72 3 Reduction of External Funding Needs
Group companies should agree on the distribution of costs and benefits between
themselves.
Effective cash pooling (cash concentration) is legally more complicated, be-
cause effective cash pooling creates loans and debts between the participating
companies. Irreversible donations or distributions of funds might breach company
law rules that govern the making of distributions to shareholders.^168
Particular legal questions. The participating companies must address, for ex-
ample, the following legal questions.
(a) Will cash pooling be regarded as the pursuit of regulated banking business
by the parent? In the EU, cash concentration in the parent’s account is not re-
garded as the pursuit of banking business by the parent^169 and will not require au-
thorisation.^170
(b) In cross-border cases involving countries that do not belong to the EU, the
company should ask whether the transaction is constrained by currency restric-
tions. In the Member States of the EU, cash pooling between group companies
will not be constrained by currency restrictions. Currency restrictions are basically
prohibited under the EC Treaty as restrictions on the movement of capital^171 or
payment restrictions.^172
(c) Will the transfer of funds between accounts participating in a cash pool
structure be regarded as intercompany lending? To what extent are intercompany
loans permitted under company laws? Intercompany lending is usually constrained
by company law rules, but it is permitted at least where the transaction is custom-
ary and motivated by business reasons.^173 Company laws typically restrict cash
pooling where a participating company uses it as a long-term source of funding.^174
A company that acts as a net source of finance for other group companies can be
required to charge interest at the market rate.
Under German law, intercompany lending raises particular questions^175 relating to: capital
maintenance (upstream loans);^176 equity-replacing loans or shareholder loans^177 (downstream
(^168) Article 15 of Directive 77/91/EEC (Second Company Law Directive).
(^169) Articles 1(1) and 4(1) of Directive 2006/48/EC.
(^170) See, for example, § 2(1) Nr. 7 and § 2(2) Nr. 5 KWG in German law.
(^171) Article 56(1) of the EC Treaty.
(^172) Article 56(2) of the EC Treaty.
(^173) Vandsø Jacobsen S, Lindekilde Schmidt C, Cash Pooling i selskabsretlig belysning,
NTS 2002:4 pp 451–465.
(^174) See Blöse J, Cash-Management-Systeme als Problem des Eigenkapitalersatzes, GmbH-
Rundschau 14/2002 pp 675–678; Cahn A, Kapitalaufbringung im Cash Pool, ZHR 166
(2002) p 279: “Wenn Liquiditätsanlage und Kreditaufnahme den einzelnen Konzern-
unternehmen überlassen bleiben, kann ... die Situation eintreten, dass einige
Konzernglieder von dritter Seite verhältnismäßig teure Kredite in Anspruch nehmen,
während andere Gesellschaften ihre überschüssige Liquidität am Markt anlegen und
dafür bestenfalls die übliche Verzinsung erhalten.”
(^175) Vetter J, Schwandtner C, Cash Pooling Under the Revised German Private Limited
Companies Act (GmbHG), German L J 9 (2008).
(^176) § 30(1) GmbHG.
(^177) § 39(1) number 5 and § 135 InsO (Gesellschafterdarlehen) introduced by the MoMiG.