§ 30 Capital maintenance

a) Legal Relations

Section 30 German Limited Liability Companies Act (Gesetz betreffend die Gesellschaften mit beschränkter Haftung – GmbHG) is one of the central provisions in the regulatory structure for raising and maintaining capital in a Limited Liability Company (GmbH). The  Federal Court of Justice (BGH) describes Sections 30 GmbHG and Section 19 GmbHG as the “core of the law on limited liability companies”. Federal Court of Justice, Judgement of 30.06.1958 – II ZR 213/56, BGHZ 28, 77

Section 30 I GmbHG contains - in short - a prohibition on payments by the GmbH to its shareholders if the payment would be at the expense of the GmbH's share capital (subscribed capital). Section 30 II GmbHG supplements the protection of the (equity) capital of the GmbH by restricting the free repayment of additional contributions (besides the contribution of the share capital) within the meaning of Sections 26 et seq. GmbHG, which are, however, not very common in practice.

Section 30 GmbHG primarily serves to protect the creditors of the company. As the shareholders of a Limited Liability Company such as a GmbH are generally only obliged to make a payment on the shares they have subscribed to, but are not personally liable for the liabilities of the GmbH, the regulations on raising capital (in particular Sections 14, 19 GmbHG) and capital maintenance (Sections 30, 31 GmbHG) are intended to ensure that, at minimum, the share capital of the GmbH is maintained and is available for the settlement of claims of the company's creditors. Section 30 I sentence 1 GmbHG therefore stipulates a payment prohibition that prohibits payments by the GmbH to its shareholders if this payment would affect the share capital (subscribed capital).

The protected share capital, which is referred to as “subscribed capital” in the balance sheet, corresponds to the amount of share capital stated in the articles of association and registered in the commercial register, irrespective of whether the contributions on the subscribed shares have already been paid in full.

Whether the share capital is affected by the payment to the shareholder must be examined on the basis of an interim balance sheet as at the time of the payment, which must be prepared in accordance with the principles of commercial law. This interim balance sheet is used to determine the so-called “Net Assets” (Reinvermögen) of the GmbH, which is the difference between the assets and the “real” liabilities, i.e. provisions and liabilities:

If the Net Assets determined as described before are lower than the share capital (subscribed capital) this is referred to as an short balance (Unterbilanz). If a short balance is already apparent at the time of the intended payment to the shareholder or if the Net Assets would fall below the share capital as a result of such payment, payment is prohibited in accordance with Section 30 GmbHG.

It is important to note that the term “payment” does not only include direct cash payments by the GmbH to its shareholder, but is defined extensively for the protection of creditors. A prohibited payment within the meaning of Section 30 I sentence 1 GmbHG can therefore be benefits of any kind for the favor of a shareholder that lead to a reduction in the company's assets, such as the transfer of property or rights or the waiver of claims. The assumption of liabilities or the creation of new liabilities to third parties can also be a “prohibited payment” within the meaning of Section 30 GmbHG, provided that this is done at the request or in the interest of the shareholder (e.g. assumption of liabilities of the shareholder without compensation or creation of obligations towards third parties who provide their services to the shareholder for private use).

On the other hand, the shareholder is of course not prohibited from having business relationships with “his” GmbH, for example if the shareholder of the GmbH leases business property, sells goods to or simply provides services for the GmbH, e.g. as managing director or consultant.

The question of whether a benefit provided by the GmbH to its shareholder results in a reduction in assets at the expense of the share capital must always be considered from a balancing perspective. If the payment made by the GmbH to its shareholder is offset by an equivalent consideration, there is no reduction in assets from a balancing perspective that could affect the share capital. For example, if the GmbH acquires goods at market value from its shareholder, the (purchase price) payment to the shareholder is offset by the acquired asset, which compensates for the cash outflow in the balance sheet.

In order to determine whether a permissible transaction or a prohibited payment was made in an individual case, it is determined whether a prudent managing director acting in accordance with commercial principles would also have concluded the transaction with a non-shareholder under the same circumstances and on the same conditions, i.e. whether the payment was justified by business reasons Federal Court of Justice, Judgement of 13.11.1995 – II ZR 113/94, ZIP 1996, 68(so-called “arm's length principle”). If the transaction between the shareholder and the GmbH does not comply with the arm's length principle, for example because the shareholder sells goods to the GmbH at inflated prices or, conversely, purchases goods from the GmbH below market value, there is a hidden distribution to the shareholder in the amount of the difference, which leads to a breach of the payment prohibition of Section 30 I sentence 1 GmbHG if a short balance has already applied (see above). A “classic” in this context is excessive management remuneration for the shareholder-managing director or excessive fees as part of a consultancy agreement between the shareholder and the GmbH.

If the GmbH makes payments to its shareholder in breach of the payment prohibition in Section 30 I sentence 1 GmbHG, the shareholder concerned is obliged to reimburse the payment received in breach of the prohibition in accordance with Section 31 I GmbHG. If the shareholder concerned is unable to make the reimbursement, the other shareholders are liable for the reimbursement on a pro rata basis in accordance with Section 31 III GmbHG. Although the subsidiary liability of co-shareholders pursuant to Section 31 III GmbHG only applies if the amount to be reimbursed is “necessary to satisfy the company's creditors”, this requirement is generally met, as claims for reimbursement pursuant to Sections 30, 31 GmbHG are usually asserted by the insolvency administrator in the GmbH's insolvency proceedings.

For reasons of creditor protection and to prevent attempts of circumvention, the capital maintenance regulations also apply to third parties in various constellations defined by case law, i.e. the payment prohibition of Section 30 I sentence 1 GmbHG can also apply if the GmbH does not make a payment directly to the shareholder, but to a third party, if this third party is legally or familiarly related to the shareholder or the payment was initiated by the shareholder. Please refer to the expert section below for explanations of the individual cases.

Conversely, Section 30 I sentences 2 and 3 GmbHG also provide for exceptions to the prohibition of payment:

1. According to Section 30 I sentence 2, 1st alternative GmbHG, the payment prohibition does not apply if a control and profit transfer agreement (Beherrschungs- und Gewinnabführungsvertrag) within the meaning of Section 291 I German Stock Corporation Act (Aktiengesetz – AktG) exists between the shareholder (controlling company) and the GmbH (controlled company). This is because the controlling company (shareholder) is then obliged under Section 302 I AktG to compensate for losses of the controlled GmbH, which in the opinion of the legislator guarantees a level of protection in favor of creditors equivalent to the capital maintenance regime.
2. According to Section 30 I sentence 2, 2nd alternative GmbHG, the prohibition of payment also does not apply if the GmbH's payment is offset by an equivalent claim for consideration or restitution against the shareholder. If, for example, the GmbH pays a purchase price to the shareholder, but in return receives a claim to the acquisition of an equivalent item, or grants the shareholder a loan which the shareholder is able to repay at any time due to his creditworthiness, the payment of the purchase price or the granting of the loan does not constitute a prohibited payment within the meaning of Section 30 I sentence 1 GmbHG. The provision is purely declaratory, because according to the relevant balancing approach (see above), there is no reduction in assets for the GmbH if it acquires an equivalent claim to consideration for its payment to the shareholder. The legislator introduced the provision primarily to prevent legal uncertainties in connection with cash pooling, which is particularly common between group companies. This is because in the context of cash pooling, liquidity transfers from subsidiaries to the parent company managing the cash pool are generally treated as loans from a legal perspective and the provision in Section 30 I sentence 2, 2nd alternative GmbHG shall clarify that such liquidity transfers are permissible from the perspective of Section 30 I sentence 1 GmbHG, provided that the parent company managing the cash pool is financially able to meet the claims of the subsidiaries from the cash pooling.
3. Finally, according to Section 30 I sentence 3 GmbHG, repayments made by the GmbH to repay shareholder loans are excluded from the payment prohibition. This is because the law on shareholder loans was completely transferred to the German Insolvency Code (Insolvenzordnung – InsO) by the Act to Modernize the Law on Limited Liability Companies and Combat Abuses (MoMiG). Federal Law Gazette, BGBl. I 2008, S. 2026, Bundesgesetzblatt BGBl. Online-Archiv 1949 - 2022 | Bundesanzeiger Verlag The new insolvency law provisions now stipulate the general subordination of shareholder loans (Section 39 I No. 5 InsO) on the one hand, and on the other hand, loan repayments made by the GmbH to its shareholder in the last year before the application for insolvency are generally subject to insolvency contestation in accordance with Section 135 I No. 2 InsO.

For further explanations on the exceptions described above, please refer to the expert section below.

b) Impact for Shareholders

For the shareholder as the recipient of the payment, the prohibition of payment in Section 30 I sentence 1 GmbHG primarily implies that he must reimburse payments that he has received from the company in breach of Section 30 I sentence 1 GmbHG in accordance with Section 31 I GmbHG, irrespective of whether the share capital has been refilled in the meantime in another way, for example through profits that have accrued again. The claim for reimbursement is also only time-barred after 10 years (Section 31 V sentence 1 GmbHG) and can be asserted by the insolvency administrator in insolvency proceedings.

However, breaches of Section 30 I sentence 1 GmbHG also entail liability risks for the co-shareholders of the recipient of the payment. This is because if the prohibited payment cannot be obtained from the recipient of the payment, the other shareholders are liable on a pro rata basis in proportion to their shares (Section 31 III sentence 1 GmbHG). Although the subsidiary liability of co-shareholders pursuant to Section 31 III GmbHG only applies if the amount to be reimbursed is “necessary to satisfy the company's creditors”, this requirement is generally met, as claims for reimbursement pursuant to Sections 30, 31 GmbHG are usually asserted by the insolvency administrator in the GmbH's insolvency proceedings.

c) Impact for Managing Directors

In addition to the co-shareholders of the recipient of the payment, it is primarily the managing director who bears the liability risks in the event of breaches of Section 30 I sentence 1 GmbHG.

If the co-shareholders of the recipient are required to reimburse the prohibited payment due to the default of the actual recipient of the payment in accordance with Section 31 III GmbHG, they can take recourse against the managing director in accordance with Section 31 VI GmbHG if the managing director intentionally or negligently violated the payment prohibition when effecting the payment.

Furthermore, in the event of prohibited payments, the company itself is also entitled to a claim for damages against the managing director in accordance with Section 43 III sentence 1 GmbHG, which is typically asserted by the insolvency administrator in insolvency proceedings. Unlike claims for damages under Section 43 II GmbHG, claims for damages under Section 43 III sentence 1 GmbHG cannot be extinguished in advance by discharge, settlement or waiver and the managing director is also not exculpated by the fact that he has complied with a resolution of the shareholders if the amount of damages is “necessary to satisfy the creditors”, which is regularly the case in insolvency proceedings.

In addition, the managing director is liable under Section 15b V sentence 1 InsO for payments to shareholders that lead to the insolvency of the GmbH. This claim is also regularly asserted by an insolvency administrator after insolvency proceedings have been opened.

d) Impact for Creditors

As compensation for the limitation of liability, the capital maintenance system primarily serves the purpose of protecting the assets of the GmbH against interventions by the shareholders and ensuring that sufficient assets are retained for the satisfaction of company's creditors. Nevertheless, this objective can only be achieved to a limited extent (cf. the criticism of the current capital maintenance system in the literature set out below).

As the claim for reimbursement pursuant to Section 31 I GmbHG is a claim of the GmbH against its shareholder, company creditors who have obtained an enforcement order against the GmbH for a claim can seize the claim and have it transferred to them for collection (Sections 829, 835 German Code of Civil Procedure, Zivilprozessordnung – ZPO) in order to then take direct action against the shareholder who received the prohibited payment. However, it is generally almost impossible for an outside creditor who does not have access to the GmbH's books and business transactions to provide evidence.

From a tax perspective, a prohibited payment within the meaning of Section 30 I sentence 1 GmbHG can also constitute a hidden profit distribution (verdeckte Gewinnausschüttung - vGA).

According to the established jurisdition of the Federal Fiscal Court (BFH), a hidden profit distribution is deemed to exist if the company grants its shareholder a benefit outside of the distribution of profits under company law and this benefit has its origin in the company relationship. An origin in the company relationship is given if a prudent and diligent managing director would not have granted this benefit to a non-shareholder. Federal Fiscal Court, Resolution of 05.09.2023 – VIII R 2/20, DStZ 2024, 6, Entscheidung Detail | BundesfinanzhofAlso in this context, it is therefore generally a matter of transactions between the GmbH and its shareholder that do not comply with the arm's length principle (see above) - often in connection with excessive remuneration of the shareholder-managing director.