22.5.2 Bankruptcy law limits on capital withdrawals

The shareholder’s discretion to decide on the financing of the company is not only regulated by company law rules; bankruptcy law also imposes limits on this discretion. By invoking bankruptcy law provisions, a trustee can sometimes challenge a capital withdrawal by a shareholder. For this reason, the bankruptcy law doctrines that serve to avoid prejudicial transactions are a functional equivalent of the distribution rules. For example, in the U.S., fraudulent transfer law plays an important role in the regulation of transactions between the company and its shareholders.1 American trustees who seek to avoid a distribution rely more frequently on the bankruptcy law doctrine of fraudulent transfers than on the company law rules. In the U.S., a trustee – and sometimes an individual creditor, as well – can nullify a transfer by the company to a shareholder if the company did not receive a reasonably equivalent value in exchange and, after the transaction, became insolvent or was left with an unreasonably small capital. This does not require that the shareholder be aware of the unauthorized nature of the transaction. Even though there is no German case law in which the Insolvenzanfechtung is applied to distributions to shareholders, a growing number of legal authors in Germany does argue that distributions can be nullified based on this bankruptcy law doctrine.2 However, opinions differ regarding the way in which reclaiming distributions should be incorporated in the highly complex system of the Insolvenzanfechtung. In the Netherlands, it is common opinion that distribution resolutions can be nullified by means of an actio pauliana.3 In recent years, trustees appear to be using this possibility more and more often.