayment of the loan is
barred in the amount of 10. See Habersack supra note 12, margin number 214.
42
Habersack, supra note 12, margin numbers 214 and 221.
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importance since, unlike of the statutory avoidance rules, it also applies when the
repayment was made more than one year prior to the insolvency filing.43 If, for
instance, the company was already in crisis two years before it filed for insolvency,
any repayments made at that time can still be recovered under the judge-made
rules. These repayments would, however, be out of reach under the statutory
avoidance provisions. Another difference between the judge-made rules and the
statutory provisions stems from the fact that, at least in theory, the company’s
claims for reimbursement under the judge-made rules can also be asserted outside
of a company’s insolvency proceedings. In practice, however, such claims are rarely
asserted prior to the insolvency proceedings.
II. The New Approach
1. Avoidance of All Repayments in the Vicinity of Insolvency
The reform will alter the existing restrictions on the repayment of shareholder loans
in two ways. First, statutory avoidance provisions will be extended to apply to all
shareholder loans and not just to loans deemed to substitute for equity. As a result,
the repayments of all shareholder loans will be subject to avoidance if they were
made within a one-year period prior to, or after the filing for insolvency.44 Parallel
to what has been said with regards to subordination, the questions of when the
crisis began and whether or not the loan was granted or not withdrawn while the
company was in crisis will no longer be relevant. This new approach is subject only
to the two exceptions mentioned above for small shareholders and investors who
acquire shares in an attempt to rescue the company. As described above, these
exceptions are already a part of the current law and will continue to apply in the
new law with the effect that neither the subordination nor the avoidance rules will
apply to such cases.45
43
The limitation period is ten years; GmbHG § 31 (5).
44 InsO § 135 n. 2, as amended. If no insolvency proceedings are commenced, the one-year period is to be
calculated not from the date of the insolvency filing, but from the date on which the creditor obtained an
enforceable title for his claim; see AnfG § 6 n. 2, as amended.
45 See supra Part B.II.1. Note that while the exception for small shareholders can easily be explained on
the ground that such shareholders will typically not have the same informational advantage as other
corporate insiders, the merits of the second exception are dubious as far as repayments are concerned. It
may be useful to give an incentive to investors who acquire shares in an attempt to rescue the company
by exempting them from the subordination rule. It is difficult to see, however, why such an investor
should also be exempt from the repayment restrictions, given that this enables him to abuse of his
insider status by causing the repayment of his loan in the vicinity of insolvency.
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The second alteration to the existing rules involves abolition of the judge-made
rules without substitution.46 Taken together, both alterations will considerably
simplify the application of the law. In the future, it will only have to be determined
whether or not the repayment was made more than one year prior to the insolvency
filing. If the answer will be yes, then the shareholder will be entitled to keep the
repayment. If the answer will be no, with the two exceptions mentioned above,
then the repayment will be subject to avoidance.
2. Practical Consequences and Merits of the New Approach
2.1. Additional Risks for Shareholders
The new approach is based on the assumption that, typically, the company will
already have been in financial distress in the year prior to the insolvency filing and
that, therefore, the approaching insolvency will have been discernible during that
period. Obviously, this is a bright line approach that has its accompanying pros and
cons. A clear advantage of this approach is that it produces predictable results and
avoids the difficult inquiry of when exactly the crisis of the company began. The
disadvantage is that this approach lacks the flexibility to do justice in each
individual case.
It is undeniable that, compared to the current law, the new approach will at least
partly deteriorate the shareholder-lenders’ position. This is true for all cases where
a company was not in crisis at the time of the repayment of the loan, but due to an
exogenous shock or other unexpected events became insolvent within the next 12
months. Though such cases may be relatively rare,47 they cannot be ruled out.
Under the current law, the repayment would not be subject to avoidance in these
circumstances since the company was not in crisis at the time of the repayment. In
contrast, under the new rules, the repayment will be subject to avoidance merely
because it was made within a one-year period prior to the insolvency filing.
It remains to be seen whether the courts will be prepared to soften the new
approach by allowing certain exceptions in cases where it is obvious that the
shareholder-lender was unable to discern the approaching insolvency and did not
abuse his insider status. A good example would be the case of a shareholder who,
at a time when the company was still prosperous, sold his shares to a new investor
and had his shareholder loans repaid on that occasion. Let’s assume the new
46
GmbHG § 30 (1) s. 3 and AktG § 57 (1) s. 3, as amended.
Empirical data suggests that most companies are in financial distress long before the insolvency
petition is filed; see Haas, supra note 30, at 621.
47
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investor ran down the business and the company thereupon filed for insolvency
within a one-year period after the sale of the shares. If the new rules are taken
literally, the repayment of the loan would be subject to avoidance even if it is
perfectly clear that it was the new investor who caused the insolvency of the
formerly prosperous company. There is much to be said for the view that such a
case should be exempt from the new rule since the underlying rationale evidently
does not apply.48 However, such exceptions will have to be construed narrowly,
since otherwise the advantages of the bright line approach would be undermined.
It is precisely the intention of the new law to render it unnecessary for the courts to
dwell into the difficult issue of when exactly the company entered into financial
distress and whether or not the approaching insolvency should have been foreseen.
In any event, in such cases as the one described in the example, a shareholderlender can best circumvent the problem by selling the loan along with the shares to
the new investor, rather than having the loan repaid.49
2.2. Safe Harbor for Repayments Made more than One Year Prior to the Insolvency Filing
On the other hand, the new bright line approach gives the shareholders advantage
by providing a safe harbor for loan repayments made more than one year prior to
the insolvency filing. This differs markedly from the current law since, as noted
above,50 the judge-made rules were also applied to repayments made at a much
earlier point in time. The new approach thus entails a significant gain in legal
certainty.
A concern has been raised that the safe harbor rule will give an incentive to
postpone the insolvency filing until the one-year period has expired. In order to
prevent this, it has been argued that the one-year period should be calculated not
from the date of the insolvency filing but rather from the date on which the
company first became insolvent.51 The objection to this proposal, however, is that it
would re-introduce precisely the same sort of uncertainties which the reform seeks
to avoid. Apart from that, delays in the insolvency filing are penalized by farreaching sanctions.52 Against this background, it appears preferable that the oneSee Eidenmüller, supra note 10, at 64; Peter O. Mülbert, Neuordnung des Kapitalrechts, 60 WERTPAPIERMITTEILUNGEN (WM) 1977, 1978-1979 (2006).
48
49 See, e.g., Eckhard Wälzholz, Die insolvenzrechtliche Behandlung haftungsbeschränkter Gesellschaften nach der
Reform durch das MoMiG, DEUTSCHES STEUERRECHT (DSTR) 1914, 1920 (2007).
50
Supra Part C.I.
51 See, e.g., Gerrit Hölzle, Gesellschafterfremdfinanzierung und Kapitalerhaltung im Regierungsentwurf des
MoMiG, 98 GMBH-RUNDSCHAU 729, 733 (2007).
52
See the contribution by Matthias Casper in this issue of the GERMAN LAW JOURNAL.
2008]
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1121
year period runs from the filing of the insolvency petition and not from the
beginning of the insolvency itself.
D. Secured Shareholder Loans
While the analysis thus far has only addressed unsecured shareholder loans, the
reform also has repercussions on secured shareholder loans. Current law contains
an avoidance provision that is specifically targeted at the grant of security interests
for shareholder loans. It provides that the insolvency administrator is entitled to
avoid and claim to any security interest for shareholder loans deemed to substitute
for equity, provided that the security interest was granted within a ten-year period
prior to the insolvency filing.53 In line with the general approach of the reform, the
new law will introduce the same rule not just for equity substituting loans, but for
all shareholder loans.54 However, as mentioned above, this is subject to the two
exceptions: small shareholders and investors who acquire shares in an attempt to
rescue the company.55
The fact that the avoidance of security interests is no longer confined to equity
substituting shareholder loans substantially restricts the scope of secured
shareholder-lending. Under current law, if a company falls into a crisis, the
shareholder-lender is able to escape the requalification of his loan as an equity
substitute by immediately terminating the loan. In this case, the shareholder’s
security interest will not be caught by the current rules and may thus be enforced
by the shareholder. In contrast, under the new law, the shareholder’s security
interest will be subject to avoidance even if that shareholder responds to the crisis
by immediately terminating the loan.56
The reason why the law seeks to avoid shareholders’ security interests is fairly
obvious: The subordination of shareholder loans could easily be circumvented if
shareholders could simply rely on their security interests. This rationale also
explains why the avoidance period of ten years for security grants is much longer
53 InsO § 135 n. 1. If no insolvency proceedings are commenced, the creditors themselves are entitled to
avoid and claim back the security interest under AnfG § 6 n. 1.
54
InsO § 135 n. 1, as amended; cf. also AnfG § 6 n. 1, as amended.
55
Supra Part B.II.1.
56 For a critical analysis of the consequences of this approach in particular with regard to intra-group
financing, see Michael Burg and Stefan Westerheide, Praktische Auswirkungen des MoMiG auf die
Finanzierung von Konzernen, 63 BETRIEBS-BERATER (BB) 62 (2008).
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than the avoidance period of only one year for repayments.57 It should be added
that, even if there was no subordination rule, there would still be good reason for
striking down the shareholders’ security interests.58 The reason is that lending on a
collateralized basis would permit shareholders to finance excessively risky projects
while at the same time limiting their exposure to a minimum. This is particularly
worrisome in cases where shareholders’ equity stake is low or widely dissipated
and therefore no longer serves as an incentive to abstain from extremely risky
transactions and transactions with a negative present value. Therefore, in order to
prevent the shareholders from speculating at the expense of the creditors, it would
appear well-founded to have a rule which avoids the shareholders’ security
interests even if no subordination rule existed.
E. (Pseudo-) Foreign Companies
Another important aspect of the reform deserves mentioning. As a result of the
case-law of the European Court of Justice (ECJ) on freedom of establishment (art.
43, 48 EC Treaty), and specifically the landmark decisions in Centros, Überseering
and Inspire Art,59 the number of (pseudo-) foreign companies operating mainly or
exclusively in Germany has increased dramatically.60 It is, therefore, not surprising
that the reform also addresses the issue of whether or not the abovementioned rules
on shareholder loans are applicable to such foreign companies.
Under the relevant rules of private international law, the answer to this question
depends on whether the rules on shareholder loans are to be regarded as a matter
of corporate law or insolvency law. In the former case, these rules would be
inapplicable to foreign companies, since the lex societatis is determined by the place
of incorporation.61 If, in contrast, these rules are classified as belonging to
57 Huber and Habersack, supra note 8, at 5-6, even suggest that the avoidance should not be subject to
any deadline at all.
58 See Cahn, supra note 10, at 298; Skeel and Krause-Vilmar, supra note 1, at 271-274; Andreas Engert, Die
ökonomische Begründung der Grundsätze ordnungsgemäßer Unternehmensfinanzierung, 33 ZEITSCHRIFT FÜR
UNTERNEHMENS- UND GESELLSCHAFTSRECHT (ZGR) 813, 830-831 (2004).
59 Case C-212/97, Centros Ltd v. Erhvervs- og Selskabsstyrelsen, 1999 ECR I-1459; Case C-208/00,
Überseering BV v. Nordic Construction Company Baumanagement GmbH, 2002 ECR I-9919; Case C167/01, Kamer von Koophandel en Fabrieken voor Amsterdam v. Inspire Art Ltd., 2003 ECR I-10155.
60 On the rise of the UK limited company in Germany, see, e.g., Marco Becht, Colin Mayer & Hannes F.
Wagner, Where do Firms Incorporate? Deregulation and the Cost of Entry, ECGI LAW WORKING PAPER N.
70/2006 (AUGUST 2007); Dirk A. Verse, Company Law Reform in Germany – The Proposed New Private
Limited Company Law –, 4 KYOTO JOURNAL OF LAW AND POLITICS 1, 3 (2008).
61 This “incorporation theory” has been controversial for many years, but is now the prevailing view also
in Germany, at least with regard to E.U. and U.S. companies. For details, see Andreas Heldrich, Anh. zu
2008]
Shareholder Loans
1123
insolvency law, the lex fori concursus will apply. For foreign companies operating
mainly or exclusively in Germany this will be German law, since the insolvency
proceedings of these companies are subject to the jurisdiction of the German
courts.62
Under the current law, the issue of whether the rules on shareholder loans fall
under the lex societatis or the lex fori concursus remains controversial. The official
notes on the new rules suggest that the latter view should be preferred.63 In order to
underline this position, the new rules will be contained exclusively in the
insolvency legislation whereas hitherto they were contained partly in the GmbHGesetz and partly in insolvency law.64 There is indeed much to be said for the view
that the rules on shareholder loans should be regarded as part of the lex fori
concursus. German legislature, however, is probably not in power to decide this
issue for companies from other EU member states. Rather, its outcome has already
been decided by art. 4 (2) of the European Insolvency Regulation, which provides
that, inter alia, the ranking of the claims in insolvency as well as the rules relating to
the avoidance of legal acts detrimental to creditors are parts of the lex fori
concursus.65 It is hard to see why the rules on shareholder loans should not be
caught by this provision.66
The argument has been made, however, that even if the rules on shareholder loans
are subject to the lex fori concursus, they could still not be applied to (pseudo-)
foreign companies from other EU member states because doing so would violate
the freedom of establishment (art. 43, 48 EC Treaty). Although the more convincing
view is probably that there is no such violation,67 this is a difficult question which
Art. 12 EGBGB, in BÜRGERLICHES GESETZBUCH, margin numbers 6, 23 (Otto Palandt ed., 67th ed., 2008).
Note that the German government is currently preparing a reform of international company law which
shall codify the incorporation doctrine for companies from all jurisdictions.
62 See European Insolvency Regulation, art. 3 (1) § 1 and art. 4 (1), Council Regulation 1346/2000, 2000
O.J. (L160) 1 on insolvency proceedings.
63
BTDrucks 16/6140.
64 GmbHG §§ 32a, b will be repealed, and the new provisions will be found in InsO §§ 39, 135 and AnfG
§ 6 as amended.
65
European Insolvency Regulation, art. 4 (2) (i), (m), Council Regulation 1346/2000, 2000 O.J. (L160) 1.
66 For a detailed analysis of this issue, see Ulrich Huber, Gesellschafterdarlehen in der Inlandsinsolvenz von
Auslandsgesellschaften, in EUROPÄISCHE AUSLANDSGESELLSCHAFTEN IN DEUTSCHLAND 131, 165-185
(Marcus Lutter ed., 2005).
See Huber, supra note 66, at 185-188; but see Horst Eidenmüller, AUSLÄNDISCHE
KAPITALGESELLSCHAFTEN IM DEUTSCHEN RECHT, § 9, margin number 44 (2004).
67
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may ultimately have to be resolved by the ECJ. For the time being, shareholders of
(pseudo-) foreign companies should take into account that there is at least a
considerable risk that the German rules on shareholder loans will be applied
against them.
F. Conclusion
The GmbH reform marks a paradigm shift in the treatment of shareholder loans in
corporate insolvencies in Germany. While the current law turns on the distinction
between shareholder loans granted or not withdrawn in the course of a financial
crisis (equity substituting loans) and other loans, the new law will introduce an
automatic subordination rule which, subject to few exceptions, will apply to all
shareholder loans. The new rules will further provide that repayments of all
subordinated shareholder loans made within a one-year period prior to the
insolvency filing are subject to avoidance. The same applies to the grant of security
interests by the company for all subordinated shareholder loans if the security
interest was granted within a ten-year period prior to the insolvency filing.
While the German government praises the new rules for enhancing the
competiveness of the GmbH in the international competition of company law
regulators, the new rules are in fact partly stricter and partly more lenient for
shareholders. In particular, the fact that the application of the new rules no longer
depends on the requirement of a crisis has the effect that repayments of shareholder
loans may be avoided merely on the ground that they were made less than one year
prior to the insolvency filing. The reverse side of the coin, however, is that there is
now a safe harbor for repayments made more than one year prior to the insolvency
filing. This is a considerable gain in legal certainty as compared to the current law.
Taken together, the new rules will markedly simplify the treatment of shareholder
loans in corporate insolvency. In an area of the law which is notorious for its
complexity, this is no little achievement.
GMBH – SPECIAL ISSUE
Liability of the Managing Director and the Shareholder in
the GmbH (Private Limited Company) in Crisis
By Matthias Casper*
A. Introduction
I. The Term “Crisis”
The insolvency of a company does not arrive suddenly. Normally, insolvency
precedes a crisis. At present, the term “crisis” is defined in § 32 a sec. 1 of the Gesetz
betreffend die Gesellschaften mit Beschränkter Haftung (GmbHG – Private Limited
Companies Act) as the point when the company does not receive any credits
according to the usual conditions in the particular market and when the
shareholders provide the company with further shareholder capital instead of debt
capital. Besides the rules governing shareholder capital substitution, which will be
omitted due to the upcoming reform of private limited companies,1 there are few
legal guidelines that regulate the standards of conduct for managing directors and
shareholders in the case of a crisis. In particular, § 49 sec. 3 GmbHG needs to be
singled out. This paragraph establishes an obligation to call a shareholder meeting
if more than half of the capital stock is lost. If an adverse balance arises because of
the payouts to the shareholders, the protections of §§ 30, 31 GmbHG will intervene.
An adverse balance results when there is insufficient capital to cover the liabilities,
ownership’s equity, and guaranteed capital. However these protections often do
not suffice.
Prof. Dr. iur., Dipl-Oec., Director at the Institute of Civil, Banking and Capital Market Law, WWU
Münster. Email: matthias.casper@uni-muenster.de.
*
1 Regierungsentwurf des Gesetzes zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen
(in the following RegE MoMiG – Government Draft of an Act to Modernise the Law Governing Private
Limited Companies and to Combat Abuses), Drucksachen des Bundestages (BTDrucks.), 16/6140 =
ZEITSCHRIFT FÜR WIRTSCHAFTSRECHT (ZIP) 2007, supplement with No. 23. Concerning the omission of
the law on shareholder capital substitution in favor of a subordination in the Insolvenzordnung (InsOBankruptcy Act); See Gerrit Hölzle, DEUTSCHES STEUERRECHT (DStR) 1484, 1490 (2007); See Schäfer, DStR
2085, 2086 (2006); See Martin Winter, DStR 1484, 1490 (2007).
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II. The New Regulation by the MoMiG, the Object of Investigation
At this point two legal developments become relevant: the Gesetz zur
Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG –
Law Governing Private Limited Companies and to Combat Abuses) and the judgemade doctrine known as Existenzvernichtungshaftung (liability arising from a
withdrawal which destroys the economic basis of a company). According to § 64
sent. 3 n.F. (new text in the following n.F.) GmbHG, the managing director should
be responsible for those paybacks to the shareholders that have lead to the
insolvency of the company even though those paybacks do not necessarily have to
lead to an adverse balance as required by §§ 30, 31 GmbHG.
The following article gives an overview of this new regulation and points out
parallels with liability arising from a withdrawal that destroys the economic basis
of a company. The effects of changing the mainly discussed liability resulting from
delaying the filing of an insolvency petition (Insolvenzverschleppungshaftung), shall
also be illustrated. Liability resulting from delayed filing of an insolvency petition
is partially regulated by the new MoMiG and is expanded as a deficiency
competence of the shareholders.
B.
Insolvenzverursachungshaftung (Insolvency Causation Liability) of the
Managing Director Under § 64 sent. 3 n.F. GmbHG
I. Purpose of the Regulation
With the new § 64 sent. 3 the duty to reimburse according to sent.1 (previously, § 64
sec. 2 GmbHG) will also be extended to those payments that were rendered to the
shareholders and have lead to the insolvency of the company, unless this situation
was imperceptible as in the case of exercising proper care of an ordinary managing
director.2 For this reason, the temporal scope of the duty to reimburse and the
intentional freezing of payments are shifted and advanced in time. The purpose of
the regulation is to protect creditors by reducing the probability of insolvency.
Unlike liability arising from delayed filing of an insolvency petition, § 64 sec. 1
GmbHG in connection with § 823 sec. 2 of the Bürgerliches Gesetzbuch (BGB–
German Civil Code), the focus of § 64 sent. 3 n.F. GmbHG is
Insolvenzverursachungshaftung (liability arising from the causation of insolvency)
2 In the new regulation it says: “Die gleiche Verpflichtung trifft die Geschäftsführer für Zahlungen an die
Gesellschafter, soweit diese zur Zahlungsunfähigkeit der Gesellschaft führen mussten, es sei denn, dies war auch
bei Beachtung der in Satz 2 bezeichneten Sorgfalt nicht erkennbar.“ The same obligation concerns the
managing directors for payments to the shareholders as far as these payments had to lead to the
insolvency of the company unless this was also not perceptible in the case of exercising the in sent. 2
identified care.
2008]
Liability of the Managing Director
1127
and not Insolvenzvertiefungshaftung (liability for the immersion of insolvency).3 The
parliament sought to combine substitute equity capital law with insolvency law.4
The distribution of dividends and profits of the company before insolvency shall be
avoided5 and, in this manner, the protection in the preliminary stages of insolvency
shall be strengthened. Unlike claims under §§ 30, 31 GmbHG, payments to the
shareholders neither lead to an adverse balance nor enhance the deficit balance.6 In
relation to similar existing claims under § 43 sec. 3 in connection with §§ 30, 31
GmbHG, these are considered to be concurrent claims.
The new regulation also contains certain parallels in Haftung aus einem
existenzvernichtendem Eingriff (the liability from a withdrawal which destroys the
economic basis of the company). It does not, however, codify this unwritten legal
concept conclusively.7 The conclusive codification of this legal concept is not
desired because the addressee of the liability is the managing director according to
§ 64 sent. 3 n.F. GmbHG8 unlike the case of a liability arising from a shareholders’
withdrawal that destroys the economic basis of a company. Ultimately, liability
according to sent. 3 continues indirectly with the especially well-known concept of
the “solvency test” in Anglo-Saxon law.9 Among the quitclaim of financial barriers,
according to a balance test like in §§ 30, 31 GmbHG, a payment to the shareholders
will only be forbidden for the managing director if the liquidity of the company is
at risk. In other words, when the ability of the company to fulfill its debts payable is
Equally Sven Greulich and Jan Bunnemann, NEUE ZEITSCHRIFT FÜR GESELLSCHAFTSRECHT (NZG) 681,
684 (2006); Karsten Schmidt, GMBH RUNDSCHAU (GMBHR) 1072, 1079 (2007).
3
See Philip Böcker and Christoph Poertzgen, ZEITSCHRIFT FÜR WIRTSCHAFTS- UND BANKRECHT (WM)
1203, 1205 (2007); Béla Knof, DSTR 1072, 1079 (2007).
4
See Matthias Casper in STEUERUNGSFUNKTIONEN DES HAFTUNGSRECHTS IM GESELLSCHAFTS- UND
KAPITALMARKTRECHT 33, 41 (Gregor Bachmann, Matthias Casper, Carsten Schäfer, and Rüdiger Veil
eds., 2007); Dagmar Gesmann-Nuissl, WM 1756, 1763 (2006).
5
RegE MoMiG, BTDrucks No. 16/6140, page 111; Casper, supra note 5, at 41; Gesmann-Nuissl, supra
note 5, at 1763; Böcker and Poertzgen, supra note 4, at 1205; Greulich and Bunnemann, supra note 3, at
682.
6
7
RegE MoMiG, BTDrucks No. 16/6140, page 112.
8 Also, the shareholder may not be covered if the obligation of an insolvency petition has been devolved
to him according to § 15 a sec. 3 n.F. InsO in the case of the limited company without management; but
see Gerrit Hölzle, GMBHR 729, 731 (2007).
9 This implicates RegE MoMiG BTDrucks 16/6140, page 112; see also Böcker, supra at, 1205; Seibert, ZIP
1157, 1167 (2006); Ulrich Noack, DER BETRIEB (DB) 1475, 1479 (2006); Greulich, supra note 3, at 683;
Karsten Schmidt, supra note 3, at 1079; Knof, DStR 1536, 1537 (2007); Gerrit Hölzle, GmbHR 729, 730
(2007).
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at risk.10 The managing director has to make a prediction concerning the situation
of financial solvency in the future. Also, the German managing director will be at
least indirectly forced if he or she carries out the admissible payments to the
shareholders in the future according to §§ 30, 31 GmbHG since, alternatively, he or
she is threatened by liability according to § 64 sent. 3 n.F. GmbHG. Certainly, the
discussion from Anglo-Saxon law cannot be exactly projected onto the new
regulation, and individualized standards should be applied regarding the scope of
sent. 3, 2. clause n.F. in connection with the interpretation of the care that is
demanded of a manager.
II. Open Questions
There are numerous open questions connected with this new regulation. At this
point, presently unproblematic concepts like “payment”11 and “shareholder”12 do
not have to be discussed. However, it is unclear if the issue of causing
overindebtedness is also covered (discussed in detail infra at section B.III.1. of this
article). Especially problematic are the questions of when a payment is considered
the cause of insolvency and whether there has to be a temporal and factual
connection between the payment and the inability to pay (discussed in detail infra
at section B.III.2. of this article). Ultimately, the preconditions of the subsequent
insolvency need to be clarified, including the manager’s application of proper care
(discussed in detail infra at section B.IV. of this article).
More specifically, to the concept of the solvency test, see e.g. Engert, ZEITSCHRIFT FÜR DAS GESAMTE
HANDELS- UND WIRTSCHAFTSRECHT (ZHR) 170, 296, 318 (2007); Peter O. Mülbert, DER KONZERN 151, 160
(2004); Rüdiger Veil in DAS KAPITAL DER AKTIENGESELLSCHAFT IN EUROPA, 91, 96 (Marcus Lutter ed.,
2006); Carsten Jungmann, ZEITSCHRIFT FÜR UNTERNEHMENS- UND GESELLSCHAFTSRECHT (ZGR) 638, 647
(2006); see also Béla Knof, DStR 1536, 1541 (2007).
10
11 Insofar it can be referred to the previous literature concerning § 64 sec. 2 GmbHG, See Joachim
Schulze-Osterloh in GMBH-GESETZ, § 64 margin number 79 (Adolf Baumbach and Götz Hueck eds., 18th
ed., 2006) (majority opinion); but see Karsten Schmidt in KOMMENTAR ZUM GMBH-GESETZ, § 64 margin
number 23 (Franz Scholz ed., vol. 2, 9th ed., 2002).
12 Every shareholder is a possible payee, a privilege of small shareholding like up to now known from §
32a sec. 3 sent. 2 GmbHG does not exist, see Matthias Casper in GROßKOMMENTAR ZUM GMBH-GESETZ
106 (Peter Ulmer, Mathias Habersack, and Martin Winter eds., vol. 3, 2008), § 64 margin number 106.
2008]
Liability of the Managing Director
1129
III. Causing an Inability to Pay
1. Liability also for Causing Overindebtedness?
Paragraph 64 sent. 3 n.F. GmbHG is limited to insolvency in terms of § 17 of the
Insolvenzordnung (InsO – Insolvency Regulation).13 The causation of
overindebtedness (§ 19 InsO), that is to say, the situation when the equity capital is
completely consumed and, therefore, there are more liabilities than existing assets,
is not mentioned. This seems to depend on the association that, in the case of the
causation of an excess of liabilities over assets, the liability of the managing director
according to §§ 43 sec. 3, 30, 31 GmbHG would arise and would be adequate. Such
a perception certainly does not reach far enough. In light of the purpose of the legal
provision, which consists of protecting the company against advance looting, the
liability of managing directors does not inevitably provide an effective protection
on account of an interdicted repayment of the nominal capital, for example,
concerning a marginal nominal capital.
2. Causality of the Payment for the Causation of Insolvency
Undoubtedly, not every payment to the shareholders is suitable to cause
insolvency. In fact, there must be a causal connection between the payment and the
resulting insolvency. In the first comments concerning the new regulation there is
mutual consent that a simple causality in terms of the cause-in-fact theory of
causation (conditio sine qua non theory of causation) cannot be sufficient.14 The
government’s statements in support of the reform present the same position, stating
that the managing directors shall not be obliged “to reimburse any payments to the
shareholders that have become in any way the cause of the company’s
insolvency.”15 On the contrary, the additional occurrence of any optional further
causal contribution for an interruption of the course of causality will not suffice.16
In fact, a judgmental reflection on the theory of adequacy is required that then
needs to be adapted to the particularities of the purpose of § 64 sent. 3 n.F.
GmbHG.17 Thereby, it needs to be adjusted to a close temporal and factual
13 See Greulich and Bunnemann, supra note 3, at 684 et seq; different view Casper, supra note 12, at 107;
Knof, supra note 9, at 1538.
14 See Greulich and Bunnemann, supra note 3, at 685; Knof, supra note 9, at 1539; see also Böcker and
Poertzgen, supra note 4, at 1207.
15
RegE MoMiG BTDrucks 16/6140, page 112.
16
In this sense however RegE MoMiG BTDrucks 16/6140, page 112.
17
Similarly Knof, supra note 9, at 1539.
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coherence between the payment and the occurrence of a shortage of liquid assets.18
As a rule of thumb, it can be assumed that a payment to a shareholder will only be
causal if the payment leads to the occurrence of insolvency within one year. As a
secondary modification of too wide Causation of Insolvency, it has been suggested
that causality only comes into question when an objective third person could see
that a payment has a crucial significance for the liquidity of the company and can
constitute a Weichenstellung ins Aus (strategic alignment into the expiration).19 A
similar concept reveals the recourse of the prognosis of preservation that has been
developed in the framework of § 19 InsO.20 However, the following can be
proposed: if one already on the level of causality sorted out all payments that did
not necessarily seem to result in the insolvency of the company, the possibility of
exoneration according to sent 3, 2. clause n.F. GmbHG would contain no function.
This would lead to an inadmissible shifting of the onus of presentation and proof
with which the managing director is charged under the 2. Clause, whereas the
company, as a matter of fact the trustee in bankruptcy, is charged with the
presentation and proof of causality.21 That is why, on the one hand, no payment, in
the sense of wide causality, can be considered to be adequate but, on the other
hand, it can only be required that, according to an objective third person, a
payment is suitable to cause insolvency having regard to the concrete financial
circumstances. In other terms, wide causality is only missing when insolvency can
only occur because of chains of further, not readily foreseeable, circumstances.
The objection that a lawful alternative behavior, along the lines of arguing that the
insolvency would have occurred even without the payments to the shareholders, is
principally unsuitable22 since a contributory causation already suffices, provided
that the remaining circumstances were not impossible. If the illiquidity, in the sense
of § 17 InsO, already existed in the moment of the payment, there is no space for the
application of § 64 sent. 3 n.F. GmbHG.23 If the managing director reconstitutes the
liquidity of the company, for example, by disposing the shareholder to pay back the
money, the chain of causality will be regularly broken if the illiquidity occurs later
18
RegE MoMiG BTDrucks 16/6140, page 112; See Greulich and Bunnemann, supra note 3, at 685.
19
See Greulich and Bunnemann, supra note 3, at 685.
20
See Knof, supra note 9, at 1536, 1541, and 1580.
21 See Knof, supra note 9, at 1580, 1585 (justifiably points at the fact that, in the case of unavailable forecast
data, the managing director also falls victim to the onus of proof whereby according to the here argued
opinion it is a matter of the question concerning the subjective facts of a case); on its merits see also A.
Schmidt, ZEITSCHRIFT FÜR DAS GESAMTE INSOLVENZRECHT (ZINSO) 975, 978 (2007).
22
Insofar appropriate Böcker and Poertzgen, supra note 4, at 1208.
23
Id. at 1208.
2008]
Liability of the Managing Director
1131
on. The opposing opinion of the Bundesgerichtshof (BGH – Federal Court of Justice)24
in connection with the replenishment of the nominal capital according to §§ 30, 31
GmbHG cannot be transferred to sent. 3.25
IV. Recognizability and Fault
Like liability according to § 64 sent. 1 n.F. GmbHG (former § 64 sec. 2 sent. 1),
liability according to the new § 64 sent. 3 GmbHG requires fault. However, § 64
sent. 3, 2. clause n.F. includes a possibility of exculpation of the managing directors
when the inability to pay was also not recognizable by applying the due diligence
of a prudent businessperson. Insofar as it needs to be adjusted to a subjective point
of view of the managing director with relation to the standards of a prudent
businessperson, certainly a strongly objective element takes effect. Nevertheless,
this approach does not necessarily correspond to the point of view of the objective
observer that is to be taken as a basis within the framework of causality (discussed
in detail supra section B.III.2. of this article). Therefore, this proof of exoneration
goes further than the discontinuity of the causation. This is relevant insofar as the
decision is based on the prognosis that is required of a responsible managing
director.26 For this reason, the period of time based on prognosis is questionable.
Regularly, this may not exceed one year.27 One can orient oneself by considering
the common period of time for financial planning in this company or in companies
of the same size. Small to medium-sized enterprises plan their concrete payment
flows usually not longer than one year in advance whereas, for the upcoming
months after the disbursement, a more detailed payment is required than for the
following months.28
Furthermore, for the right decision based on prognosis, the question of selecting
certain information as a basis plays a significant part.29 Also, it must be assumed
that the managing director has to identify all this necessary information within the
scope of short-term financial planning. The previous development of the volume of
24 BGHZ 144, 226 (340) = BGH NEUE JURISTISCHE WOCHENSCHRIFT (NJW) 2577 (2000); BGH ZIP 1256,
1257 (2000); BGH NJW 3629 (2002); BGH ZIP 2203, 2204 (2005).
25
Equally Böcker and Poertzgen, supra note 4, at 1208; Hölzle, supra note 9, at 732.
26
For more Details see Knof, supra note 9, at 1580, 1584.
27 Further Knof, supra note 9, at 1580, 1582 (the ongoing and the following business year, which is to say,
up to two years).
28
See Greulich and Bunnemann, supra note 3, at 686; Knof supra note 9 at 1580 and 1582.
29
Compare thereto also Greulich and Bunnemann, supra note 3, at 686; Knof, supra note 9, at 1580.
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trade and the probability of the loss of outstanding funds is to be taken as a basis.
Unusual circumstances like a big financial loss caused by the loss of a debtor only
have to be included in the decision based on prognosis if, by applying the ordinary
duty of care of a businessperson, they are expected. In practice, the managing
director can orient himself or herself by taking into account the recommendations
of the Fachausschuss Recht des Institus der Witschaftesprüfer – IDW zur Prüfung
eingetretener oder drohender Zahlungsunfähigkeit bei Unternehmen (Expert Committee
on Legal Affairs of the Institute for Auditors Examining Occurred or Imminent
Insolvencies of Companies).30 The managing director cannot excuse himself or
herself in the context of sent. 3, 2. clause n.F. by arguing that he or she was
instructed by the shareholder to accomplish the payment because such a directive
of the shareholder would be unlawful and the director was not authorized to carry
out these instructions.31 This is the direct consequence of the reference in sent. 4 n.F.
to § 43 sec. 3 sent. 3 GmbHG.
C. The Liability Arising from the Causation of an Insolvency on the Basis of the
Trihotel Decision, BGHZ 173, 246 (2007).
I. Overview and Formulation of a Question
The heart of the Gesellschaften mit Beschränkter Haftung (GmbH – private limited
company) is to limit liability. The shareholders do not have to invest into a
bottomless pit. If the company is no longer profitable or if the shareholders do not
want to continue with the company, the shareholders can sell items of property in
order to transform them into liquid assets and liquidate the company within the
terms of the statutory provisions. The legal concept of the so-called qualified factual
consolidated companies has surfaced from initial adjudication over the law
concerning industrial groups as a means of preventing abuses. After fundamental
preparatory work of the former presiding judge of the Second Civil Senate, Volker
Röhricht,32 this concept was replaced by the Existenzvernichtungshaftung (liability
arising from a withdrawal which destroys the economic basis of a company) that
has an acknowledged interest in maintaining the legal continuity of the company in
IDW examination standards (Prüfungsstandard - PS): Empfehlungen zur Prüfung eingetretener oder
drohender Zahlungsunfähigkeit bei Unternehmen – IDW PS 800 of 22 January 1999, DIE
WIRTSCHAFTSPRÜFUNG (WPG) 250 (1999); see also A. Schmidt, supra note 21, at 978; Engert, supra note 10,
at 296, 325, and 327.
30
31 RegE MoMiG BTDrucks 16/6140, page 113; Böcker and Poertzgen, supra note 4, at 1203 and 1207;
Hölzle, supra note 9, at 732.
32 Volker Röhricht, Die GmbH im Spannungsfeld zwischen wirtschaftlicher Dispositionsfreiheit ihrer
Gesellschafter und Gläubigerschutz, in FESTSCHRIFT 50 JAHRE BGH, 83 (K. Geiß, K. Nehm, H.E. Brandner
and H. Hagen eds., 2000).
2008]
Liability of the Managing Director
1133
the interest of its creditors. Following the first milestone in the adjudication, with
the Bremer Vulkanentscheidung,33 a first specification occurred in the KBV Decision .34
Thereby liability arising from a withdrawal that destroys the economic basis of a
company justified Durchgriffshaftung (piercing the corporate veil) to create direct
liability of the controlling shareholder, which should lead to unlimited external
liability of the shareholders. A repeated turnaround has been performed by the
Company Law Senate of the BGH in its Trihotel Decision from the summer of 2007.35
The BGH concluded that liability arising from a withdrawal that destroys the
economic basis of a company is more like an internal liability based on § 826 BGB.
Paragraph 826 BGB contains the concept that a person who, in an immoral manner,
which is contrary to public policy, intentionally inflicts damage on another person
is liable to the other person to compensate the damage. In the following, the
extremely controversial, dogmatic classification of liability arising from a
withdrawal that destroys the economic basis of a company shall be traced and its
parallels to liability arising from the causation of an insolvency and to § 64 sent. 3
n.F. GmbHG shall be presented.
II. The Previous Interpretation Attempts of Liability Arising from a Withdrawal
Destroying the Economic Basis of a Company
Taking into account not only the so far presented adjudication but also the different
and supremely various comments in literature, five different opinions concerning
the legal foundation of liability for destroying the economic basis of a company can
be identified whereof two plead clearly for internal liability and two for external
liability. The fifth perspective constitutes the abovementioned adjudication that
seeks to use an external liability tort law approach for defending internal liability.
The approach of the KBV Decision36 argues that liability on the basis of misuse of the
legal form has found widespread acceptance in literature.37 According to this
33
See BGHZ 149, 10 =NJW 3622 (2001).
34
See BGHZ 151, 181 = NJW 3024 (2002).
35
See BGHZ 173, 246 = ZIP 1552 ff. (2007).
36 See BGHZ 151, 181 =NJW 3024 (2002); see also Oberlandesgericht (OLG – Regional Appeal Court) Jena,
GMBHR 115 (2002).
See Martin Winter, ZGR 570, 591 (1994); Georg Bitter, WM 2133, 2137 (2001); Tim Drygala, GMBHR 729,
730 (2003); Gehrlein, NJW 1089, 1090 (2000); Haas, WM 1929, 1932 (2003); Jan Lieder, DEUTSCHE
ZEITSCHRIFT FÜR WIRTSCHAFTS- UND INSOLVENZRECHT (DZWIR) 309 (2005); THOMAS LIEBSCHER, GMBHKONZERNRECHT 499 (2006); Raiser, in FESTSCHRIFT FÜR PETER ULMER, 493, 504 (Mathias Habersack, Peter
Hommelhoff, Uwe Huffer and Karsten Schmidt eds., 2003); Vetter, ZIP 601, 602 (2003); MARC-PHILIPPE
WELLER, EUROPÄISCHE RECHTSFORMWAHLFREIHEIT UND GESELLSCHAFTERHAFTUNG, 140 (2004); V.
Röhricht, supra note 32, at 103.
37
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opinion, liability by reason of a withdrawal that destroys the economic basis of the
company shall be a specification of Durchgriffshaftung (the general personal liability
of the shareholder), which is equivalent to piercing the corporate veil in AngloSaxon jurisdictions for damages exceeding the share capital. The misuse of rights
shall be identified in the lack of respect of the predetermination concerning the
assets of the company and the disrespect of the guidelines of proper liquidation
proceedings. This justifies a teleological reduction of § 13 sec. 2 GmbHG. However,
according to the majority of the exponents who follow insofar an obiter dictum in the
Autokran Decision,38 the basis for a claim for the personal liability of the intervening
shareholder shall be seen in an analogous application of §§ 1, 128, 129 HGB.39 This
unlimited liability due to the misuse of the legal form has been especially criticized
and it has been pleaded for liability for damages.40 A contrasting approach in
literature wants to master external liability only by means of tort law.41 As a
starting point, § 826 BGB is predominantly chosen. The notable approach from
Altmeppen based liability of the shareholder who withdraws money improperly
from the company’s assets upon an analogous application of § 43 sec. 3 by
qualifying the shareholder as shadow director.42 This is classified as internal
liability.
38
See BGHZ 95, 330 (332) = NJW 188 (1986).
Thereto fundamentally GEORG BITTER, DIE KONZERNRECHTLICHE DURCHGRIFFSHAFTUNG BEI
PERSONENGESELLSCHAFTEN, 432 (2000). See also Liebscher, supra note 37, at 500; Raiser in
GROßKOMMENTAR ZUM GMBH-GESETZ, § 13 margin number 152 (Peter Ulmer, Mathias Habersack, and
Martin Winter eds., vol. 3, 2008); Emmerich, in Scholz, supra note 11, § 13 margin number 96; see e.g.
Weller, supra note 37, at 176 and 184; Lieder, supra note 37, at 309.
39
40
See Vetter, ZIP 601, 603 et seq (2003); Haas, WM 1929, 1940 (2003); Burgard, ZIP 827, 830 (2002).
Fundamentally now Wagner, in FESTSCHRIFT FÜR CLAUS-WILHELM CANARIS 473, 489 (Andreas Held
Rich, Juergen Prölss, Ingo Koller, and Katja Langenbucher eds., 2007); Zöllner, FESTSCHRIFT FÜR HORST
KONZEN, 999, 1013 (2006); before allready EMMERICH AND HABERSACK, AKTIEN- UND GMBH-KONZERNR
(4th ed.) Anhang zu § 318 margin numerber 35; Rüdiger Veil, Gesellschaftsrecht in der Diskussion, 10
GESELLSCHAFTSRECHTLICHE VEREINIGUNG (VGR) 103, 113 (2005); Ulrich Haas, Gutachten zum 66.
DEUTSCHER JURISTENTAG (DJT) E. 83 (2006); Barbara Dauner-Lieb, DStR 2034, 2041 (2006); see now also
Weller, DStR 1166, 1168 (2007).
41
42 See Holger Altmeppen, ZIP 1837, 1847 (2001); the same NJW 321, 323 (2002); the same ZIP 961, 966
(2002); the same ZIP 1553, 152 (2002); see also Wilhelm, NJW 175, 178 (2003); see also Schön, ZHR 168, 268,
289(2004) (tendency for the group of cases of the “Spekulation auf Kosten der Gläubiger” (speculation at the
cost of the creditors)); Wilhelm, JURISTISCHE PERSON 285 and 335 (1981); Flume, BGB AT I/2 88 (1983). In
contrast particularly see Ulmer, ZIP 2021, 2025 et seq (2001).
2008]
Liability of the Managing Director
1135
In contrast to this is a fourth and widespread opinion in literature43 that also
defends an internal liability and estimates a violation of the existing and arising
special relationship between the limited and the shareholder on the basis of the
freedom of contract. This special relationship derives partially from a fiduciary
duty of the sole shareholder over the company.44 Other opinions, however, estimate
a special relationship based on membership45. Consequently, the starting point for
liability is any negligent breach of duty (§§ 280 sec. 1, 241 sec. 2, 276 BGB).46
The fifth approach, which follows a valuation directed against an internal liability,
was presented by the BGH in the Trihotel Decision.47 In Trihotel the BGH combined
motivations and reasons from different approaches. Using § 826 BGB, the BGH
first estimated all the tort law perspective. However, with the subsequent
derivation of an internal liability that is based upon the functional proximity to §§
30, 31 GmbHG, the BGH again argues close to the exemplars of internal liability.
III. Classification of a Withdrawal Destroying the Economic Basis of a Company as
Liability for the Causation of Insolvency
It needs to be considered that, in the discussion concerning the correct legal
foundation of the liability arising from a withdrawal that destroys the economic
basis of a company, a few positions are interweaved and, more precisely, determine
the scope of liability. Above all, the question is whether the liability arising from
Existenzvernichtungshaftung (a withdrawal that destroys the economic basis of a
company) should be shaped as internal or external liability. However, there is
mutual consent regarding the fact that the enforcement of claims arising from a
withdrawal destroying the economic basis of a company in the case of an
insolvency proceeding should be concentrated on the trustee in bankruptcy.
43 Compare to the aside from footnotes 45-47; see also Hans-Christoph Ihrig, DStR 1170 (2007) (who,
however, leaves the exact basis of an internal liability finally open).
See Ulmer, ZIP 2021, 2026 (2001); MARTIN WINTER, MITGLIEDSCHAFTLICHE TREUBINDUNGEN IM GMBHRECHT 190 and 202 (1988); ZGR 570, 580 (1994)(the same); but see HANS CHRISTOPH GRIGOLEIT,
GESELLSCHAFTERHAFTUNG FÜR INTERNE EINFLUSSNAHME IM RECHT DER GMBH 321 (2006) (same basic
approach but speaks of an obligation for a dezentrale Gewinnverteilung (peripheral distribution of profits)
deriving from a fiduciary duty); For an other view see Günther Hönn, WM 769, 771 (2008).
44
45
Karsten Schmidt, NJW 3577, 3579 (2001).
See Wolfgang Zöllner, Gläubigerschutz durch Gesellschafterhaftung bei der GmbH, in FESTSCHRIFT FÜR
HORST KONZEN 999, 1018 (Barbara Dauner-Lieb, Peter Hommelhoff, Mathias Jacobs, Dagmar Kaiser, and
Christoph Weber eds., 2006).
46
47 See note 35; once again confirmed by BGH ZIP 455, 456 (2008); BGH ZIP 1232, 1233 (2008); BGH WM
302, 303 et seq (2008); BGH WM 1402, 1403 (2008); BGH WM 761 (2008).
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[Vol. 09 No. 09
Liability arising from a withdrawal that destroys the economic basis of a company
intends to close a gap in the protection system of creditors of the GmbH by creating
an equation for the interferences beyond the barrier of §§ 30, 31 GmbHG. This kind
of liability is not only linked to the disregard of the abstract earmarking for the
specific purpose of the company assets in order to satisfy creditors but also to the
interference that leads to the fact that the GmbH cannot completely or even
partially satisfy its debts. This is to say that it is not about causation of short-term
financial difficulties but about the deprivation of assets that are essential for the
continuance of the GmbH. This was correctly expressed in the KBV Decision in
2002,48 which used terminology such as Haftung für Existenzvernichtung (liability for
a withdrawal destroying the economic basis of a company) for the first time.49 This
divestment normally ends in insolvency of the company provided that the
interference is not exceptionally balanced by the allocation of new equity capital.
Considering this, the withdrawal destroying the economic basis of a company
presents itself as updating the law by the enhanced liability for the causation of
insolvency like the law with the MoMiG also intends to introduce in the form of the
new § 64 sent. 3 GmbHG for the managing directors (discussed in detail at supra
section B of this article). A systematic proximity to liability arising from delaying
the filing of an insolvency petition suggests itself even if its addressee,subject to the
new § 15a sec. 3 InsO (discussed in detail at infra section D of this article), is the
managing director. This function and proximity speaks at first for classifying the
liability arising from a withdrawal which destroys the economic basis of a company
as tort law. Another argument is that the acknowledged interest in existence of the
company is not recognized for the company itself but for the will of the creditors.
Ultimately, liability arising from a withdrawal that destroys the economic basis of a
company assures the function of liquidation proceedings that aim beyond § 73 sec.
1 GmbHG for the complete satisfaction of the creditors. That is unless, in the
absence of sufficient assets, this is not achievable, in which case it works towards an
equally proportional satisfaction of the creditors with the aid of the insolvency
proceeding.
Recognizing the function of liability arising from a withdrawal that destroys the
economic basis of a company as liability for the causation of an insolvency and its
proximity to the liability of delaying the filing of an insolvency petition, which
initially seems to speak for an internal liability, it seems that an insolvency
proceeding is possible in order to achieve a proportional satisfaction of all creditors.
Primarily, a comparison with § 64 sec. 2 GmbHG shows a movement in this
48
BGHZ 150, 61 (67) = NJW 1803 (2002).
49
Critical concerning this terminology, particularly Zöllner, supra note 46, at 1003.
2008]
Liability of the Managing Director
1137
direction. However, a glance at the legal framework of the liability arising from
delaying the filing of an insolvency petition according to § 823 sec. 2 BGB in
connection with § 64 sec.1 GmbHG demonstrates that it is about external liability in
the interest of the assignors. Nevertheless, they cannot enforce their claims in an
individual process until it has been determined that the commencement of the
insolvency proceeding for lack of assets is dismissed or continued as provided in
the Insolvenzordnung (Bankruptcy Act) in § 92 InsO. In other terms, the question of
an internal or external liability is not about an “either-or” but about the perspective
of when enforcement of the liability by the creditors is still possible outside of an
insolvency proceeding.50 At least in the situation of an insolvency without assets, an
internal liability is impracticable and, therefore, objectionable.51
In sum, liability arising from a withdrawal that destroys the economic basis of a
company constitutes tort law liability in the interest of the creditors that represents,
as liability for the causation of insolvency, a particular group of cases of § 826 BGB.
From this follows, principally, fault-based external liability which, on the basis of §
92 InsO, cannot be enforced until the rejection of a trustee in bankruptcy for lack of
assets according to the principle of priority of the creditors. The further, not yet
fully discussed, preconditions of the liability as well as the legal consequences
cannot be looked into in more detail due to reasons of space at this point.52
D. Reform of Liability Arising from Delayed Filing of an Insolvency Petition
I. External Liability of Managing Directors
Since the landmark Decision BGHZ 29, 100 from 1959,53 it has been widely
recognized that the obligation of an insolvency petition constitutes a protective law
in the sense of § 823 sec. 2 BGB.54 The following compensatory damages target the
50
Insofar different view however Wagner, supra note 41, at 488.
Equally besides the exponents of a direct liability of controlling shareholder, e.g. GRIGOLEIT, supra note
45, at 455; Ulmer, ZIP 2021, 2027 (2001); Schwab, ZIP 341, 347 (2008); different view however BGHZ 173, 246
= ZIP 1552, 1557 (2007).
51
52
For further Details Compare Casper, supra note 12, Anhang § 77 margin number 124.
53
BGHZ 29, 100 = NJW 623 (1959).
54 See for example BGHZ 75, 96 (106) = NJW 1823 (1979); BGHZ 100, 19 (21) =NJW 2433 (1987); BGHZ
126, 181 (190) = NJW 2220 (1994); BGHZ 138, 211 (214) = NJW 2667 (1998); BGHZ 171, 46 (49, 51) =
GmbHR 482 (2007); BGH GmbHR 599, 600 (2007); see also REICHSGERICHT JURISTISCHE WOCHENSCHRIFT
(JW) 3301 (1935); FROM LITERATURE INSTEAD OF MANY see Lutter/Hommelhoff/Kleindiek GmbHGesetz, 16th ed, § 64 margin number 41; Rowedder/Schmidt-Leithoff GmbH-Gesetz, 4th ed., § 64
margin number 38; Scholz/Karsten Schmidt, supra note 11, at 37; Baumbach/Hueck/Schulze-Osterloh,
supra note 11, at 90; and more in detail Joachim Schulze-Osterloh, in FESTSCHRIFT FÜR MARCUS LUTTER
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quota deterioration damage that the assignors suffer due to the delayed filing of the
insolvency petition.55 A direct claim of the creditors is adjudicated against the
managing directors which, according to § 92 InsO in the insolvency of the
company, is added to the bankrupt company’s estate by the trustee in bankruptcy
as total loss of the creditors and is paid to the creditors by applying an increased
proportion. In other terms, a direct claim of the creditors is only possible in cases of
a rejection of the insolvency proceedings due to a lack of assets.
The MoMiG is going to shift the obligation of an insolvency petition (up to now
regulated in § 64 sec. 1 GmbHG) into the insolvency law and it is going to regulate
the obligation of an insolvency petition across all legal forms in § 15a n.F. InsO for
all corporate enterprises. However, this is not going to change anything about the
classification as protective law in the sense of § 823 sec. 2 BGB in the new GmbH
law. The government’s rationale concerning § 15a sec. 1 n.F. InsO, which
corresponds factually to the previous § 64 sec. 1 GmbHG, cannot be inferred from
the fact that a paradigm shift is intended. The question of its status as a protective
law is not at all addressed.56 Since the parliament anchored the insolvency petition
in insolvency law, the previous classification as protective law cannot only be
transferred but should also correspond to the intention of the reform.57 The
controversial, specific questions concerning the external liability according to § 823
sec. 2 BGB in connection with § 64 sec. 1 n.F. GmbHG, like the controversial
involvement of the new creditors, will also be raised mutatis mutandis in the new
law.
II. Subsidiary Deficiency Competence of the Shareholders in the Case of the Limited
Company without Management
According to previous law, the obligation of a petition of § 64 sec. 1 GmbHG
applies only to the managing directors, the liquidators, or the de facto managing
707, 708 (Uwe H. Schneider, Peter Hommelhoff, Karsten Schmidt, Wolfram Timm, Barbara Grunewald,
Tim Drygala eds., 2000); Christoph Poertzgen, ORGANHAFTUNG WEGEN INSOLVENZVERSCHLEPPUNG 254
(2006).
Concerning the controversial question if all new creditors may be included in the scope of application
of § 64 GmbHG and if the trustee in bankruptcy is allowed to also collect their quota deterioration
damage, see e.g. Casper, supra note 12, at 121.
55
56 See RegE MoMiG BTDrucks 16/6140, p. 133 f.; however the Bundesrat (Upper House of the German
Federal Parliament) points in his comment at the fact that insofar nothing may be changed about the
applicable legal situation.
57 See Karsten Schmidt, GmbHR 1072, 1078 (2007); Kallmeyer, DB 2755, 2759 (2007); Christoph Poertzgen,
GmbHR 1258 (2007); the same ZInsO 574, 575 (2007); Béla Knof and Sebastian Mock, GmbHR 852, 854
(2007).
2008]
Liability of the Managing Director
1139
directors.58 Also, after the new law goes into effect, the subsidiary obligation of a
petition of the shareholders (§ 15a sec. 3 n.F. InsO) only steps in in the exceptional
case of the Führungslosigkeit (limited company without management). This case is
presumed when the GmbH does not dispose of a managing director or does not
dispose of a serviceable mailing address.59 Liability of the tortfeasor who is a
shareholder but has not been appointed a managing director on the basis of a faulty
violation of the obligation of a petition according to § 823 sec. 2 BGB is also
basically eliminated in the new law as far as the preconditions of a de facto
managing director are not exceptionally existent. In the case of a GmbH without
management (§ 35 sec. 1 sent. 2 n.F. GmbHG), every shareholder is, according to §
15a sec. 3 n.F. InsO, obligated and, according to § 15 sec. 1 sent. 2 n.F. InsO,
authorized to file an insolvency petition. Consequently, a deficiency competence of
the shareholders is created. An exception will only be provided if the shareholders
have not known about the lack of management or about the existence of a reason
for insolvency.60 The scope of application of § 15a sec. 3 InsO should also be ranged
over foreign companies which have their COMI (Center of Main Interest) in
Germany, since the obligation of an insolvency petition according to § 15a InsO is
classified as belonging to insolvency law and not to company law.61 Also, the
shareholder is subject to liability arising from delayed filing of an insolvency
petition according to § 15a sec. 3 n.F. InsO in connection with § 823 sec. 2 BGB in
the new law provided that he violates his subsidiary deficiency competence.
E. Conclusion
The new regulation of the responsibility of shareholders for payments in advance of
insolvency as well as the subsidiary contingent liability of shareholders for liability
arising from delaying the liability of an insolvency petition are highly appreciated.
They mark a step in the right direction even though there is still a lack of provisions
regarding the still numerous insolvencies without assets. From a dogmatic point of
view, there exists a strong relationship between the new liability of the managing
directors for the causation of an insolvency and the liability of shareholders for the
58 See Casper, supra note 12, at 36 and 145 (concerning the scope of application and the concept of the de
facto managing director).
For more Details see Casper, supra note 12, at 168 et seqq; in depth details concerning the combat of the
company without management by the MoMiG see Felix Steffek, BETRIEBS-BERATER (BB) 2077 (2007).
59
60 In contrast to this, according to the government bill, the knowledge of one circumstance already did
harm, consequently one was not allowed to have knowledge of both circumstances for not being
obligated, see Casper, supra note 5, at 43.
61 See Casper, supra note 12, at 33 et seq (more detailed reasons with further verifications also concerning
the opposing view).
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withdrawal destroying the economic basis of a company. Both cases concern
liability arising from the causation of insolvency which should be classified as tort
law. Residual inconsistencies remain particularly on the side of the subjective facts
of the case. The BGH has assumed, up to now, that liability arising from a
withdrawal which destroys the economic basis of a company based on § 826 BGB
required intent of the shareholders62 whereas the new liability arising from the
causation of insolvency according to § 64 sent. 3 n.F. GmbHG only requires a single
act of negligence.63 This is not very reasonable. In my opinion, the preexisting
contradictory valuation will have to be solved by taking hold of the valuation of §
64 sent. 3 n.F. GmbHG without hesitation so that liability arising from a withdrawal
which destroys the economic basis of a company of the shareholders’ pure
negligence is also sufficient. The danger of uncontrolled shareholder liability needs
to be compensated by a restrictive interpretation of the objective facts of the case.64
Further debate in this context will be exciting and will certainly offer plenty of
explosive issues to discuss.
62
BGHZ 173, 246 = ZIP 1552, 1556 (2007).
63
See Günther Hönn, WM 769, 778 (2008) (equal result).
64
See Casper, supra note 12, Anhang § 77 margin number 134 et seqq (further details).
GMBH – SPECIAL ISSUE
The Acquisition of GmbH Shares in Good Faith
By Christian Altgen!
A. Introduction
It can take a lifetime from the recognition of a legal problem until it is finally
solved. Seventy-nine years after Walter Grau1 focused attention on gaps in the
security of transactions of Gesellschaft mit beschränkter Haftung (GmbH – private
limited company) shares, the GmbH reform intends to solve the problem.2 Until
this reform, a prospective buyer of a GmbH share ran the risk that the person
transferring the share was, in fact, not the true shareholder and, thus, had no power
to assign the share. While the former law did not provide for a bona fide acquisition,
the new § 16 (3) of the Gesetz betreffend die Gesellschaften mit beschränkter Haftung
(GmbHG – Private Limited Companies Act) protects the true shareholder while
also taking into account the buyer’s reliance upon the transferor, considering him
or her to be the shareholder.3 This little revolution results in a new kind of good
!
Research Assistant at the University of Münster, Institute for Labor, Social and Business Law (Division
I, Corporate, Banking and Capital Market Law; Prof. Dr. Matthias Casper); e-mail: c.altgen@unimuenster.de.
Walter Grau, Lücken im Schutz des gutgläubigen Rechtsverkehrs bei unwirksamer Übertragung von G.m.b.H.Anteilen, in FESTSCHRIFT HERMANN OBERNECK 173 (Deutscher Notarverein ed., 1929).
1
2 Regierungsentwurf eines Gesetzes zur Modernisierung des GmbH-Rechts und zur Bekämpfung von
Missbräuchen (MoMiG – Government’s bill for an Act to Modernize the Law Governing Private Limited
Companies), BT-Drucks. 16/6140.
3 § 16 (3) GmbHG as amended by the MoMiG (supra, note 2): “Der Erwerber kann einen Geschäftsanteil oder
ein Recht daran durch Rechtsgeschäft wirksam vom Nichtberechtigten erwerben, wenn der Veräußerer als Inhaber
des Geschäftsanteils in der im Handelsregister aufgenommenen Gesellschafterliste eingetragen ist. Dies gilt nicht,
wenn die Liste zum Zeitpunkt des Erwerbs hinsichtlich des Geschäftsanteils weniger als drei Jahre unrichtig und
die Unrichtigkeit dem Berechtigten nicht zuzurechnen ist. Ein gutgläubiger Erwerb ist ferner nicht möglich, wenn
dem Erwerber die mangelnde Berechtigung bekannt oder infolge grober Fahrlässigkeit unbekannt ist oder der Liste
ein Widerspruch zugeordnet ist. Die Zuordnung eines Widerspruchs erfolgt aufgrund einer einstweiligen
Verfügung oder aufgrund einer Bewilligung desjenigen, gegen dessen Berechtigung sich der Widerspruch richtet.
Eine Gefährdung des Rechts des Widersprechenden muss nicht glaubhaft gemacht werden.“ (The transferee can
acquire a GmbH share or a right in a share of an apparent shareholder by way of a legal transaction,
provided that the transferor is entered in the shareholder list which is deposited at the commercial
register. That does not apply if, at the time of the transfer and regarding the relevant share, the
shareholder list is incorrect for less than three years and the incorrectness is not attributable to the
rightful shareholder. Furthermore, an acquisition in good faith is not possible if the transferee knows or,
due to gross negligence on his part, does not know about the transferor’s lack of power or if an objection
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faith acquisition that mixes different elements of “traditional” bona fide rules and
adds new details.
This article will first provide a brief outline of both the basic concept of acquisition
in good faith in German private law and of the acquisition of GmbH shares.
Subsequently, the main focus will be on a closer examination of § 16 (3) GmbHG.
I. Overview: Acquisition in Good Faith in German Private Law
The Roman law’s basic principle that no one can transfer a better title than he
himself has (nemo plus iuris transferre potest quam ipse habet) is not as rigidly followed
in German private law today. Several rules enable bona fide purchasers to acquire
ownership from an apparent owner. These rules balance the conflicting interests of
the true owner, who loses his right by operation of law although he or she neither
intends to transfer title nor knows of the transfer, and that of the bona fide
transferee, who does not know that the transferor has no authority to transfer. The
result is a ”compromise between the sanctity of ownership and the security of
transactions,”4 which, inter alia, depends on how likely it is that the transferee’s
assumption is correct, the owner’s chance to prevent a third person from an
acquisition in good faith, and the transferee’s possibility to find out that the
transferor is not the true owner. A condition that all these bona fide rules have in
common is the necessity of an objective basis on which the acquiring party may
rely. Objectivity is found through the use of registration in state registers and in the
possession of movable property, or securities, which indicates the transferee’s
assumption of the transferor’s title is correct. In contrast to the common law
doctrine of estoppel, no additional circumstances or indicia of ownership are
necessary to confirm this assumption.5 However, there has to be a legal regulation
stating that the circumstances which indicate the transferor’s ownership should
give rise to a good faith acquisition. That is why, as a basic principle, assignees
cannot acquire a claim or other non-chartered rights from an apparent holder.6
is attached to the shareholder list. The attachment of an objection is subject to a temporary restraining
order or the consent of the person against whom the objection is made. The objecting party does not
have to substantiate an impending infringement of his right.).
4
William Swadling, Property, in ENGLISH PRIVATE LAW, margin number 4.446 (Peter Birks ed., 2000).
See Konrad Zweigert, Rechtsvergleichend- kritisches zum gutgläubigen Mobiliarerwerb, 23 RABELS
ZEITSCHRIFT FÜR AUSLÄNDISCHES UND INTERNATIONALES PRIVATRECHT 1, 7 (1958).
5
6 But see § 2366 Bürgerliches Gesetzbuch (BGB – Civil Code) (Provided that the bequeather has been the
holder of these rights, an exception is granted if the assignor holds an incorrect Erbschein (certificate of
inheritance), stating that the assignor is the rightful heir).
2008]
Good Faith Acquisition of GmbH Shares
1143
II. The Acquisition of GmbH Shares
By acquiring a GmbH share the transferee becomes a member of the company. Both
the contract that obligates the seller to transfer the share and the transfer itself have
to be certified by a notary.7 The function of this requirement is primarily to restrict
trade in GmbH shares, since the GmbH is designed to be an alternative to
Aktiengesellschaften (AG – stock corporation), whose shares are much more
fungible.8 Notwithstanding a considerable debate on the necessity of these
notarization requirements, the legislator refused to facilitate the transfer of shares
in this respect. Furthermore, it is important to note that the acquisition is still not
subject to an entry of the transferee in the GmbH’s Gesellschafterliste (shareholder
list), registration in the Handelsregister (commercial register), or registration in a
(non-existent) special register for GmbHs.9 It is, rather, left to the shareholders to
determine when the transfer will become effective, which leads to an increased
flexibility for the parties.10 The exercise of shareholder rights, however, is subject to
the transferee’s entry in the shareholder list. Moreover, the shareholders are not
able to facilitate the transfer by chartering the shares. As a consequence, an
Anteilschein (share certificate) is only a document of proof of the share ownership,
not a negotiable instrument. Taken together in principle, the transfer of GmbH
shares is solely the result of the contract between transferor and transferee in due
form. Nevertheless, the GmbH’s articles of association can limit the transferability
of shares by fixing additional conditions to be fulfilled, especially the need for the
GmbH’s prior approval (Vinkulierung).11
B. Bona Fide Acquisition of GmbH Shares
The GmbH reform brings about a number of changes to the German GmbH law,
which, inter alia, should make the GmbH more attractive as there is an increasing
competition from other corporate forms in the European Union.12 Legal certainty
7
§ 15 (3), (4) GmbHG.
See Jochem Reichert & Marc-Philippe Weller, § 15, in DER GMBH-GESCHÄFTSANTEIL: ÜBERTRAGUNG
UND VINKULIERUNG, margin numbers 16 – 19 (Reichert/Weller ed., 2006).
8
Jürgen Breitenstein & Bernhard Meyding, GmbH-Reform: Die 'neue' GmbH als wettbewerbsfähige
Alternative oder nur 'GmbH light'?, BETRIEBSBERATER (BB) 1457, 1460 (2006) (recommending that the
transfer should be subject to the transferee’s registration in the shareholder list).
9
10 Barbara Grunewald, Der gutgläubige Erwerb von GmbH-Anteilen: Eine neue Option, DER KONZERN 13, 15
(2007).
11
§ 15 (5) GmbHG.
12
BT-Drucks. 16/6140, p. 58.
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and the total transaction costs are important factors for corporate founders.
Therefore, the new § 16 (3) GmbHG, which introduces the bona fide acquisition of
GmbH shares, might help to achieve the legislator’s aim.
I. Necessity for a Bona Fide Acquisition
There are many circumstances that may lead to a divergence between the true
shareholder and the ostensible owner of the share. For example, the transfer may be
void because of a defect in formal requirements, due to the GmbH refusing its
consent or because of a failure to comply with conditions upon which the parties
agreed. Moreover, the transferee cannot even be sure that the share exists, for
example, as a consequence of an increase of the share capital’s failure.13
Nevertheless, regarding the transfer of GmbH shares, there was no exception from
the doctrine that a non-owner cannot give a good title, nemo dat quod non habet. As
already shown, the acquisition is valid without completing a register or delivering
a document of title. Therefore, the transferee’s confidence in having effectively
acquired an existing share from a true shareholder was not supported by any
objective evidence, which the law accepts as a basis for a bona fide acquisition. If the
true shareholder refused to subsequently approve the transfer, the parties had no
power to remedy the transfer.14 The bona fide purchaser neither benefited from a
curing of the defect nor benefited from the principle of fehlerhafte Anteilsübertragung
(that defective, but nevertheless carried out transfers of company shares, can be
valid).
In practice, two alternatives protected the transferee. First, a due diligence
investigation concerning the identity of the true shareholder was carried out. Such
title research was time-consuming. Only a complete chain of declarations of
assignment in due form, dating back to the articles of incorporation, could
minimize the risk.15 The older the company, the more unlikely it was that these
documents still existed. However, this title research could not eliminate the risk of
unknown transfers to third parties or other defects of an assignment. Thus, title
searches were associated with a relatively high degree of uncertainty.
However, once being registered in the commercial register, only in exceptional cases the shareholder
resolution can be challenged in the courts, see Hans-Joachim Priester, § 57, in KOMMENTAR ZUM GMBHGESETZ (Franz Scholz ed., 9th ed. 2002), margin number 44; Wolfgang Zöllner, § 57, in GMBH-GESETZ
(Adolf Baumbach/Alfred Hueck eds., 18th ed. 2006), margin number 27.
13
14
§ 185 (2) BGB (the true shareholder may approve the transfer).
Klaus J. Müller, Der Entwurf des „MoMiG“ und die Auswirkungen auf den Unternehmens- und
Beteiligungskauf, GMBH-RUNDSCHAU (GMBHR) 953, 954 (2006).
15
2008]
Good Faith Acquisition of GmbH Shares
1145
Second, the purchaser could ask for the seller’s guarantee that he or she, in fact, was
the shareholder and that the share was free from encumbrances. If this was not the
case, then the purchaser could seek a remedy. But, especially for purchasers
pursuing strategic goals, damages did not put them in the position they would
have been in if the seller had been able to transfer the share.16
II. Scope of Application of § 16 (3) GmbHG
§ 16 (3) GmbHG provides for the good faith acquisition of both the GmbH share
itself and the bona fide acquisition of restricted rights in rem, for example a lien on
the share from an apparent shareholder.17
According to the Government’s bill, the share must fully exist. Even if the
shareholder list contains a non-existing share (i.e. a share that not only the
registered person does not hold but neither does anybody else), the bona fide
transferee cannot acquire it. Although this seems to be a relatively obvious
restriction, doubt remains as to how to distinguish between existing and nonexisting shares. For instance, it is not clear if a share that exists in another
denomination other than in the one in which it is registered is an existing share
according to § 16 (3) GmbHG. This situation may occur if the person who deposited
a new shareholder list at the commercial register inadvertently expected a share to
be split into several shares or expected several shares to be consolidated. In this
case, the registered shares exist only when taken together or only when divided
into several shares. Although the Government’s bill does not contain any hint
regarding the application of § 16 (3) GmbHG, it has been suggested to accept a bona
fide acquisition if the nominal value of the existing shares corresponds with the
shares in the shareholders list.18 This point of view strengthens the security of
transactions and does not conflict with the wording in § 16 (3) GmbHG.19
Moreover, the provision that the total nominal value of all shares must correspond
Patrick Flesner, Die GmbH-Reform (MoMiG) aus Sicht der Akquisitions- und Restrukturierungspraxis, NEUE
ZEITSCHRIFT FÜR GESELLSCHAFTSRECHT (NZG) 641, 643 (2006).
16
17
BT-Drucks 16/6140, p. 93.
18 Lars Böttcher & Sebastian Blasche, Gutgläubiger Erwerb von Geschäftsanteilen entsprechend der in der
Gesellschafterliste eingetragenen Stückelung nach dem MoMiG, NZG 565, 567 (2007); Cornelius Götze &
Stefan Bressler, Praxisfragen der Gesellschafterliste und des gutgläubigen Erwerbs von Geschäftsanteilen nach
dem MoMiG, NZG 894, 897 (2007).
19
See the wording of § 16 (3) in note 3; Böttcher & Blasche, supra note 18.
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[Vol. 09 No. 09
with the nominal capital is not infringed.20 Such an acquisition eventually results in
a splitting or consolidation of shares by operation of law.
The new law does not provide for a bona fide acquisition of shares free from
encumbrances, regardless of whether the transferor or third party is the true
shareholder. Furthermore, the transferee is at risk of being obliged to pay capital
contributions that his predecessors failed to make.21 In this regard, a bona fide
acquisition is also excluded.22 This is due to the fact that encumbrances and capital
contributions are not part of the shareholder list, which is, therefore, no basis for an
acquisition in good faith in this respect. In addition, other provisions on the good
faith acquisition usually contain a specific reference to an acquisition free from
encumbrances, for example § 936 of the Bürgerliches Gesetzbuch (BGB - German Civil
Code), whereas § 16 (3) GmbHG does not mention this alternative.23 On the one
hand, this may seem surprising. If the shares are not free from security interests, the
transferee is at risk of losing them. If, for instance, the transferor’s creditor enforces
his lien, the share might be sold and the transferee can only seek remedy from the
transferor. As a result, there can be no significant difference to a transferee who
tried to acquire a share from a non-shareholder before the GmbH reform.
On the other hand, the registration of encumbrances in the shareholder list would
result in an extensive disclosure. In light of the publicity of the shareholder list,
which is published electronically, anybody might access the list and discover that
the share serves as security.24 A secret pledging would be impossible. In order to
balance these conflicting interests it has been suggested in legal literature that
encumbrances have to be registered in the list, while at the same time keeping the
right of access limited to persons showing legitimate interest.25 A similar provision
can be found for the Grundbuch (land records).26
20
§ 5 (3) GmbHG.
21
§ 16 (2) GmbHG.
Ulrich Haas/Jürgen Oechsler, Missbrauch, Cash Pool und gutgläubiger Erwerb nach dem MoMiG, NZG
806, 812 (2006).
22
Peter O. Mülbert, Gesetzesreform ermöglicht Firmenkauf vom Nichtbesitzer, 253 FRANKFURTER ALLGEMEINE
ZEITUNG (FAZ) 31 (2007).
23
24 Since 1 January 2007 (Gesetz über elektronische Handelsregister und Genossenschaftsregister sowie das
Unternehmensregister – EHUG – Act on Electronic Commercial Registers and Company Registers) the
German commercial register is available at: http://www.handelsregister.de.
Désirée Rodewig, Gutgläubiger Erwerb von GmbH-Anteilen. Diskussionsbericht, ZEITSCHRIFT FÜR
WIRTSCHAFTSRECHT (ZIP) 690, 691 (2006); Ulrich Noack, Reform des deutschen Kapitalgesellschaftsrechts: Das
Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen, DER BETRIEB (DB) 1475,
1477 (2006) (points out the need to limit the right to access with regard to § 67 (6) Aktiengesetz (AktG –
25
2008]
Good Faith Acquisition of GmbH Shares
1147
A different approach would be to leave it up to the vendor whether encumbrances
should be registered or not.27 As a result, the vendor might provide a higher
protection for the purchaser, and through this increase the purchaser’s buying
interest. Hence, the level of protection would depend on the transferor. This seems
quite inconvenient for a provision safeguarding the security of transactions. In any
case, it destroys the legal certainty that derives from a simplification and
standardization of the good faith acquisition.
III. Acquisition in Reliance on the Shareholder List
1. Mode of Acquisition
The transfer has to be valid, except for the power of the transferor. If the GmbH’s
articles of association limit the transferability of shares (Vinkulierung), the
additional conditions have to be fulfilled. Whether such a condition is met or not is
not published in the shareholder list. Therefore a transferee cannot acquire a share
without meeting these conditions, even in good faith.28
Transmissions due to an operation of law or an act of state, however, are not in
accordance with § 16 (3) GmbHG. As a consequence, a bona fide heir cannot acquire
shares in good faith. Moreover, according to settled case law (concerning other
rules on good faith acquisition), the transferor and a bona fide transferee may not be
identical from a legal or an economic point of view (Verkehrsgeschäft).29 This
restriction can be transferred to the good faith acquisition of GmbH shares because
German Stock Corporation Act)); Hildegard Ziemons, Mehr Transaktionssicherheit durch das MoMiG?, 7
BB SPECIAL 9, 13 (2006); Stephan Harbarth, Gutgläubiger Erwerb von GmbH-Geschäftsanteilen nach dem
MoMiG-RegE, ZIP 57, 64 (2008).
26
§ 12(1) Grundbuchordnung (GBO – Land Register Code).
27 Stephan Rau, Der Erwerb einer GmbH nach In-Kraft-Treten des MoMiG – Höhere Transparenz des
Gesellschafterkreises, gutgläubiger Erwerb und vereinfachte Stückelung, DEUTSCHES STEUERRECHT (DStR) 1892,
1899 (2006).
28 Martin Schockenhoff & Andreas Höder, Gutgläubiger Erwerb von GmbH-Anteilen nach dem MoMiG:
Nachbesserungsbedarf aus Sicht der M&A-Praxis, ZIP 1841, 1844 (2006) (pointing out that a publication of
detailed information is undesirable, because clauses e.g. on preemptive rights, tag-along and drag-along
rights can be found frequently); Christian Gehling, Gutgläubiger Erwerb von GmbH-Anteilen nach
wertpapierrechtlichen Grundsätzen, ZIP 689 (2006) (prefering a bona fide acquisition of shares
notwithstanding a Vinkulierung).
See Andreas Wacke, § 892, in MÜCHENER KOMMENTAR ZUM BÜRGERLICHEN GESETZBUCH (Kurt
Rebmann, Franz Jürgen Säcker, Roland Rixecker, eds., 4th. ed. 2004), margin number 38.
29
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GERMAN LAW JOURNAL
[Vol. 09 No. 09
the transferor does not need protection in cases of such identity.30 Therefore, there
is no acquisition if a company is the transferring shareholder and its sole
shareholder is the transferee.
2. The Shareholder List – an Imperfect Link for a Good Faith Acquisition
The shareholder list constitutes the inevitable objective basis for the good faith
acquisition. It is standardized, contains the consecutively numbered shares, and it is
deposited at the commercial register. Since it is not part of the commercial register
itself the publicity of the commercial register, covering cases of divergence between
registration and legal situation, does not apply.31
a) Protection of the Shareholder List’s Accuracy
If a notary is involved in changes concerning the ownership or the nominal value of
a GmbH share, he or she is responsible for sending an updated version of the
shareholders list to the registration court after the changes take place.32 Moreover,
the notary has to certify that this updated version corresponds with these changes
and the old list. This applies to the certification of a transfer, a universal succession
in consequence of a transformation, and an increase of the share capital leading to
an increase in the amount of shares or in the nominal value of shares. In some cases,
the notary cannot know whether or not a transfer becomes effective, especially if it
is subject to a condition precedent. Hence, the parties should inform the notary
about the fulfillment of the condition by sending him or her a closing
memorandum.33 If a notary is not involved, for example in an acquisition by way of
succession, the managing director of the GmbH is similarly obliged to update the
list receiving notice and evidence by the old or new shareholder.34
It is important to note that the registration court does not examine the shareholder
list. As a result, a major distinction is drawn between the shareholder list and an
30
Oliver Vossius, Gutgläubiger Erwerb von GmbH-Anteilen nach MoMiG, DB 2299, 2300 (2007).
31
§ 15 Handelsgesetzbuch (HGB – Commercial Code).
32
§ 40 (2) GmbHG.
Liane Bednarz, Die Gesellschafterliste als Rechtsscheinträger für einen gutgläubigen Erwerb von GmbHGeschäftsanteilen, BB 1854, 1860 (2008); Schockenhoff & Höder, supra note 28.
33
34 § 40 (1) GmbHG. If a managing director deceases who at the same time is the sole shareholder, it is
not clear who is obliged to update the list, see Mülbert, supra note 23. Furthermore there is no control
concerning the authenticity of the managing director updating the list, see Statement of the Bundesrat
(Federal Council) on the Government’s Bill, BT-Drucks. 16/6140, p. 162; Heribert Heckschen, Die GmbHReform – Wege und Irrwege, DStR 1442, 1450 (2007); Bednarz, supra note 33, at 1858.
2008]
Good Faith Acquisition of GmbH Shares
1149
entry in the land record or a certificate of inheritance.35 The Grundbuchamt (title
registration office), which is part of the Amtsgericht (municipal court), only records
a title to real property if several formal provisions are not infringed.36 The transfer
of real property is actually subject to registration in the land register. Furthermore,
the certificate of inheritance is an official document issued by the probate court,
which investigates the relevant facts.37 As a consequence it is most likely that land
records and certificates of inheritance correspond to the real legal situation. They
are actually subject to a presumption of accuracy.38 In clear contrast to that, the
transfer of shares is not subject to entry in the list and no official control entity is
involved in the creation of the shareholder list. Hence, in many cases the notary is
solely responsible for the accuracy of the shareholder list and therefore occupies an
important position.39
This raises the question of whether a transfer certified by a foreign notary is valid
under German law. Historically, such a notarized transfer was considered to be
valid if the foreign state had a similar method of notarization and a similar position
for notaries.40 As Germany cannot oblige a foreign notary to update the shareholder
list, however, the accuracy of the list in these cases depends on the managing
director.41 Although this might reduce the reliability of the list, the following
circumstances lead to a reduction of the resulting objections. Firstly, as already
shown, the law considers the managing director to be able to safeguard the
35
Harbarth, supra note 25, at 58.
36
See §§ 13, 19, 20, 39 GBO.
37
See §§ 2358, 2356 BGB.
38
See §§ 891, 2365 BGB.
39 Vossius, supra note 30, at 2303; Rau, supra note 27, at 1892; Michael Bohrer, Fehlerquellen und
gutgläubiger Erwerb im Geschäftsanteilsverkehr – Das Vertrauensschutzkonzept im Regierungsentwurf des
MoMiG, DStR, 995, 998 (2007); Flesner, supra note 16, at 643, 648; Heckschen, supra note 34 (Flesner and
Heckschen doubt the accuracy of a shareholder list which is updated by the managing directors. They
therefore suggest to strengthen the participation of the notary).
40 BGHZ 80, 76 (78) (concerning the amendment of the articles of incorporation); Bundesgerichtshof
(BGH – Federal Court of Justice), GmbHR 25, 28 (1990); Martin Winter& Marc Löbbe, § 15, in GMBHG
GROßKOMMENTAR (Peter Ulmer, Mathias Habersack, Martin Winter eds., 2005), Margin number 135. A
transfer notarized in the USA is invalid under German law, see Stephan Ulrich & Jens Böhle, Die
Auslandsbeurkundung im M&A-Geschäft, GmbHR 566, 569 (2007).
41 Breitenstein & Meyding, supra note 9, at 1460; Götze & Bressler, supra note 18, at 896; Wolfgang
Zöllner, Übertragung von GmbH-Anteilen – Zwei rechtspolitische Grundsatzfragen, in DIE GMBH-REFORM IN
DER DISKUSSION 175, 180 (Gesellschaftsrechtliche Vereinigung ed., 2006) (favoring a contractual
obligation of the notary to update the shareholder list).
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accuracy of the shareholder list in several other instances.42 Secondly, according to §
40 (3) GmbHG, the failure to update the shareholder list gives rise to the former
shareholder’s claim for damages. In this respect, it is likely that the managing
director has a high interest to fulfill his duty. Finally, the GmbH would not be more
attractive if a transfer could only be certified by a German notary.43 Nevertheless,
this problem exemplarily shows that the shareholder list is not a very reliable basis
for a good faith acquisition.
b) Attribution to the Shareholder and Three-Year Period
The protection of bona fide acquirers is severely limited. The mere entry in the
shareholder list for a short period does not suffice unless the incorrectness of this
entry can be attributed to the real shareholder. The concept of attribution is a
fundamental issue in German law, though the various provisions that protect third
party reliance on an ostensible existence of a legal situation differ in detail.44
Regarding § 16 (3) GmbHG, it is not clear whether a chain of causation between the
shareholder’s conduct and the incorrect list entry is sufficient or not.45 The criterion
of attribution is not defined by the law and therefore it is left open to interpretation
by the courts.46 The Government’s bill only gives an example of a rightful heir who
does not care about the shareholder list, although a third person is registered as the
shareholder.47 Regardless, the law imposes the burden of proof on the true
shareholder. It is up to him or her to prove that the incorrectness of the list cannot
be attributed to his own person. 48
42
Schockenhoff & Höder, supra note 28, at 1846; Ingo Saenger & Alexander Scheuch,
Auslandsbeurkundungen bei der GmbH – Konsequenzen aus MoMiG und Reform des Schweizer
Obligationenrechts, BB 65, 67 (2008); Daniel Schlößer, Die Auswirkungen der Schweizer GmbH-Reform 2007
auf die Übertragung von Geschäftsanteilen einer deutschen GmbH in der Schweiz, GmbHR 301, 304 (2007);
Marc-Philippe Weller, Die Übertragung von GmbH-Geschäftsanteilen im Ausland: Auswirkungen von MoMiG
und Schweizer GmbH-Reform, DER KONZERN 253, 259 (2008).
43
Schockenhoff & Höder, supra note 28, at 1846; Saenger & Scheuch, supra note 42, at 67.
44
Bohrer, supra note 39, at 999.
45 According to Vossius, supra note 30, at 2302, causation does not suffice; unclear Götze & Bressler, supra
note 18, at 897.
46
Vossius, supra note 30, at 2301.
47
BT-Drucks. 16/6140, p. 93.
48 Ulrich Noack, Der Regierungsentwurf des MoMiG – Die Reform des GmbH-Rechts geht in die Endrunde, DB
1395, 1399 (2007); Vossius, supra note 30, at 2301.
2008]
Good Faith Acquisition of GmbH Shares
1151
If the true shareholder manages to prove this lack of attribution, shares can only be
acquired in good faith if, prior to the transfer, the incorrect entry in the list exists for
more than three years. Although § 16 (3) GmbHG does not provide for any kind of
Ersitzung (acquisitive prescription) after three years, this period nevertheless seems
like a Ersitzungsfrist (prescriptive period), and therefore clearly distinguishes § 16
(3) GmbHG from “traditional“ rules on good faith acquisition. As a consequence,
shareholders will have to check the list at least every three years.49 Otherwise they
won’t be able to prevent the loss of their share by making sure that the managing
director corrects the list.
The combination of an objective basis for a bona fide acquisition and a period of time
is ambiguous. On the one hand, the relatively poor quality of the basis for the good
faith acquisition is, in a way, compensated by this period.50 On the other hand, such
a three-year period might impede a rapid resale of the share. Although, for that
reason a one-year period might be preferable,51 the legislator rather intends to grant
the security of transactions over a longer period.52
It is neither sufficient nor required that the seller be registered in the shareholders
list for more than three years. Firstly, this type of entry also has to be incorrect for
the three year period. Not even the registration of the seller for 100 years would
result in a good faith acquisition if the registration was correct for 99 years.
Secondly, the entry has to be incorrect regarding the specific share. If different
persons in succession are registered instead of the true shareholder for the relevant
period, it is irrelevant that the transferor himself is registered for less than three
years.53 To summarize, a chain of shareholder lists that, for a period of more than
three years, does not contain the true shareholder constitutes the basis for the bona
fide acquisition.
Finally, the acquirer of a GmbH share is in an odd situation.54 Due to the
incorrectness of the list marking the beginning of the three-year period, he might
49
Bednarz, supra note 33, at 1856, fears that old and diseased shareholders are not able to do this.
50
See BT-Drucks. 16/6140, p. 92.
51
See, e.g., Haas & Oechsler, supra note 22, at 812; Heckschen, supra note 33.
52
BT-Drucks. 16/6140, p. 92.
53 BT-Drucks. 16/6140, p. 93; Vossius, supra note 30, at 2303, mentions the idea underlying §§ 943, 900 (1)
BGB, concerning the calculation of the period of prescription.
54
Hanjo Hamann, GmbH-Anteilserwerb vom Nichtberechtigten – Die Mischung verschiedener
Gutglaubenstatbestände im MoMiG-Regierungsentwurf, NZG 492, 493 (2007); Müller, supra note 15, at 959;
Götze & Bressler, supra note 18, at 899.
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GERMAN LAW JOURNAL
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wish to find out if the list is incorrect at all. The best situation for the acquirer
emerges if he discovers that no changes occurred during the last three years. In this
case the transferor is either the true shareholder or the transfer is valid because of
the three-year period. But if the acquirer detects incorrectness, he or she acts in bad
faith at the same time and cannot acquire the share. Therefore, the acquirer might
tend to omit a title search. As a result, he or she still acts in good faith and can
acquire regardless of the three-year period, provided that the incorrectness can be
attributed to the true shareholder. Unfortunately in this case, the acquirer cannot be
sure that the bona fide acquisition is valid because the attribution is a vague
criterion. Moreover, the attribution again is dependent on the incorrectness of the
list. That is why the acquirer also cannot check this criterion without acting in bad
faith from then on. In view of this dilemma, it has been suggested that the relevant
time period be assessed independently from the incorrectness of the list.55
However, this solution conflicts with the legislator’s aim to give the true
shareholder a three-year period to correct the shareholder list.56 If the (former)
shareholder intends to assign the share a second time immediately after a transfer,
while he or she is still registered in the list, the new shareholder will never have a
real chance to correct the list.57
3. Good Faith
A good faith acquisition is ruled out if the transferee knows or, due to gross
negligence, does not know that the registered owner is not the true shareholder.
The burden of proof is on the true shareholder. According to settled case law
(concerning the bona fide acquisition of movables) a lack of knowledge is caused by
gross negligence if the acquirer disregards circumstances that anybody else would
have realized.58
As already mentioned, prior to the GmbH reform a due diligence of checking the
complete chain of transfers has been a convenient step of an acquirer. Hence, one
might argue that the omission of due diligence efforts constitutes gross negligence
if a title search clearly would have shown the legal situation.59 This might, however,
conflict with the GmbH reform’s aim to facilitate the transfer of shares, thus
55
Müller, supra note 15, at 957.
56
BT-Drucks. 16/6140, p. 93.
57
Grunewald, supra note 10, at 14.
58
BGHZ 10, 14 (16).
59
Harbarth, supra note 25, at 60, 63; Müller, supra note 15, at 956.
2008]
Good Faith Acquisition of GmbH Shares
1153
limiting the need to do a title search to a maximum of three years.60 Furthermore, it
is widely accepted that in the absence of suspicious facts even the bona fide buyer of
movables is not obliged to make rigorous inquiries, although the mere possession is
not a very reliable basis for a good faith acquisition. Nevertheless, the shareholder
list is not very reliable either and therefore it remains to be seen what kind of due
diligence efforts will be deemed appropriate by the courts.
Finally, the acquisition in good faith does not mean a transfer just because of the
wrong registration in the shareholder list.61 The acquirer neither has to know the
apparent shareholder’s registration or know about the existence of a shareholder
list at all.
IV. The True Shareholder’s Possibility to Inhibit a Bona Fide Acquisition
As a consequence of a good faith acquisition, the true shareholder loses his or her
share and has to claim compensation from the transferor. To avoid that situation he
or she can raise an objection to an incorrect entry in the shareholder list. The
attachment of an objection to the list is subject to the apparent shareholder’s
consent or a temporary restraining order. As the objection is attached to the
shareholder list, it is also published electronically and is open to inspection by
anyone. It therefore destroys the appearance resulting from the transferor’s entry in
the list and thereby inhibits a good faith acquisition. However, the true shareholder
has the continuing ability to transfer the share notwithstanding a false objection of a
third person.62
C. Conclusion
§ 16 (3) GmbHG codifies a new model type of bona fide acquisition, mixing elements
of “traditional“ rules and adding new elements. The shareholder list is not a very
reliable basis for a good faith acquisition. Therefore, the combination of a three-year
period and the true shareholder’s responsibility for the incorrect entry in the list is
of particular interest. It remains to be seen whether or not the new law will result in
a tremendously facilitated transfer of GmbH shares. In particular, the beginning of
the three-year period (incorrectness of the shareholder list) causes difficulties.
60
Götze & Bressler, supra note 18, at 898.
61
Bohrer, supra note 39, at 999; Schockenhoff & Höder, supra note 28, at 1842.
62
BT-Drucks. 16/6140, p. 94.
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Although compared to the former law there is an increase in the protection for
good faith acquirers, the reform nevertheless does not reach the aim of making due
diligence procedures, to a large extent, superfluous. The good faith transferee still
runs the risk of buying a non-existing share. Moreover, the law unfortunately does
not provide for an acquisition free from existing encumbrances.63 In this respect, the
concern that only small or medium-sized businesses benefit from the reform,
because prior to major transactions a due diligence procedure still is necessary, is
comprehensible.64 However, an extension of the good faith acquisition would affect
not only the true shareholder’s position, but also other interests, especially those of
creditors and even those of other shareholders. Therefore such an extension would
necessitate further precautions safeguarding the correctness of the shareholder
list.65
63
Rau, supra note 27, at 1899.
64
Bohrer, supra note 39, at 1003.
65
Vossius, supra note 30, at 2304, suggests an increased involvement of the notary.
GMBH – SPECIAL ISSUE
Cash Pooling Under the Revised German Private Limited
Companies Act (GmbHG)
By Jochen Vetter and Christian Schwandtner*
A. Introduction
Following the 24 November 2003 decision of the Bundesgerichtshof (BGH - Federal
Court of Justice)1 the legal framework for upstream loans granted by companies in
the legal form of a Gesellschaft mit beschränkter Haftung (GmbH - Private Limited
Company), i.e., loans by the GmbH to its direct and indirect shareholders or to an
affiliate of such shareholder, has remained uncertain. The ruling of the BGH led to
a broad spectrum of interpretations by legal scholars and practitioners – some even
predicted the end of cash pooling arrangements for German corporations – which
made it difficult for managers of a GmbH to continue existing cash pooling
arrangements without changes to their original scope and conditions.
The uncertainty caused the German legislature to clarify the legal framework of
upstream loans. Because the rules on downstream loans, i.e., loans granted to the
GmbH by an indirect or direct shareholder of the GmbH or by an affiliate of such
shareholder which is not a direct or indirect subsidiary of the GmbH, were not only
clarified, but significantly modified, the entire legal framework for cash pooling
arrangements has changed. After initial proposals for a revision were brought
forward in 2006, the German government introduced a first draft of the Gesetz zur
Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG - Act
on the modernization of the GmbH law and on the prevention of abuses) in May
2007, a bill which provides for the most fundamental reform of the law on the
GmbH since its introduction in Germany in 1892. The German Bundestag (lower
house of the German Parliament) accepted the MoMiG on 26 June 2008. It is to be
expected that the new law will come into effect in October/November 2008.
* Jochen Vetter, Dr. iur., Dipl.-Ökonom, is a partner and Christian Schwandtner, Dr. iur., Dipl.-Betriebswirt (BA), is an associate
with the law firm Hengeler Mueller in Düsseldorf/Germany. Both mainly advise on Corporate (incl. corporate finance) and
Mergers & Acquisitions. E-Mail: jochen.vetter@hengeler.com and christian.schwandtner@hengeler.com
1 BGHZ 157, 52.
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[Vol. 09 No. 09
This article presents, after a brief description of the technical implementation of
cash pooling systems and the legal relevance thereof, an overview of the changes in
the Gesetz betreffend die Gesellschaft mit beschränkter Haftung) (GmbHG - Private
Limited Companies Act) relevant for cash pooling systems with a focus on the rules
on downstream loans.
B. Description of Cash Pooling and its Legal Relevance
I. Technical Implementation of a Cash Pooling System
“Cash Pooling” is a popular instrument for optimizing the liquidity reserves within
a group of companies and thereby reducing external borrowings (primarily from
banks) as well as the associated interest costs. The reduction of interest payable can
be achieved by concentrating and allocating the liquidity that is available within a
group of companies. This makes it possible to avoid situations where certain
companies within the group have a cash surplus deposited on their bank accounts
(so-called “cash positive” entities) at significantly lower rates than the interest rates
to be paid by other members of the group that may otherwise need to borrow from
a bank (so-called “cash negative” entities). Instead, by implementing a cash pooling
system, cash held by cash positive companies is made available under the cash
pooling system for group companies that are cash negative and only the excess
amount required by the group is financed externally through banks.
There are two main ways to implement a cash pooling system: The so-called
“notional” or “virtual” cash pooling does not result in a physical transfer of funds
held by cash positive entities to the accounts of cash negative entities. However, a
reduction of interest costs can be achieved by involving the banks in the cash
pooling and having them calculate interest only on the amount of net indebtedness
incurred by all members of the group (i.e., after deduction of cash deposits of the
group members with the banks involved).
The so-called “zero balancing” results in a physical transfer of all amounts standing
to the credit of the accounts of the members of the group (e.g., at the end of each
business day) to a central account which is held by such member of the group that
manages the cash pooling system (the cash pool leader). This means that the
accounts of all entities of the group participating in the cash pooling system will be
balanced to zero (0) at the end of each business day by cash transfers to, or from,
the cash pool leader. The amount that remains with the cash pool leader after
balancing all accounts participating in the cash pool will either be deposited with a
bank (in case of an overall positive cash balance) or will be loaned from banks (in
case of a negative cash balance). Each company participating in the cash pooling
2008]
Cash Pooling
1157
notifies its cash needs in advance so that the cash pool leader can plan and manage
the appropriate allocation of available, and the procurement of additional cash.
II. Legal Relevance of the Technical Implementation
Since the notional or virtual cash pooling does not result in a physical transfer of
funds between the group members, the legal relevance of notional and virtual cash
pooling is rather low from the point of view of each entity participating in the cash
pool. Therefore, the notional cash pooling shall not be considered further
hereinafter.
In contrast, the zero balancing cash pooling results in a transfer of cash between
different members of the group via the cash pool leader. From a legal point of view,
the relevant payment is made on the basis of a loan agreement between the two
members of the group among which the payment under the cash pooling is made,
i.e., the cash pool leader of the group on the one hand and the entity participating
in the cash pool on the other hand. The cash pool leader typically is the parent or
group head company or a special financing vehicle set up by the group head for
such purpose. The following discussion will assume that the cash pool leader is a
direct or indirect shareholder of the cash pool participating entity or an affiliate of
such shareholder, but not a subsidiary of the entity participating in the cash
pooling.
Depending on the direction of the flow of funds, cash pooling can raise various
legal concerns. On the one hand, the flow of funds can be upstream, i.e., the cash
pool leader is an indirect or direct shareholder of the cash pool participating entity
or an affiliate of such shareholder and the cash pool participating entity transfers a
positive cash balance to the cash pool leader.
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GERMAN LAW JOURNAL
[Vol. 09 No. 09
Parent
Note:
The GmbH is cash positive and
transfers funds under the cash
pooling system to the cash pool
leader
! upstream loan
Cash Pool
Leader
upstream
loan
GmbH
(cash pool participator)
On the other hand, the funds can flow downstream, i.e., the cash pool leader is an
indirect or direct shareholder of the cash pool participating entity or an affiliate of
such shareholder and it transfers cash to the cash pool participating entity.
Note:
The GmbH is cash negative and
therefore the cash pool leader
transfers funds under the cash
pooling system to the GmbH
! downstream loan
Parent
Cash Pool
Leader
downstream
loan
GmbH
(cash pool
participator)
With a view to the participation of entities in the legal form of a GmbH in a cash
pooling system, upstream loans may, in particular, raise concerns in view of the
capital maintenance rules (Section 30 GmbHG, see C.I. below). Downstream loans,
on the other hand, may raise concerns in view of the rules on equity replacing loans
2008]
Cash Pooling
1159
as set out in Sections 32a and 32b GmbHG, and of the rules set by the jurisprudence
of the BGH2 (see C.II. below). In addition, the transfer of funds to a direct or
indirect shareholder (or an affiliate thereof), whether by way of upstream loan or
repayment of a downstream loan, may conflict with the rules and principles on the
so-called “existenzvernichtender Eingriff” (acts causing the insolvency), i.e., the
prohibition to transfer assets to a shareholder, if such transfer could deprive the
GmbH of its ability to properly fulfill its obligations towards creditors when due
(see C.III. below). The following discussion will focus on capital maintenance rules
and only briefly address the other questions raised.
C. Legal Framework of Cash Pooling under German Corporate Law
I. Upstream Loans – Restrictions resulting from Capital Maintenance Rules
While it is in the interest of the group to reduce external interest costs by
concentrating liquidity within the group, there are certain risks connected with
upstream loans under cash pooling systems. In particular, external creditors may
face the risk that the entity participating in the cash pooling is stripped of the cash
required to meet its external liabilities. A company which transfers readily available
cash to the cash pool leader but receives a less liquid claim against the cash pool
leader in turn is subject to an increased insolvency risk. This risk might not be offset
by the contractual right of the company participating in the cash pooling to be
provided with the liquidity required for its business up to a certain maximum
amount, as this claim, again, is subject to the cash pool leader’s ability to provide
such financing when needed. In order to reduce the risks resulting from upstream
loans, Section 30 (1) GmbHG sets out restrictions for upstream loans granted by
entities in the legal form of a GmbH.
1. Capital Maintenance Rules -- Former Law
a) Basic Principles of Section 30 (1) GmbHG
Section 30 (1) GmbHG sets forth strict capital maintenance rules for companies in
the legal form of a GmbH. Section 30 (1) GmbHG states: “Company assets required
to preserve the stated Stammkapital (share capital) may not be distributed to the
shareholders.”
Pursuant to Section 30 GmbHG, any payment or other financial advantage by a
GmbH to its direct or indirect shareholders as well as to affiliates of such
2 See BGHZ 90, 381, 388.
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[Vol. 09 No. 09
shareholders which are not subsidiaries of the GmbH is prohibited if such payment
results in the company’s net assets falling short of the amount of its stated share
capital. Any payment or other financial advantage by a GmbH to its direct or
indirect shareholders (or to affiliated companies) exceeding the amount of its net
“free” assets is considered unlawful. The rationale of the introduction of the capital
maintenance rules is that a limitation of liability of the shareholders of a GmbH
shall only be granted if and to the extent the equity contribution promised by the
shareholders has been validly contributed to the GmbH and not been repaid to the
shareholders.3
The prohibition of a repayment of share capital under the capital maintenance rules
is interpreted broadly. It applies not only to payments but to all kinds of benefits
with a financial or commercial value, including upstream guarantees and the
granting of other security charges.4 Therefore, any financial assistance by a GmbH
to its direct or indirect shareholder (or affiliates thereof) must be limited to the
amount by which the net assets exceed the registered share capital of the company.
Relevant for the test if a payment or other financial advantage by a GmbH results in
a breach of Section 30 (1) GmbHG is the equity of the company as reported in its
balance sheet established pursuant to German Generally Accepted Accounting
Principles (GAAP) (not International Financial Reporting Standards (IFRS)). Such
equity consists of the line items (i) stated share capital, (ii) capital and profit
reserves and (iii) a profit/loss carried forward, and therefore is equal to the balance
of the assets minus real liabilities (liabilities, accruals and deferred income) as
shown in the balance sheet of the company.
Once the equity as recorded in the balance sheet of the company falls short of the
amount of the stated share capital, the GmbH is in the status of an Unterbilanz
(underbalance). As long as this is the case, any payment or other financial
advantage by the GmbH to its shareholder is forbidden even if such payment or
financial advantage has no impact on the balance sheet and the equity, e.g., the sale
3 See Christoph Teichmann, Reform des Gläubigerschutzes im Kapitalgesellschaftsrecht, NEUE JURISTISCHE WOCHENSCHRIFT, 2444, 2445
(2006); Christoph Schmelz, Cash-Management, quo vadis?, NEUE ZEITSCHRIFT FÜR GESELLSCHAFTSRECHT, 456, 457 (2007).
4 Peter Dampf, Die Gewährung von Upstream-Sicherheiten im Konzern, DER KONZERN, 157 (2007); Goetz Hueck & Lorenz Fastrich,
Section 30 GmbHG, in GMBH-GESETZ (Adolf Baumbach & Alfred Hueck ed., 18th ed., 2006), margin number 27; Tobias Tillmann,
Upstream-Sicherheiten der GmbH im Lichte der Kapitalerhaltung – Ausblick auf das MoMiG, NEUE ZEITSCHRIFT
GESELLSCHAFTSRECHT, 401 (2008); Michael Winter, Upstream-Finanzierung nach dem MoMiG-Regierungsentwurf, DAS
STEUERRECHT, 1484, 1488 (2007); Gerald Spindler, Konzernfinanzierung, 171 ZEITSCHRIFT
WIRTSCHAFTSRECHT, 245, 278 (2007).
FÜR DAS GESAMTE
FÜR
DEUTSCHE
HANDELS-
UND
2008]
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Cash Pooling
of an asset which has a fair market value of EUR 1,000 at its book value of EUR 1 to
the shareholder.5
b) Legal Consequences of a Violation of Section 30 (1) GmbHG
Violations of Section 30 (1) GmbHG can have a broad range of legal consequences.
First of all, the shareholder is obliged to return the payment or financial advantage
received (Section 31 (1) GmbHG). If the shareholder who has received the payment
does not fulfill his return obligation, a corresponding liability of the coshareholders arises (Section 31 (3) GmbHG).6
Moreover, the managing directors of the GmbH may be held liable for the breach of
Section 30 (1) GmbHG and may be obliged to compensate the damage caused to the
GmbH (Section 43 GmbHG). A violation of the capital maintenance rules
(Section 30 (1) GmbHG) may also constitute a criminal offence by the managing
directors of the company (Section 266 of the Strafgesetzbuch (German Penal Code))
and by the managers of the shareholder who initiated the forbidden distribution.
Finally, a violation of Section 30(1) GmbHG may cause problems in the course of
the statutory audit of the company’s annual accounts. The auditor may, in
particular, point to a serious violation of the law in the statutory audit report. For
tax purposes, a violation of Section 30 (1) GmbHG may be regarded as a verdeckte
Gewinnausschüttung (hidden distribution of profits) within the meaning of
Section 8 (3) Körperschaftsteuergesetz (Corporate Income Tax Act) so that taxes may
be imposed upon the payment to the shareholder.
c) Upstream Loans under the Former Law
The transfer of a positive cash balance by a GmbH under a cash pooling system to
the cash pool leader constitutes an upstream loan by the GmbH to the cash pool
leader.
5 See Jochen Vetter & Christoph Stadler, HAFTUNGSRISIKEN
BEIM KONZERNWEITEN
Kreditbesicherung durch abhängige Kapitalgesellschaft, 159 ZEITSCHRIFT
CASH POOLING 35 (2003); Wolfgang Schön,
FÜR DAS GESAMTE
HANDELS-
UND
WIRTSCHAFTSRECHT, 351;
Winter, supra note 4, at 1486.
6 For further details regarding legal consequences of a violation of Section 30 (1) GmbHG please refer to Vetter & Stadler, supra
note 5, at 40.
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[Vol. 09 No. 09
i) Prevailing Opinion until the Ruling of 24 November 2003
Following a decision of the Reichsgericht (Supreme Court of the German Reich) in
1935,7 it was the prevailing opinion of constant jurisdiction and legal scholars that a
loan granted by a GmbH to its shareholder complied with Section 30 (1) GmbHG
provided that the respective repayment claim of the GmbH (as lender) against its
shareholder (as borrower) was valuable and vollwertig (fully realizable) and that the
loan was granted on an arm’s length basis. This view was based on the assumption
that a loan granted by the GmbH to its shareholder would not affect the net asset
position of the company to the extent it is fully valuable because it, in turn, could be
accounted for on the balance sheet of the GmbH at face value of the loan. In such a
case, the granting of the upstream loan would result in a mere exchange of asset
positions on the company’s balance sheet, i.e., the respective reduction of the line
item "cash" would be offset by an equivalent increase of the line item "accounts
receivable" so that the equity shown on the balance sheet would remain
unaffected.8
ii) 24 November 2003 Ruling of the Federal Court of Justice
Severe legal uncertainty was caused by the ruling of the BGH of 24 November
2003.9 With respect to an upstream loan in a significant amount granted by a
distressed GmbH to its shareholder the court ruled:
“Upstream loans by a GmbH to its shareholder
which are not paid out of capital/profit reserves or
profit carried forward, but are paid to the
detriment of the stated share capital do violate
Section 30 (1) GmbHG even if the claim for
repayment of the loan against the shareholder
should be fully realizable.”
However, the BGH indicated that an upstream loan may, as an exception to the
above mentioned general rule, not have violated Section 30 (1) GmbHG if (i) the
granting of the loan was in the interest of the GmbH, (ii) the terms of the loan
corresponded to market conditions (arm’s length basis) and (iii) the shareholder’s
financial standing was beyond any doubt or, alternatively, the loan was adequately
7 Reichsgericht, II 113/25, RGZ 150, 28, 34/35 (Dec. 20, 1935).
8 See Winter, supra note 4, at 1485; VETTER & STADLER, supra note 5, at 35 with further references.
9 BGHZ 157, 52.
2008]
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Cash Pooling
secured so that there was no doubt as to the realizability of the repayment claim of
the GmbH against the borrower.
Pursuant to the prevailing opinion of legal scholars, the limitation on upstream
loans set by the above ruling of the BGH also applies to a transfer of positive cash
balances under a cash pooling system as this results in an upstream loan as well.
iii) Interpretation of the Ruling of 24 November 2003
The key statements of the ruling as well as the underlying reasoning given by the
BGH are ambiguous and therefore led to a considerable uncertainty in the
application of the capital maintenance rules. The major alternative interpretations
were as follows:
Interpretation 1: Upstream loans granted by a GmbH to its shareholder are only
permitted if the capital reserves and accumulated profits exceed the loan amount
irrespective of the expected realizability of the loan. Given that the BGH has not
clearly declared an exception in case the three specific conditions mentioned above
(loan in the interest of the GmbH, terms at arm’s length, financial standing of the
borrower beyond any doubt or adequate security provided) are met, the strictest
view leaves it at that, i.e., upstream loans can only be granted if and to the extent
the GmbH has adequate free distributable reserves. In other words, the repayment
claim relating to the loan granted by the GmbH to its shareholder has to be
accounted for at a value of zero (0) for the purposes of the balance sheet orientated
test with respect to a possible violation of Section 30 (1) GmbHG.10
Interpretation 2: Others share the basic view of the BGH but make an exception in
case the three preconditions for an exception for upstream loans set by the court
(see above) are fulfilled.11
10 Oberlandesgericht München (OLG - Higher Regional Court), 23 U 3480/05, ZIP 2006, 25, 26 (Nov. 24, 2005); Joachim Blöse,
Zur Frage der Zulässigkeit eines Finanzierungs- und Liquiditätsausgleichs zwischen verbundenen Unternehmen, GMBH RUNDSCHAU, 146
(2006); Walter Bayer & Jan Lieder, Darlehen der GmbH an Gesellschafter und Sicherheiten aus dem GmbH-Vermögen für die
Gesellschaftsverbindlichkeiten, ZEITSCHRIFT
FÜR
UNTERNEHMENS-
UND
GESELLSCHAFTSRECHT, 133, 141 (2005); Detlev Joost, Cash Pool
Systeme, International Financial Reporting Standards, Solvency Test, in DIE GMBH-REFORM
IN
DER
DISKUSSION, 31, 34
(Gesellschaftsrechtliche Vereinigung ed., 2006); Markus C. Kerber, Die Beurteilung von Cash-Pool-Verträgen im Lichte
höchstrichterlicher Rechtsprechung, ZEITSCHRIFT
FÜR
UNTERNEHMENS-
Konzernfinanzierung und Besicherung, ZEITSCHRIFT
FÜR
UND
WIRTSCHAFTS-
GESELLSCHAFTSRECHT, 437 (2005); Hartwig Henze,
UND
BANKRECHT, 717 (2005); Andreas Engert,
Kreditgewährung an GmbH-Gesellschafter und bilanzorientierter Kapitalschutz, BETRIEBS-BERATER, 1951, 1954 (2005).
11 Hueck & Fastrich, supra note 4, at margin number 26.
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Interpretation 3: A third group of legal scholars and practitioners is of the opinion
that the strict rules and the exception set by the BGH only apply if (1) the GmbH is
already in the status of underbalance (as it was apparently the case in the decision
of the BGH given that the GmbH was distressed) or (2) enters into such status due
to the granting of the loan (which is only conceivable if the repayment claim does
not appear to be fully realizable or if the interest is below market condition so that
the face amount must be impaired for accounting purposes).12
For upstream loans created by a transfer of cash under a cash pooling system, the
strict interpretation of the ruling of the BGH of 24 November 2003 as outlined
above (interpretation 1) would have meant that such a loan would not have
violated Section 30 (1) GmbHG in case the freely available capital reserves and
accumulated profits of the GmbH would have exceeded the amount owed by the
cash pool leader to the GmbH at any time. However, such a test is very strict and it
was not unusual that it was not satisfied by a GmbH even if the company was far
from any financial crisis.
Against this background and in view of the severe legal consequences of a breach
of Section 30 (1) GmbHG (see C.I.1.b) above), a significant uncertainty was caused
by the 24 November 2003 ruling of the BGH. Although the wider interpretation 3 of
the ruling of the BGH seemed to be predominant among legal commentators and
practitioners given that the other alternatives would have treated the granting of an
upstream loan like a definite distribution of the corresponding amount and would,
in testing whether the company was in the status of underbalance, have supposed
that the claim for repayment of the loan had no positive value at all, irrespective of
the creditworthiness of the borrower or the security granted,13 many GmbH
managers have obeyed the strictest interpretation of the ruling to avoid personal
liability. In consequence of the ruling of the BGH, many cash pooling arrangements
were amended for precautionary reasons and the amount of upstream loans was
limited to the amount of freely distributable reserves of the GmbH even if the
GmbH had much higher cash reserves available.
12 Jochen Vetter, Darlehen der GmbH an ihre Gesellschafter und Erhaltung des Stammkapitals, BETRIEBS-BERATER, 1509 (2004); Wulf
Goette, Cash-Pool und Kapitalerhaltung, DAS DEUTSCHE STEUERRECHT, 767, 768 (2006); Carsten Schäfer, Probleme des Cash-Poolings bei
Kapitalaufbringung und -erhaltung – Welche Lösung bringt das MoMiG?, BETRIEBS-BERATER, 5, 6 (2006); Matthias Hentzen,
Konzerninnenfinanzierung nach BGHZ 157, 72 ZEITSCHRIFT FÜR UNTERNEHMENS-
UND
GESELLSCHAFTSRECHT, 480, 488 (2005); Mathias
Habersack & Jan Schürbrand, BETRIEBS-BERATER, 288, 289 (2006); Ulrich Haas & Jürgen Oechsler, Missbrauch, Cash Pool und
gutgläubiger Erwerb nach dem MoMiG, NEUE ZEITSCHRIFT FÜR GESELLSCHAFTSRECHT, 806, 811 (2006).
13 See Ulrich Seibert, GmbH-Reform: Der Referentenentwurf eines Gesetzes zur Modernisierung des GmbH-Rechts und zur Bekämpfung
von Missbräuchen – MoMiG, ZEITSCHRIFT FÜR WIRTSCHAFTSRECHT, 1157, 1163 (2006).
2008]
Cash Pooling
1165
iv) Safe Haven for Cash Pooling Systems
aa) Exception set by the Federal Court of Justice in the Ruling of 24 November 2003
For practical purposes, the exceptions set by the BGH (see C.I.1.c) ii) above) did not
significantly lower the uncertainty caused by the ruling of the BGH because the
BGH had neither clearly accepted an exception to its strict rules nor explained in
detail under what circumstances it considered such conditions to be met. Therefore
many managers abstained from widening the scope of cash pooling arrangements
to be on the safe side. The exceptions mentioned by the BGH therefore did not
create a true safe haven in practice.
bb) Implementation of a Domination Agreement
A more reliable means of reducing the risk of a violation of Section 30 (1) GmbHG
under the ruling of 24 November 2003 was to enter into a Beherrschungsvertrag
(control or domination agreement) concluded between the GmbH as cash pool
participating entity and its shareholder (which would not necessarily have to be the
cash pool leader). Pursuant to a domination agreement, the herrschende Gesellschaft
(controlling entity) is, in principle, entitled to instruct the beherrschte Gesellschaft
(controlled entity) to effectuate certain acts even if they have a negative impact on
the controlled entity (cf. Section 308 Aktiengesetz (AktG - Stock Corporation Act)).
With respect to domination agreements entered into with an Aktiengesellschaft (AG stock corporation) as a controlled entity, Section 291 (3) AktG expressly stated that
the relevant capital maintenance rules (in particular Section 57 (1) AktG) did not
apply to payments made upon a valid instruction under the domination agreement.
The reason was that the controlled company and its creditors are protected by
different means, in particular by the obligation of the controlling company to
compensate any annual net loss of the controlled entity occurring during the term
of the domination agreement (Section 302 AktG). The obligation to compensate for
any loss incurred by the controlled entity significantly reduces the insolvency risk
of the controlled entity which justifies a relaxation of the otherwise strict capital
maintenance rules.
Domination agreements can also be entered into with a GmbH as the controlled
entity. However, the GmbHG has not expressly excluded the strict capital
maintenance rule of Section 30 (1) GmbHG for payments made based on a valid
instruction under a domination agreement until the implementation of the MoMiG.
Therefore, it was highly disputed among legal commentators whether Section 30 (1)
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[Vol. 09 No. 09
GmbHG was nevertheless precluded under the regime of a domination
agreement.14
2. Impact of the MoMiG on Cash Pooling
The legal uncertainty caused by the 24 November 2003 ruling of the BGH with
respect to upstream loans led the German legislature to clarify the legal regime of
upstream loans of a GmbH by implementing the MoMiG. Among other rules, the
MoMiG provides for a revision of the capital maintenance rules set forth in
Section 30 (1) GmbHG (and similarly in Section 57 (1) AktG for stock corporations).
While the wording of Section 30 (1) sentence 1 GmbHG will remain unchanged, the
MoMiG will implement more relaxed standards of capital maintenance by adding a
new sentence 2 to Section 30 (1) GmbHG which states: “Sentence 1 does not apply
to benefits which are granted while a domination or profit-and-loss transfer
agreement (Section 291 AktG) is in place or which are covered by a fully valuable
counterclaim or retransfer claim against the shareholder.”
Section 30 (1) sentence 2 GmbHG therefore will clarify the existing legal uncertainty
in two aspects:
a) Reconstitution of the Balance Sheet orientated Test of Upstream Loans
Under the new capital maintenance rules, the management of a GmbH will be
allowed to transfer assets of the company to direct or indirect shareholders of the
company if a fully valuable counterclaim for their return exists.
The new law therefore will reconstitute the strictly balance sheet oriented
interpretation of Section 30 (1) GmbHG with respect to upstream loans as it was
widespread before the 24 November 2003 ruling of the BGH:15 An upstream loan
will not violate Section 30 (1) sentence 1 GmbHG if the repayment claim against the
borrower appears to be fully realizable. The legislature therefore expressly confirms
that the test as to whether a payment or other benefit granted by the GmbH to its
direct or indirect shareholder violates Section 30 (1) GmbHG shall be based on a
review of the balance sheet of the GmbH only. Upstream loans are no longer
limited by the amount of the capital and profit reserves and a profit/loss carried
14 See Matthias Hentzen, supra note 12, at 517; Boris Schilmar, Kapitalschutz beim Cash Management, DAS DEUTSCHE STEUERRECHT,
568, 573 (2006); Spindler, supra note 4, at 258; Harm Peter Westermann, Section 30 GmbHG, in SCHOLZ - KOMMENTAR ZUM GMBHGESETZ, margin number 51 (10th ed., 2006).
15 See Winter, supra note 4,at 1486.
2008]
1167
Cash Pooling
forward. Also, the further conditions set by the BGH for an exception to its strict
rule (loan in the interest of the GmbH, conditions at arm’s length) are abolished by
the legislature.
On the other hand, the approach supported by some legal commentators to replace
or complement the balance sheet orientated test by a solvency test will not be
implemented in Section 30 (1) GmbHG.16 Rather, Section 64 sentence 3 GmbHG (as
amended, see III. below) will expressly provide for an obligation of the managing
directors of the GmbH to indemnify the company for payments to shareholders
which result in a Zahlungsunfähigkeit (illiquidity) of the company. Consequently, a
solvency test in relation to payments to shareholders, and therefore also in relation
to upstream loans, will form part of the fiduciary duties of the managers of a
GmbH.
The explanatory statements of the legislature, which are not legally binding, state
that the violation of the capital maintenance rules has to be tested only at the time
of the drawdown of the upstream loan. Any negative development of the
realizability of the repayment claim against the shareholder which may result in an
impairment of the claim shown on the balance sheet will not retroactively
incriminate the drawdown of the loan.17 However, such impairment of the
realizability may oblige the management of the GmbH under its fiduciary duties to
terminate the upstream loan early and to enforce the repayment claim against the
shareholder. Therefore a prudent manager should abstain from entering into longterm upstream loan agreements with the shareholder without an adequate
possibility to react by early termination if the financial situation of its debtor
deteriorates. That means that under the new law it will still be advisable to
implement an early warning system that allows the management of the GmbH to
receive adequate information about the financial standing of the borrower and to
include early termination rights in case the financial standing of the shareholder
would deteriorate after drawdown of the upstream loan.
With respect to cash pooling systems, the new law will mean that any transfer of
cash by a GmbH to the cash pool leader under the cash pooling system which
16
With respect to the proposed introduction of a solvency test please refer to Joachim Hennrichs, Zur Zukunft der
Kapitalerhaltung: Bilanztest – Solvenztest – oder beides?, DER KONZERN, 42 (2008); Tim Drygala & Thomas Kremer, Alles neu macht der
Mai – Zur Neuregelung der Kapitalerhaltungsvorschriften im Regierungsentwurf zum MoMiG, ZEITSCHRIFT
1289, 1292 (2007); Horst Eidenmüller, Die GmbH im Wettbewerb der Rechtsformen, ZEITSCHRIFT
GESELLSCHAFTSRECHT, 168, 190 (2007).
17 BTDrucks 16/6140, 94.
FÜR
FÜR
WIRTSCHAFTSRECHT,
UNTERNEHMENS-
UND
1168
[Vol. 09 No. 09
GERMAN LAW JOURNAL
creates an upstream loan will not violate Section 30 (1) sentence 1 GmbHG if the
repayment claim of the GmbH against the cash pool leader appears to be fully
realizable at the time of the transfer of cash to the cash pool leader.18
If the repayment claim does not appear to be fully realizable, the transfer of cash
under the cash pooling system will not violate the capital maintenance rules if the
payment is covered by freely distributable reserves of the GmbH. In this regard, the
wording of the new law is unclear in respect of the question whether the loan
amount needs to be fully covered by freely distributable reserves of the company or
if it is sufficient that it is so covered only to the extent the amount of the upstream
loan appears not to be fully realizable. Based on the balance sheet orientated test of
a breach of the capital maintenance rules and the general approach to relax the
capital maintenance rules, the latter interpretation seems to be favorable.
Even if the GmbH is already in the status of underbalance, the new Section 30 (1)
sentence 2 GmbHG does apply (i.e., no violation of the capital maintenance rules
occurs) as long as the repayment claim is fully realizable and the interest has been
set at arm’s length.19 The new law thereby accepts, in principle, that the GmbH
transfers readily available cash to shareholders thereby creating a less liquid claim
against the borrower.
Should the interest be below market conditions however, this would lead to a
violation of Section 30 (1) sentence 1 GmbHG if the GmbH was already in the status
of an underbalance or if such unfavorable interest arrangement would result in an
underbalance due to an impairment of the repayment claim based on German
GAAP.
b) Clarification in Respect of Domination Agreements
The second remarkable revision of Section 30 (1) sentence 2 GmbHG refers to the
express clarification that Section 30 (1) sentence 1 GmbHG shall not apply in case of
payments effectuated while a domination and/or profit-and-loss transfer
agreement is in place. The new law therefore clarifies the uncertainty existing under
the former law on the applicability of the capital maintenance rules under a
18 Drygala & Kremer, supra note 16, at 1292.
19 Deutscher Anwalt Verein, Stellungnahme des Deutschen Anwaltsvereins zum Referentenentwurf eines Gesetzes zur Modernisierung
des
GmbH-Rechts
und
zur
Bekämpfung
von
Missbräuchen
(MoMiG),
No.
6/07,
16
(February
2007),
available
at
http://www.anwaltverein.de/downloads/stellungnahmen/2007-06.pdf; Drygala & Kremer, supra note 16, at 1295; Winter,
supra note 4, at 1487.
2008]
1169
Cash Pooling
domination agreement in line with the predominant opinion among the legal
commentators.20
In addition, the new law also makes clear that the suspension of the capital
maintenance rules will not require that the relevant act, which may otherwise
violate the capital maintenance rules, is based on a valid instruction of the
controlling entity under the domination agreement. Rather, the mere existence of a
domination agreement or profit-and-loss transfer agreement will suffice to preclude
a breach of Section 30 (1) sentence 1 GmbHG.21 The MoMiG thereby goes beyond
the relief from the strict capital maintenance rules provided for in Section 291 (3)
AktG (before its amendment by the MoMiG) for stock corporations. This provision
(as well as Section 57 (1) AktG) has consequently been revised by the MoMiG as
well.
For cash pooling systems this means that upstream loans granted by a GmbH will
not violate the capital maintenance rules while the GmbH is party to a domination
agreement as controlled entity even if the repayment claim does not appear to be
fully realizable.
However, it should be noted that if a repayment claim against the cash pool leader
does not appear to be fully realizable, a claim against the controlling entity to
compensate for any potential loss of the GmbH will often not be fully realizable
either, at least if the cash pool leader is also the controlling entity under the
domination agreement. In such an instance, the managing directors of the GmbH
are not entitled to carry out instructions by the controlling entity22 and may
therefore not grant any loan upon request of, or on behalf of, the controlling
shareholder. Therefore the managing directors of the GmbH have to make sure that
the GmbH can terminate or at least suspend its participation in the cash pooling if a
potential claim against the controlling entity to compensate for any loss no longer
appears to be fully realizable in the course of time. In order to facilitate such
assessment, the cash pooling system should provide for an early warning system in
respect of the financial stability of the cash pool leader as well as the controlling
20 See Drygala & Kremer, supra note 16, at 1295.
21 The wording of the Act is thereby implementing a proposal made in Deutscher Anwalt Verein, Stellungnahme des Deutschen
Anwaltsvereins zum Regierungsentwurf eines Gesetzes zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen
(MoMiG), No. 43/07, 20 (Sept. 5, 2007), available at http://www.anwaltverein.de/downloads/stellungnahmen/2007-43.pdf.
22 Holger Altmeppen, Section 308 AktG, in MÜNCHNER KOMMENTAR
ZUM
AKTIENGESETZ, margin number 122 (Bruno Kropff &
Johannes Semler ed., 2nd ed., 2000); Volker Emmerich, Section 308 AktG, in AKTIEN64 (Volker Emmerich & Mathias Habersack ed., 5th ed., 2008).
UND
GMBH-KONZERNRECHT, margin number
1170
GERMAN LAW JOURNAL
[Vol. 09 No. 09
entity and corresponding suspension and termination rights with regard to the
participation in the cash pooling system.
II. Equity Replacing Loans
1. Former Status
While upstream loans in principle are a matter of restrictions specified in the capital
maintenance rules (Section 30 (1) GmbH), downstream loans, i.e., loans granted by
a direct or indirect shareholder of a GmbH or an affiliate of such shareholder which
is not a direct or indirect subsidiary of the GmbH, mainly had to be considered in
view of the rules on eigenkaptalersetzende Darlehen (equity replacing loans).
Without going into details,23 under the old law loans which were granted by a
shareholder of a GmbH to the GmbH while the GmbH was in the status of a crisis
were treated as equity of the GmbH and could therefore not be repaid (in full) until
the GmbH resolved its crisis. In this regard, a crisis of the GmbH was mainly
defined as a situation in which the GmbH was not in the position to borrow funds
from third parties at market conditions or if it was in the status of Überschuldung
(over-indebtedness) or illiquidity.24
A repayment of equity replacing loans in violation of the rules on equity replacing
loans primarily resulted in an obligation of the shareholder as lender to recontribute the funds received from the GmbH as repayment of the loan.25
In connection with cash pooling systems, the law on equity replacing loans bore the
risk that loans created by the transfer of funds to a GmbH which was cash negative,
and which therefore incurred indebtedness under the cash pooling system vis-à-vis
the cash pool leader, were to be regarded as equity replacing loans if the GmbH
was in the status of a crisis.
To avoid such risk, the participation of a GmbH in a cash pooling system was often
suspended when a crisis of the GmbH occurred. Instead, liquid funds required by
23 For details on the revision of the law on equity replacing loans please refer to the article of Dirk Verse, Shareholder Loans in
Corporate Insolvency – A New Approach to an Old Problem [in this issue of the GERMAN LAW JOURNAL].
24 See Hueck & Fastrich, supra note 4, at margin number 48; Andreas Heidinger, Sections 32a, 32b GmbHG, in KOMMENTAR ZUM
GMBH-GESETZ, 44 (Lutz Michalski ed, 2002).
25 Karsten Schmidt, Sections 32a, 32b GmbHG, in SCHOLZ – KOMMENTAR
2006).
ZUM
GMBH-GESETZ, margin numbers 78, 83 (10th ed.,
2008]
Cash Pooling
1171
the GmbH were made available on the basis of individual loan agreements. Such
suspension was advisable in view of the legal uncertainty with respect to the
calculation of the amount of the equity replacing loan created under a cash pooling
system. Given that the amount of the loan drawn by the GmbH may increase and
decrease continuously in the day to day business, one could theoretically argue that
the aggregate amount of all decreases during a crisis could be regarded as a
prohibited repayment of equity replacing loans. However, while the maximum
amount that may be drawn under the cash pooling system at any time by each
participating entity is typically limited, it is conceivable that the aggregation of all
decreases of the loan during a crisis may exceed the amount of such limit. This
would have created an obligation to re-contribute funds to the GmbH in an amount
which may significantly exceed the amount which the shareholder/cash pool
leader was prepared to provide to the GmbH on the basis of loans under the cash
pooling system. Therefore it seemed to be more convincing that the amount of the
relevant repayment of an equity replacing loan under a cash pooling system
needed to be determined by the highest amount drawn by the GmbH during the
crisis and such amount should be compared to the amount outstanding at the time
the unlawful repayment of the equity replacing loan was raised. Only the
difference between the highest amount and the actual loan outstanding at that time
needed to be re-contributed by the shareholder/cash pool leader.26
Again, in light of the legal uncertainty in this regard, it was advisable for the
managing directors and shareholders to suspend the participation in a cash pooling
system during a crisis of a GmbH and to provide the GmbH with funds required, if
at all, on the basis of individual loan agreements only.
2. Modifications to the Law on Equity Replacing Loans by the MoMiG
a) Introduction of a “Shareholder Loan” concept
The MoMoG will significantly change the rules on downstream loans. The new law
(Sections 39 (1) no. 5 and 135 InsO) will no longer require that the loan is granted to
the GmbH while it is in the status of a crisis. Instead, any loan granted by a direct or
indirect shareholder to the GmbH, i.e., a downstream loan will, in its capacity as
shareholder loan, be subject to the new rules.
Under the new law any payment by the GmbH to the lender as repayment of a
shareholder loan will have to be returned to the GmbH if such repayment by the
GmbH occurred within the last year before the filing of an application for the
26 See Vetter & Stadler, supra note 5, at 27.
1172
GERMAN LAW JOURNAL
[Vol. 09 No. 09
opening of insolvency proceedings over the assets of the GmbH (Section 135 (1)
InsO). On the other hand, the GmbH no longer has the right to decline the
repayment of a shareholder loan based on the argument that the GmbH is still in
the status of a crisis at the time of the repayment. Under the new law a repayment
of a shareholder loan may only be declined by the management of the GmbH if the
repayment would result in an illiquidity of the GmbH (cf. Section 64 sentence 3
GmbHG (as amended)).27
b) Repercussions for Cash Pooling Systems
For downstream loans created under a cash pooling system, the new law means
that the management in general will not breach its fiduciary duties by repaying
loans incurred under the cash pooling system. However, in case the repayment of
the loan would result in an illiquidity of the GmbH, the managers must decline the
repayment in order to avoid personal liability in accordance with Section 64
sentence 3 GmbHG (as amended).
Against this background, and given the fact that the legal uncertainty on the
calculation of the amount of an equity replacing loan incurred under a cash pooling
system (see above C.II.1) will not be resolved by the MoMiG, it may still be
advisable to provide for constant control of the status of the cash pool participating
subsidiary and to suspend the participation of such subsidiary once a crisis
becomes apparent.
While under the old law, the preconditions for a crisis and therefore the definition
of the right point in time to suspend the participation in the cash pooling system
could be more or less well-defined in the cash pooling arrangements, the setup of a
cash pooling system will become more difficult under the new law as the right
point in time for a suspension can no longer be defined unambiguously because it
is determined by an event in the future, i.e., the application for the opening of the
insolvency proceedings.
27 Heribert Hirte, Die Neuregelung des Rechts der (früher: kapitalersetzenden) Gesellschafterdarlehen durch das MoMiG, ZEITSCHRIFT FÜR
WIRTSCHAFTS-
UND
BANKRECHT, 1429, 1430 (2008); Markus Gehrlein, Die Behandlung von Gesellschafterdarlehen durch das MoMiG,
BETRIEBS-BERATER, 846, 848 (2008); Michael Burg & Stefan Westerheide, Praktische Auswirkungen des MoMiG auf die Finanzierung
von Konzernen, BETRIEBS-BERATER, 62 (2008); Mathias Habersack, Gesellschafterdarlehen nach MoMiG: Anwendungsbereich, Tatbestand
und Rechtsfolgen der Neuregelung, ZEITSCHRIFT
FÜR
WIRTSCHAFTSRECHT, 2145 (2007); for details please refer to the article of Dirk
Verse, Shareholder Loans in Corporate Insolvency – A New Approach to an Old Problem [in this issue of the GERMAN LAW JOURNAL ].
2008]
Cash Pooling
1173
III. The Prohibition to Cause the Company’s Insolvency
In relation to cash pooling systems, it should also be noted that the shareholders of
a GmbH must not withdraw cash or other assets from the GmbH if this results in
the GmbH not being able to properly fulfill its obligations vis-à-vis its creditors
when due. A violation of such prohibition entitles the GmbH to claim damages
from the shareholder based on a provision of tort law (Section 826 BGB (Bürgerliches
Gesetzbuch (Civil Code)) pursuant to recent court rulings of the BGH28.
A related obligation of the managing directors has been codified by the MoMiG by
the insertion of a new Section 64 sentence 3 GmbHG: The managing directors must
not make any payment (or transfer any other asset) to a shareholder if this leads to
the illiquidity/insolvency of the GmbH, unless the managing directors could not
predict such result. While the shareholders have to indemnify the company’s
damage resulting from a forbidden transfer of assets, a violation of Section 64
sentence 3 GmbHG results in the managing directors’ obligation to repay to the
company an amount equal to the forbidden payment.
With respect to cash pooling arrangements, the above rules may become relevant
with respect to both (i) the granting of an upstream loan and (ii) the repayment of a
downstream loan.
IV. Capital Increases under Cash Pooling Systems
Cash pooling systems can also bear risks in relation to capital increases against
contribution of cash made during the operation of such system. In particular, the
preconditions for a valid contribution of cash in relation to capital increases via a
cash pooling system were highly disputed under the former law.29 In this regard
the MoMiG will provide for some relief: A cash contribution to an entity which is
cash positive, i.e., an upstream loan has been granted to the cash pool leader under
the cash pooling system, and is repaid to the shareholder under the cash pooling
system so that the amount of the upstream loan increases will, in principle, not
hinder the validity of the capital increase provided that the repayment claim
against the shareholder under the cash pooling system appears fully realizable and
28 BGHZ 173, 246; BGH, II ZR 264/06, DB 2008, 1423.
29 BGHZ 166, 8; Walter Bayer & Jan Lieder, Kapitalaufbringung im Cash-Pool, GMBH RUNDSCHAU, 449 (2006); Matthias Hentzen,
Die Abgrenzung von Kapitalaufbringung und Kapitalerhaltung im Cash-Pool, DAS DEUTSCHE STEUERRECHT, 948 (2006); Jochen Vetter &
Christian Schwandtner, Kapitalerhöhung im Cash-Pool, DER KONZERN, 407 (2006); Schäfer, supra note 12, at 7; Spindler, supra note 4,
at 273; Walter Bayer, Moderner Kapitalschutz, ZEITSCHRIFT FÜR UNTERNEHMENS- UND GESELLSCHAFTSRECHT, 220, 230 (2007).
1174
GERMAN LAW JOURNAL
[Vol. 09 No. 09
is fällig (payable) at any time (cf. Section 19 (5) GmbHG (as amended)). In practice
this will, at least to some extent, reduce the uncertainty existing in relation to
capital increases under cash pooling systems under the former law.30
D. Summary – Concluding Thesis
Under the old law the operation of a cash pooling system was mainly restricted by
the uncertainty of the 24 November 2003 ruling of the BGH.31 The limits applicable
to upstream loans in particular remained unclear. This has led the legislature to
clarify the legitimacy of upstream loans in the MoMiG.
The new law will reconstitute the strict balance sheet orientated test for violations
of the capital maintenance rules set out in Section 30 (1) GmbHG. Under the new
law upstream loans will not violate Section 30 (1) GmbHG if the repayment claim
against the borrower can be accounted for at its face value. If and to the extent the
repayment claim does not appear to be fully realizable, an upstream loan will still
be permissible if the negative balance between the face value of the repayment
claim and the amount at which the repayment claim can be accounted for on the
balance sheet of the GmbH does not exceed the capital and profit reserves -including a profit/loss carried forward of the GmbH at the time of the draw down
of the upstream loan if such loan is fully realizable (and bears interest at market
conditions).
A significant revision implemented by the MoMiG concerns upstream loans
granted while the GmbH is in the status of an underbalance. While the
permissibility of such loans was highly disputed under the old law, it will no
longer be necessary to differentiate between the granting of upstream loans during
and outside the status of underbalance.
While the regime for upstream loans will be relaxed, the rules for downstream
loans will be revised to the detriment of practical application. This mainly results
from the fact that in future the application of the rules on downstream loans will no
longer depend on whether the loan has been granted or repaid while the GmbH is
in the status of a crisis. Instead, any loan granted by a direct or indirect shareholder
30 See Christine Oppenhoff, Die GmbH-Reform durch das MoMiG – ein Überblick, BETRIEBS-BERATER, 1630 (2008); Georg MaierReimer & Axel Wenzel, Kapitalaufbringung in der GmbH nach dem MoMig, ZEITSCHRIFT FÜR WIRTSCHAFTSRECHT, 1449, 1454 (2008);
Rüdiger Veil, Die Reform des Rechts der Kapitalaufbringung durch den RegE MoMiG, ZEITSCHRIFT FÜR WIRTSCHAFTSRECHT, 1241, 1247
(2007).
31 BGHZ 157, 52.
2008]
Cash Pooling
1175
to a GmbH will be regarded as a "shareholder loan." While the management of the
GmbH then can no longer decline the repayment of a shareholder loan based on the
argument that the GmbH is in the status of a crisis, the lending shareholder is
obliged to re-contribute the funds received as a repayment of a shareholder loan if
the GmbH has to apply for insolvency proceedings within one year after the
repayment of the loan. For cash pooling systems this entails the risk that the point
in time for a suspension of the participation of a GmbH in a cash pooling system (in
the past this was the occurrence of a “crisis”) cannot be adequately determined in
advance.
1176
GERMAN LAW JOURNAL
[Vol. 09 No. 09
GMBH – SPECIAL ISSUE
The Implementation of the MiFID into the WpHG
By Sebastian Barry and Hannes Bracht!
A. Introduction
On 1 November 2007 the Finanzmarktrichtlinie-Umsetzungsgesetz (FRUG) came into
effect. The FRUG is supplemented by two directives, the WertpapierdienstleistungsVerhaltens- und Organisationsverordnung (WpDVerOV)1 (as amended by the Erste
Verordnung
zur
Änderung
der
Wertpapierdienstleistungs-Verhaltensund
Organisationsverordnung2)
and
the
Erste
Änderungsverordnung
zur
Finanzanalyseverordnung3. Together with the aforementioned directives the FRUG
implements the Markets in Financial Instruments Directive (MiFID)4 into German law,
which is itself supplemented by a MiFID Implementing Directive5 and a Commission
Regulation6. Altogether this legislation is part of the Financial Services Action Plan of
the European Commission aiming at the formation of a single market for financial
services. The new legislation leads to material changes in the
Wertpapierhandelsgesetz (WpHG)7. On the one hand numerous new regulations have
been added, on the other hand already existing regulations have become much
!
Sebastian Barry is a former research fellow at the Westfälische Wilhelms-Universität Münster, Institut
für Arbeits-, Sozial- und Wirtschaftsrecht Abt. I (Gesellschafts-, Bank- und Kapitalmarktrecht),
Universitätsstr. 14-16, 48143 Münster and trainee lawyer (Referendar) at Landgericht Münster. Email:
sebastian.barry@googlemail.com. Hannes Bracht is a research assistant at the Westfälische WilhelmsUniversität Münster, Institut für Arbeits-, Sozial- und Wirtschaftsrecht Abt. I (Gesellschafts-, Bank- und
Kapitalmarktrecht), Universitätsstr. 14-16, 48143 Münster. Email: hbracht@uni-muenster.de.
1 Wertpapierdienstleistungs-Verhaltens- und Organisationsverordnung [WpDVerOV] July 20, 2007,
BGBl. 2007 I at 1432.
2
Erste
Verordnung
zur
Änderung
der
Wertpapierdienstleistungs-VerhaltensOrganisationsverordnung, Nov. 21, 2007, BGBl. 2007 I at 2602.
3
Änderungsverordnung zur Finanzanalyseverordnung, July 20, 2007, BGBl. 2007 I at 1430.
4
Commission Directive 2004/34/EC, 2004 O. J. (L145) 1.
5
Commission Directive 2006/73/EC, 2006 O. J. (L241) 26.
6
Commission Regulation (EC) 1287/2006, 2006 O. J. (L241) 1.
7
Wertpapierhandelsgesetz, Sept. 9, 1998, BGBl. 1998 I at 2708.
und
1178
GERMAN LAW JOURNAL
[Vol. 09 No. 09
more detailed.8 Thus the WpHG has finally become “the constitution” of German
capital market law.9
The present article is based on a symposium of the Zeitschrift für Bankrecht und
Bankwirtschaft under the title “Die Umsetzung der Richtlinie über Märkte für
Finanzinstrumente” (“the implementation of the markets in financial instruments
directive”) in Frankfurt a.M. on 29.11.2007.10 In the following the main subject
matters of this symposium are presented and elaborated on. At the same time the
article shall provide a general overview of the implementation of the MiFID in the
WpHG. Firstly, the article discusses changes in the scope of application of the
WpHG and gives an overview of the concept of client classification, an instrument
previously unknown in German capital market law. Subsequently the article
focuses on some of the main regulations of the WpHG. These are the regulations on
the so-called “best execution” in § 33a WpHG, the treatment of inducements in §
31d WpHG and finally the duties of client information in § 31 WpHG.
B. Basic Regulations
I. Scope of Application
The regulations of the WpHG as amended by the MiFID, apply to investment firms.
According to § 2 sec. 4 WpHG investment firms are primarily businesses which
render investment services on a commercial basis. Thus the provision of investment
services in the meaning of § 2 sec. 3 WpHG is the central requirement. In this
respect some changes have been made, which go back to Annex I Section A, B
MiFID. To name one example, according to § 2 sec. 3 sent. 1 No. 9 WpHG
investment advice is now an investment service in the meaning of § 2 sec. 3 WpHG
and not an ancillary service in the meaning of § 2 sec. 3a WpHG as before. This will
have consequences especially for those businesses which only provide investment
advice, for family offices in particular.11 Besides the necessary licence to conduct
8 See Holger Fleischer, Die Richtlinie über Märkte für Finanzinstrumente und das Finanzmarkt-RichtlinieUmsetzungsgesetz, ZEITSCHRIFT FÜR BANK UND KAPITALMARKTRECHT (BKR) 389 (2006); Gerald Spindler &
Roman A. Kasten, Änderungen des WpHG durch das Finanzmarktrichtlinie-Umsetzungsgesetz (FRUG),
ZEITSCHRIFT FÜR WIRTSCHAFTS- UND BANKRECHT (WM) 1245 (2007).
9
Compare Herbert Jütten, Neues ‘Grundgesetz’ für das Wertpapiergeschäft, 3 ZEITSCHRIFT FÜR BANKPOLITIK
(Die Bank) 12 (2006).
UND PRAXIS
10
Compare ZEITSCHRIFT FÜR BANKRECHT UND BANKWIRTSCHAFT (ZBB) 1 et seq. (2008).
11 Compare Erich Waclawik, Erlaubnispflicht privater Family Offices nach Umsetzung der MiFID?,
ZEITSCHRIFT FÜR WIRTSCHAFTSRECHT (ZIP) 1341, 1342 et seq. (2007).
2008]
Implementation of the MiFID into the WpHG
1179
banking transactions according to § 32 Kreditwesengesetz (KWG)12 the rules of
conduct according to §§ 31 et seqq. WpHG also apply to these businesses now. §§
31 et seqq. WpHG still do not apply to professional classes, etc. lawyers and
accountants, as far as they only give investment advice on an occasional basis.
A much-discussed matter in the course of the implementation of the MiFID in
Germany was the question if closed funds fall within the scope of the MiFID.13
Starting point for this discussion is § 2 sec. 2 sent. 1 No. 2 WpHG according to
which stakes in legal entities and partnerships are securities provided that they are
comparable to shares. This could also apply to stakes in closed funds in the form of
Kommanditgesellschaften (limited partnerships) and Gesellschaften bürgerlichen Rechts
(civil-law partnerships). On the contrary, the German legislator has expressly ruled
that stakes in closed funds do not qualify as securities arguing with the lack of
comparability with securities as well as the fact that an acquisition in good faith is
not possible. 14
This line of argument has been much criticized as Art. 4 (1) No. 18 a) MiFID does
not set up any such requirements. Some critics regarded this as a false
implementation of the MiFID allowing the commencement of infringement
procedures. But finally the exclusion of closed funds from the scope of application
of the MiFID is the right approach. In the absence of any other criteria the decision
can only be based on the manageability of closed funds on capital markets
according to Art. 4 (1) No. 18 MiFID. As stakes in partnerships are generally
marketable the question if there is a market for shares in closed funds, which is
sufficiently worthy of protection, is the decisive criterion.
In this respect it is often said that trading with closed funds on the so-called grey
market has reached a certain level of organisation in the last few years, often
referring to the Hamburg funds stock. However, on closer inspection of this
institution it becomes apparent that it is not comparable with conventional capital
markets governed by the WpHG, neither with regard to the organisation of the
Kreditwesengesetz Sept. 9, 1998, BGBl. 1998 I at 2776; regarding the licence to conduct banking services
according to § 32 KWG see Fleischer, supra, note 8 at 392; Andreas Otto Kühne, Ausgewählte
Auswirkungen der Wertpapierdienstleistungsrichtlinie – MiFID, ZEITSCHRIFT FÜR BANK UND
KAPITALMARKTRECHT (BKR) 275 et seq. (2005); Waclawik, supra, note 11 at 1341.
12
Patricia Vollhard & Sarah Wilkens, Auswirkungen der Richtlinie über Märkte für Finanzinstrumente
(MiFID) auf geschlossene Fonds in Deutschland, WOCHENSCHRIFT FÜR BETRIEBSWIRTSCHAFT, STEUERRECHT,
WIRTSCHAFTSRECHT, ARBEITSRECHT (Der Betrieb) 2051 (2006); Thorsten Voß, Geschlossene Fonds in
Deutschland unter dem Rechtsregime der Finanzmarkt-Richtlinie (MiFID)?, ZEITSCHRIFT FÜR BANK- UND
KAPITALRECHT (BKR) 45 (2007).
13
14
BT-Drucks. 16/4028, 54.
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market nor with regard to transaction volume. At the fund stock intermediaries are
only involved in a very limited number of transactions. Furthermore, the most
closed funds listed on the funds stock do not have any transaction volume at all.
Due to practical reasons the question if a closed fund is a fungible security cannot
be answered on a case by cases basis but only uniformly. Keeping this in mind it is
preferable to exclude closed funds from the scope of the WpHG altogether.
II. Client Classification
A basic innovation in German law is the classification of clients into different
categories.15 The so-far uniform degree of protection of the WpHG is thereby
replaced by a gradual approach, which is meant to take better into account the
interests of the different classes of clients. The legislator has created three main
categories of clients, eligible counterparties, professional clients and retail clients, with
the peculiarity that eligible counterparties are a sub-category of professional clients. The
least protection is provided to eligible counterparties in the meaning of § 31 a sec. 4
WpHG. According to § 31b sec. 1 WpHG the essential protective regulations of §§
31 et seqq. WpHG do not apply to these clients. This especially applies for the
duties of information according to § 31 sec. 2, 3 and 5 to 7 WpHG, the provisions on
inducements in § 31d WpHG and the principles of best execution according to § 33a
WpHG. The legislator takes the view that eligible counterparties are such strong and
professional market participants that they are able to safeguard their interests
against investment firms themselves and therefore do not require protection by
financial service authorities. A medium level of protection is provided to
professional clients according to § 31a sec. 2 WpHG. To these clients all protective
regulations of §§ 31 et seqq. WpHG are generally applicable, though partly
modified. Especially § 31 sec. 9 WpHG ought to be mentioned in this context, which
narrowly confines the suitability test according to § 31 sec. 4 WpHG. The highest
level of protection is finally provided to retail clients according to § 31a sec. 3
WpHG. All provisions of §§ 31 et seqq. WpHG apply to them without any
restrictions. This concept of gradual protection along with the idea to apply the
protective regulations of the WpHG only to those market participants who are
actually in need of such protection whereas facilitating individual contractual
agreements on other respects ought to be welcomed. Yet, problems occur on closer
15 Compare PETER CLOUTH & THORSTEN SEYFRIED, MIFID PRAKTIKERHANDBUCH 27 et seq. (2007); Christian
Duve & Moritz Keller, MiFID: Die neue Welt des Wertpapiergeschäfts, ZEITSCHRIFT FÜR RECHT, STEUERN
UND WIRTSCHAFT (Betriebs-Berater) 2425, 2427 et seq. (2006); Roman A. Kasten, Das neue Kundenbild des §
31a WpHG – Umsetzungsprobleme nach MiFID & FRUG, ZEITSCHRIFT FÜR BANK- UND
KAPITALMARKTRECHT (BKR) 261 et seq. (2007); Thorsten Seyfried, Die Richtlinie über Märkte für
Finanzinstrumente (MiFID) – Neuordnung der Wohlverhaltensregeln, ZEITSCHRIFT FÜR WIRTSCHAFTS- UND
BANKRECHT (WM) 1375 (2006).
2008]
Implementation of the MiFID into the WpHG
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inspection of individual provisions of the WpHG. The scope of the different classes
of clients raises some questions. According to the legislator local authorities are
professional clients in the meaning of § 31a sec. 2 sent. 2 No. 3 WpHG.16 It appears
questionable if local authorities are really comprised by national and regional
governments in the meaning of Annex II (1) No. 3 MiFID or if they rather qualify as
public sector bodies in the meaning of Annex II (2) No. 1 MiFID and therefore as
private clients. Furthermore according to § 31a sec. 4 sent. 1 WpHG local authorities
would then even be categorized as eligible counterparties, although according to Art.
24 (2) sec. 1 MiFID this does not even apply for regional but only for national
governments and their corresponding offices. Thus the categorization of local
authorities as professional clients and eligible counterparties is a violation of EC-law
and is not in compliance with the approach in other member states either.17
Consequently, in the case of local authorities the German legislator provides a level
of protection, which is too low.18
In other cases one might ask if the level of protection is not artificially high, e.g. in
the case of a private individual, who is engaged in the management of its own
considerable assets in a professional manner. The classification of such a person as
professional client in the meaning of § 31a sec. 2 sent. 2 WpHG appears to be
difficult, as only companies fall into this category. In any case the classification of
private individuals as professional clients founders on the fact that § 31a sec. 2 sent.
2 WpHG relates to balance sheet ratios, which a private individual cannot provide
as he does not have to draw up a balance sheet in compliance with §§ 242 et seqq.
Handelsgesetzbuch (HGB). Therefore the only possibility is the opt-up of the private
individual to an elective professional client according to § 31a sec. 7 WpHG. The
above-mentioned kind of clients will meet the respective criteria in most cases.
However, an opt-up to an elective eligible counterparty is practically impossible as
§ 31a sec. 4 sent. 2 No. 1 WpHG only refers to § 31a sec. 2 sent. 2 No. 2 WpHG and
not to § 31a sec. 7 WpHG. On the contrary, Art. 24 (3), Annex II (2) MiFID, Art. 50
(1) sent. 2 of the MiFID implementing directive 2006/73/EG allows for such a
further opt-up of private clients to eligible counterparties. If § 2 sec. 2 No. 1
WpDVerOV has to be understood as a hint for the legitimacy of such a further optup contrary to the wording of the WpHG remains to be seen. However, it shows
that the client classification has not yet been perfectly balanced in terms of the
provision of the right level of protection for the variety of market participants.
16
BT-Drucks. 16/4028, 66.
17 Compare § 58, sec. 2, no. 3 Wertpapieraufsichtsgesetz [WAG] BGBl. 2007 I, 60 (Austria) or New
Conduct of Business Sourcebook (COBS) rule 3.5.2 A (Great Britain).
18 Compare Hannes Bracht, Kommunen als geeignete Gegenparteien im Handel mit Derivaten nach dem
Finanzmarktrichtlinie-Umsetzungsgesetz, ZEITSCHRIFT FÜR WIRTSCHAFTS- UND BANKRECHT (WM) 1386, 1387
et seq. (2008).
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C. Best Execution
According to § 33a sec. 1 WpHG an investment firm must take all reasonable steps
to obtain, when executing orders, the best possible result for its clients.19 This
especially implies the obligation to establish a policy for the best execution of
orders and to implement effective arrangements for complying with this policy.
According to § 33a sec. 2 WpHG this execution policy must take into account the
factors of price, costs, speed, likelihood of execution and settlement as well as the
size and the nature of the order. Within these criteria the investment firm has to
determine the relative importance of the execution factors. If the client is a retail
client the price of the financial instrument and the costs related to the execution are
decisive according to § 33a sec. 3 WpHG. From a private law perspective these rules
do not contain any innovations as the duty of best execution already follows from §
384 sec. 1 HGB. Nonetheless two consequences can be expected from the new
definition of the duty of best execution as a supervisory duty of organisation. On
the one hand the competition between the different execution venues for a
consideration in the execution policies is meant to improve their business
conditions, whereas besides the regulated markets multilateral trading facilities
(MTF) as well as systematic internalizers also take part in this competition.20 If
alternative providers can indeed take root or whether the established providers,
e.g. Xetra for shares, will keep their dominant position remains to be seen. On the
other hand § 33a WpHG is also meant to lead to a strengthening of the protection of
investors in the relationship between investment firms and clients. It ought to be
noted that according to § 31b WpHG the duty of best execution does not apply to
transactions with eligible counterparties. If, on the other hand, professional clients
or retail clients are involved the execution policies provide first evidence for the
control of the execution of orders, which would otherwise be very difficult to
retrace. Though § 33a WpHG does not aim at the best execution in individual cases
19 Peter Gomber, Michael Chlistalla & Sven S. Groth, Neue Börsenlandschaft in Europa? Die Umsetzung der
MiFID aus Sicht europäischer Marktplatzbetreiber, ZEITSCHRIFT FÜR BANKRECHT UND BANKWIRTSCHAFT
(ZBB) 2, 3 et seq. (2008); Thomas Dirkes, Best Execution in der deutschen Börsenlandschaft, ZEITSCHRIFT FÜR
BANKRECHT UND BANKWIRTSCHAFT (ZBB) 11 (2008); compare Duve & Keller, supra, note 15 at 2480 et seq.;
Peter Gomber & Holger Hirschberg, Ende oder Stärkung der konventionellen Börsen?, ZEITSCHRIFT FÜR DAS
GESAMTE AKTIENWESEN UND FÜR DEUTSCHES, EUROPÄISCHES UND INTERNATIONALES UNTERNEHMENSUND KAPITALMARKTRECHT (AG) 777, 781 et seq. (2006); Cornelia Schmitt & Sven Schielke, Best Execution
under MiFID, ZEITSCHRIFT FÜR BANKPOLITIK UND PRAXIS (Die Bank) 32 (2006); Frank Zingel, Die
Verpflichtung zur bestmöglichen Ausführung von Kundenaufträgen nach dem Finanzmarkt-RichtlinieUmsetzungsgesetz, ZEITSCHRIFT FÜR BANK- UND KAPTIALMARKTRECHT (BKR) 173 (2007).
Holger Hirschberg, MiFID – Ein neuer Rechtsrahmen für die Wertpapierhandelsplätze in Deutschland,
ZEITSCHRIFT FÜR DAS GESAMTE AKTIENWESEN UND FÜR DEUTSCHES, EUROPÄISCHES UND INTERNATIONALES
UNTERNEHMENS- UND KAPITALMARKTRECHT (AG) 398 (2006).
20
2008]
Implementation of the MiFID into the WpHG
1183
but only sets up a supervisory duty of organisation thus only demanding the
investment firm to set up a suitable concept of best execution.21 A further starting
point for questioning the effectiveness of the protection of investors by § 33a
WpHG is the possibility to carry out an order in compliance with the specific
instruction of a client according to § 33a sec. 4 WpHG. If the investment firm
follows such an instruction it complies with its duty of best execution. This enables
the investment firm to ask the client for an instruction for each transaction.
However, it does not absolve the investment firm from its duty to set up an
execution policy.22 Nonetheless, in the case that the investment firm only follows
the specific instruction of its client, the choice of the execution venue is left to the
party who has typically the least knowledge of the market mechanisms. Correctly
the consequences of such a business practice on the duties of the investment firm
needs some discussion, whereas the execution policies can only serve as a starting
for determination of the duties of the client information in such cases.
D. Inducements
§ 31d WpHG deals with the problem of inducements to investment firms in the
course of the provision of investment services.23 Regularly, this applies to situations
in which the client buys a financial instrument of a third party via the investment
firm and this third party then hands part of the remuneration it has received from
the client back to the investment firm (kick-back). The provisions in the MiFID on
this problem (§ 31d WpHG is based on Art. 19 (1) MiFID, Art. 26 MiFID
implementing directive) coincide with a basic ruling of the German Federal Court
of Justice (BGH).24 According to the BGH the duty of investment firms to disclose
such inducements already followed from § 31 sec. 1 No. 2 WpHG in its former
version. If the investment firm violates this duty the client can demand the
unwinding of the contract (compensation for damage in kind). § 31d sec. 1 WpHG
21
Compare BT-Drucks. 16/4028, 53.
22
BT-Drucks. 16/4028, 73.
Heinz-Dieter Assmann, Interessenkonflikte aufgrund von Zuwendungen, ZEITSCHRIFT FÜR BANKRECHT
BANKWIRTSCHAFT (ZBB) 21 (2008); compare Till Brocker, Aufklärungspflichten der Bank bei
Innenprovisionsgestaltungen, ZEITSCHRIFT FÜR BANK- UND KAPITALMARKTRECHT (BKR) 365 (2007);
Matthias Rozok, Tod der Vertriebsprovisionen oder Alles wie gehabt? – Die Neuregelungen über Zuwendungen
bei der Umsetzung der Finanzmarktrichtlinie, ZEITSCHRIFT FÜR BANK- UND KAPITALMARKTRECHT (BKR) 217
(2007); Florian Schumacher, Rückvergütungszahlungen von Investmentgesellschaften an Kreditinstitute – Keine
Umgehung des § 31d Abs. 1 Satz 1 WpHG mittels eines Zahlungs-‘Auftrags’ des Kunden, ZEITSCHRIFT FÜR
BANK- UND KAPITALMARKTRECHT (BKR) 447 (2007).
23
UND
24 BGHZ 170, 226; compare Max Nikolaus & Stefan d´Oleire, Aufklärung über “Kick-backs” in der
Anlageberatung: Anmerkungen zum BGH-Urteil vom 19.12.2006 = WM 2007, 487, ZEITSCHRIFT FÜR
WIRTSCHAFTS- UND BANKRECHT (WM) 2129 (2007).
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now expressly prohibits any inducements to (and from) third parties in the course
of the provision of investment services. Though it also contains several exceptions.
Also the question who is a third party in the meaning of the provision appears to be
problematic. § 31d sec. 1 WpHG does probably not apply to in-house inducements.
Yet this exception becomes difficult when thinking of inducements within a group
of companies. One might argue that a disclosure of inducements is not mandatory
in these cases as long as only products of the own group are marketed. On the other
hand even the inducement structures within a group can be important for the
client. Besides that such a general exemption would unduly privilege those
investment firms, which are organized in a group.
Ground for more discussion is provided by the three codified exceptions from the
ban of inducements. According to § 31d sec. 1 sent. 1 No. 1, 2 WpHG kick-backs are
allowed if they enhance the quality of the relevant service and are clearly disclosed
to the client. Similar to this is the exception in § 31d sec. 5 WpHG, which excludes
those inducements, which enable or are necessary for the provision of investment
services. The scope of application of these exceptions appears to be small, as at first
sight it is not conceivable in which way an inducement to a third party is capable of
enabling or improving the provision of investment services. But one might come to
different conclusion when focusing on the investment advice provided by
investment firms. Regularly the consulting of the client in the course of the
provision of an investment service does not lead to extra costs. However, it might
be possible to argue that the investment advice provided to the client is financed
precisely by means of the inducements received by the third party. This is even
more apparent, when the inducement is not a fee or commission but a nonmonetary benefit, also covered by § 31d sec. 2 WpHG, e.g. a training course for the
employees of the investment firm. § 31d sec. 4 WpHG also appears to point into this
direction, containing an assumption that the quality of investment services
improves when the inducement is provided in connection with the investment
advice of the client as defined in § 2 sec. 3 sent. 1 No. 9 WpHG. Nonetheless, there
are doubts, if this interpretation leads to satisfying results, since the provision of
investment advice is especially prone to conflicts of interests. The final exception
from the ban on inducements is contained in § 31d sec. 1 sent. 2 WpHG, according
to which no inducement is made, when the third party provides it to the
investment firm on behalf of the customer. This provision bears the danger of a
circumvention of the ban of inducements in § 31d WpHG, which has to be averted
by an accordingly strict control of the general terms and conditions of investment
firms.
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Implementation of the MiFID into the WpHG
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E. Duties of Client Information
The duties of information are now codified in § 31 WpHG. The legislator has
chosen a very detailed level of codification.25 The present article can only provide a
very short overview of this topic. According to § 31 sec. 3 WpHG an investment
firm must provide its clients with information about the financial instruments and
investment services on offer. According to § 31b sec. 2 sent. 1 WpHG this does not
apply to dealings with eligible counterparties. The provided information is meant
to enable the client to make a self-dependent investment decision. The duties of the
investment firm are not only confined to the provision of information though. In
fact the investment firm has to investigate whether the specific financial instrument
or the investment service fits the respective client. When providing investment
advice or portfolio management this takes place in the form of a “suitability test”.
For that purpose the investment firm has to obtain the necessary information about
the client and scrutinize whether the specific type of product or service fits the
client’s investment objectives, whether the financial risks can be borne by the client
and whether the client has the necessary knowledge and experience to understand
these risks. If the investment firm comes to a negative result the financial
instrument must not be recommended and the investment service must not be
provided respectively. If the client is a professional client the investment firm can,
according to § 31 sec. 9 WpHG, assume that the client is aware of the risks of the
financial instrument or the investment service and that these risks can be borne by
him. If another financial service than investment advice or portfolio management is
provided the “appropriateness test” according to § 31 sec. 5 WpHG applies. In this
case the investment firm only has to gather information about the client, in order to
scrutinize whether the financial instruments or investment services are appropriate
for the client, that is, whether the client has the necessary knowledge and
experience on the field of investment. If this test leads to a negative result the
investment firm has to warn the client. According to § 31b sec. 1 WpHG this
provision does again not apply to eligible counterparties.
Rüdiger Veil, Vermögensverwaltung und Anlageberatung im neuen Wertpapierhandelsrecht – eine behutsame
Reform der Wohlverhaltensregeln?, ZEITSCHRIFT FÜR BANKRECHT UND BANKWIRTSCHAFT (ZBB) 34 (2008);
Hans Ulrich Buhl & Marcus Kaiser, Herausforderungen und Gestaltungschancen aufgrund von MiFID und
EU-Vermittlerrichtlinie in der Kundenberatung, ZEITSCHRIFT FÜR BANKRECHT UND BANKWIRTSCHAFT (ZBB)
43 (2008); compare Peter Balzer, Umsetzung der MiFID: Ein neuer Rechtsrahmen für die Anlageberatung,
ZEITSCHRIFT FÜR BANKRECHT UND BANKWIRTSCHAFT (ZBB) 333 (2007); Duve & Keller, supra note 15, at
2477 et seq.; Hanno Teuber, Finanzmarkt-Richtlinie (MiFID) – Auswirkungen auf Anlageberatung und
Vermögensverwaltung im Überblick, ZEITSCHRIFT FÜR BANK- UND KAPITALMARKTRECHT (BKR) 429 (2006);
Tilman Weichert & Thomas Wenninger, Die Neuregelung der Erkundigungs- und Aufklärungspflichten von
Wertpapierdienstleistungsunternehmen gem. Art. 19 RiL 2004/39/EG (MiFID) und Finanzmarkt-RichtlinieUmsetzungsgesetz, ZEITSCHRIFT FÜR WIRTSCHAFTS- UND BANKRECHT (WM) 627 (2007).
25
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It is an extensively discussed question how these duties correlate with the Bondruling of the BGH. In this decision the BGH derived the duty of client information
from an implied consultancy agreement and not from any supervisory regulations.
Thus the answer to the aforementioned question depends on the effects of
supervisory regulations on private law. This is a difficult question of principle
beyond the scope of this article. It may only be referred to the discussion on the
legal nature of supervisory regulations as being either public or private law as well
as the unclear terms of the “Ausstrahlungs-“ or “Konkretisierungswirkung” (radiating
or concretizing effects) of supervisory regulations on private law.26 In this context
the present article can only deal with the controversy if the Bond-ruling of the BGH
has been outdated by the implementation of the MiFID into German law27 or if the
principles of the ruling persist28. We take the view that the Bond-ruling is not
outdated but rather needs some adaptation. In the future a much more restrictive
approach should be taken concerning the assumption of an implied consultancy
agreement in the course of the provision of investment services. § 31 WpHG as well
as the concept of client classification in § 31a WpHG show that the legislator aimed
at a gradual level of protection depending on the provided investment service as
well as the need of protection of the different types of clients. This concept would
be undermined if each provision of investment services would entail an implied
consultancy agreement triggering extensive duties of information. However, if a
consultancy agreement is actually concluded, its content has to be determined by
using the ordinary means of interpretation. In this respect § 31 sec. 3 WpHG does
not set any limits. As a consequence, contrary to § 31 sec. 3 WpHG the parties can
not only agree on duties of information regarding the relevant type of investment
service but also with regard to the specific investment service as provided in the
individual case. Arguably this result can be best brought in line with the
assumption that the supervisory regulations are only of radiating effect on private
law.
F. Conclusion
It has been shown that the implementation of the MiFID has brought many new
detailed regulations into the WpHG. In some cases the German legislator has not
met the self-set goal29 of a one-to-one implementation of the MiFID into national
Recently Rüdiger Veil, Anlageberatung im Zeitalter der MiFID, ZEITSCHRIFT FÜR WIRTSCHAFTS- UND
BANKRECHT (WM) 1821, 1825 et seq. (2007); Weichert & Wenninger, supra note 25, at 635.
26
Peter O. Mülbert, Anlegerschutz bei Zertifikaten, ZEITSCHRIFT FÜR WIRTSCHAFTS- UND BANKRECHT (WM)
1149, 1157 (2007).
27
28
Veil, supra note 26, at 1826.
29
BT-Drucks. 16/4028, 52.
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Implementation of the MiFID into the WpHG
1187
law. This might cause profound difficulties in the interpretation and application of
the new regulations. The controversial discussed classification of local authorities
as either retail clients or professional clients or even eligible counterparties may serve as
only one example. Thereby the vivid controversies in this area of the law have not
come to an end but have rather received new input. Inevitably many of these new
questions are awaiting profound research and remain unanswered for the time
being.
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