74 3 Reduction of External Funding Needs
In Germany, the MoMiG made it easier for group companies to grant collateral and use
cash pooling.^186
(f) How should a participating company take into account rules on thin capitalisa-
tion and similar rules? (1) In some countries, an insolvency rule can prevent the
making of payments (sections 5.3 and 5.4).^187 (2) Under German law, there are re-
strictions for the protection of the capital of the controlled company. For example,
a sole shareholder (Alleingesellschafter) that controls a GmbH (abhängige GmbH)
is responsible for the maintenance of the share capital of the GmbH. The sole
shareholder is liable for damage caused by breach of duty, where the GmbH can-
not fulfil its obligations due to the actions of the sole shareholder (the “Bremer
Vulkan” case).^188 There are also other restrictions like rules on shareholder loans
(see above).^189 (3) In some countries, loans to a company by its shareholder can,
under exceptional circumstances, be regarded as equity that cannot freely be re-
paid.^190 (4) There can also be the risk of making the master company liable for the
debts of the participating companies where the funds of participating companies
have not been held separate due to, for example, lack of proper bookkeeping (the
doctrine of lifting the corporate veil, the doctrine of Vermögensmischung, or simi-
lar doctrines).
(g) How should a participating company take into account insolvency law rules
according to which certain payments made before the commencement of the in-
solvency must be returned to the company?^191
(h) How should a participating company take into account company law rules
that govern share issues or the increase of share capital? In practice, the top ac-
count is often in the name of the parent. Where a subsidiary that participates in
cash pooling issues shares or increases its share capital, moneys paid by the parent
end up in the top account. (1) EU company law can govern this situation in two
ways. First, the Second Company Law Directive provides that a company “may
not advance funds, nor make loans, nor provide security, with a view to the acqui-
sition of its shares by a third party”.^192 On the other hand, a usual cash pool trans-
action is not done for the purpose of financing the acquisition of shares in the
(^186) See § 57(1) AktG and § 30(1) GmbHG; Wiehe H, Jordans R, Cash Pooling and Granting
Up-stream Security in Acquisition Finance under German Law-Current Situation and In-
tended Changes, JIBLR 23(7) (2008) pp 351–353; Vetter J, Schwandtner C, Cash Pool-
ing Under the Revised German Private Limited Companies Act (GmbHG), German L J
9 (2008).
(^187) For US law, see MCBA § 6.40 (c).
(^188) BGH, judgment of 17.9.2001 - II ZR 178/99 (“Bremer Vulkan”).
(^189) See, for example, § 302(1) AktG; § 19(2) GmbHG; OLG Jena, judgment of 21.09.2004
(8 U 1187/03); BGH, judgment of 10.7.2006 - II ZR 238/ 04.
(^190) § 39(1) number 5 and § 135 InsO (Gesellschafterdarlehen) introduced by the MoMiG.
(^191) § 826 BGB; § 64 GmbHG; BGHZ 173, 246; BGH, judgment of 28.4.2008 - II ZR
264/06 (GAMMA); Vetter J, Schwandtner C, Cash Pooling Under the Revised German
Private Limited Companies Act (GmbHG), German L J 9 (2008).
(^192) Article 23(1) of Directive 77/91/EEC (Second Company Law Directive).