The IX. Civil Senate of the Federal Court of Justice (BGH), which is responsible for insolvency law issues, has clarified in two recent decisions under which circumstances shareholder claims are to be treated as shareholder loans and to what extent securities in relation to shareholder loans are subject to insolvency appeal.
The regulations in section 39 (1) no. 5 InsO and section 135 InsO, according to which claims for the return of a shareholder loan or claims from legal acts which correspond economically to such a loan are satisfied on a subordinate basis, section 39 (1) no. 5 InsO, legal acts which have granted satisfaction or security for a shareholder’s claims for repayment of a loan within the meaning of section 39 sub-section 1 no. 5 InsO can be contested (and must be granted back) if they can be contested 10 years (security, section 135 (1) no. 1 InsO) or 1 year (satisfaction, section 135 (1) no. 2 InsO) before the application to open insolvency proceedings or after this application.
Exclusion of the cash transaction expense pursuant to section 142 InsO
A challenge of legal acts according to the provisions of §§ 129 et seq. InsO is fundamentally excluded if the insolvency debtor has directly obtained an equivalent consideration for his performance into his assets (so-called “cash transaction objection”), unless there is an intentional creditor disadvantage, section 142 (1) InsO. The exchange of service and consideration is direct if it takes place in a close temporal connection according to the type of services exchanged and taking into account the customs of business transactions, section 142 (2) sentence 1 InsO.
In the decision of 14 February 2019, IX ZR 149/16, the Federal Court of Justice (BGH) has now decided, that the cash transaction objection of section 142 (1) InsO does not apply when contesting the collateralization of a shareholder loan, i.e. is not applicable in the context of the challenge pursuant to section 135 (1) no. 1 InsO. It is true that the legal system – namely the location of the cash transaction privilege – does not comply with the rules on rescission of § 129 et seq. InsO – speak for applicability. However, such a provision would lead to unequal treatment of collateral provided.
While the collateral provided in close temporal connection with the loan disbursement would be privileged, this would not apply to collateral provided well before the loan disbursement. However, such unequal treatment was not justified. Furthermore, it was clear from the history of the law, that the cash transaction privilege should not have any effect from a legislative point of view on the contestability of collateral for claims arising from shareholder loans. For example, in contrast to the other grounds for avoidance, the avoidance provision of the current section 135 InsO was not mentioned in the explanatory memorandum to section 142 InsO. In addition, the meaning and purpose of § 135, Subsection 1, No. 1, InsO and § 142, InsO also argue against the applicability of the cash transaction expense in the context of the collateralisation of shareholder loans.
The latter consists of ‘making provision for the shareholder to transfer the risk associated with the granting of a loan to the community of creditors of the company’ and thus fails to meet its responsibility for the consequences of the financing. “If a company founded with a small share capital can take up its business operations at all only on the basis of shareholder loans granted to it, there is a risk, if the company grants a security, that from the start of the advertising activity until a possible insolvency, practically all of its corporate assets will be reserved for the shareholder to the exclusion of creditors”. In the opinion of the Federal Court of Justice, the “shareholder’s risk incentive already lying in the limited liability (…) would be additionally increased if he is also satisfied with priority from the company assets thanks to a security in relation to the other creditors. A secured shareholder, who does not have to fear for the fulfilment of his repayment claim, will be inclined to take unreasonable, if not irresponsible, business risks that only affect unsecured creditors. The granting of shareholder loans secured by the company’s assets is therefore not compatible with proper corporate financing.
The sense and purpose of the cash transaction privilege would also contradict the applicability of § 142 InsO to the collateralisation of shareholder loans. Finally, the reason for the exemption of the cash transaction privilege was the intention that a debtor in crisis would practically be excluded from business transactions if even cash transactions of equivalent value were subject to challenge. Section 142 InsO was therefore intended to maintain the ability of the debtor in crisis to act. For this purpose, the company in crisis should be able to conduct incontestable transactions with neutral third parties. However, the collateralisation of a shareholder loan could not be regarded as a normal turnover transaction in general business transactions.
The decision of the Federal Court of Justice (BGH) of 14 February 2019 means, that even collateral granted in close temporal connection with the loan extension is subject to the 10-year rescission period of section 135 (1) no. 1 InsO in the broadest sense.
Treatment of a shareholder claim as a claim equivalent to a loan
In the decision of 11 July 2019, IX ZR 210/18, the BGH specified in specific terms when a claim of a shareholder exchange transaction (e.g. purchase agreement) constitutes a claim equivalent to a loan within the meaning of sections 39 (1) no. 5, 135 InsO. arising from a customary.
It has clarified in this respect, that all receivables of a shareholder resulting from exchange transactions correspond to a loan, in particular if these are deferred – legally or de facto. After all, such a deferral “is equivalent to an agreement loan from an economic point of view”. In this case, the claim was also to be treated as a (shareholder) loan under insolvency law.
Nevertheless, not every deferral leads to a qualification of the claim as a loan. In particular, not every exceeding of payment periods customary in the market or in commerce leads to the acceptance of a claim equivalent to a loan, so that exceeding a payment period of 60 days is not sufficient to necessarily accept a claim equivalent to a loan. Rather, an additional payment period must be granted and, in the overall view, the conclusion that a loan should be granted must undoubtedly be drawn. This is “generally to be assumed if a due claim is deferred by the shareholder for more than three months by way of a legal transaction or is actually left standing”, whereby the law stipulates a period of notice of three months for loan agreements of indefinite duration pursuant to § 488 (3) BGB. In practice, the decision of the Federal Court of Justice means that shareholders or equivalent persons should not enter into any payment agreements for claims resulting from exchange transactions which approach the three-month period mentioned by the Federal Court of Justice. At the same time, claims should not be “left standing” for approximately three months. As far as possible, payment terms – up to the time threshold of 60 days at the most – should correspond at most to the usual market payment terms in order to keep the risk of qualification as equivalent to a loan as low as possible.