22.5.4 Special rules for shareholder loans

Under American and German law, special rules apply to loans that the shareholder makes to the company. For example, since MoMiG’s implementation in Germany in 2008, in a bankruptcy, all loans furnished by shareholders are subordinated to the claims of the other creditors.1 Security that the company established for shareholder loans has no effect in bankruptcy; the trustee can nullify all repayments that the company made towards a shareholder loan in the period of one year prior to the bankruptcy. Thus, the German legislature opts for a very absolute regulation of shareholder credit and of the “fragwürdige” repayments made towards such credit. The American Bankruptcy Code also offers the possibility of subordinating shareholder claims and transferring the security on such claims to the bankrupt estate; however, these rules are based on a different notion.2 Where the subordination rules in Germany seem to be based on a vague notion of the general financing responsibility of shareholders, the bankrupty trustee in the US, in order to successfully invoke subordination, has to demonstrate that the shareholder can be blamed for inequitable conduct towards the company’s creditors. The American Bankruptcy Code also offers the possibility of nullifying payments to certain shareholders; however, this requires – in brief – that the company be insolvent at the time of payment and where payment was not made “in the ordinary course of business or financial affairs”. Thus, on this point as well, the American rules reflect a different approach as compared to the absolute German standard. The Netherlands does not have any special standards for shareholder loans.3 For this reason, some authors advocate for the introduction of rules where shareholder loans can be subordinated in the event of bankruptcy, and where payments made on those loans can be nullified. On the other hand, others argue that the current system offers sufficient tools to challenge any prejudice caused by shareholder loans.