3.4 Management of Working Capital 75company (for financial assistance, see section 20.4).^193 (2) Second, EU company
law also regulates the issuing of shares for a consideration other than in cash.^194
The use of the issuing company’s net debt as consideration for the shares is in
some Member States (like in Germany^195 but not in England) regarded as issuing
shares for a consideration other than in cash, meaning that an experts’ report be-
comes necessary under the Second Company Law Directive (see section 5.12).^196
The participating companies can mitigate this legal risk by paying for shares is-
sued by another participating company or the increase in its share capital from
pool-free accounts, and ensuring that those payments will be made to a pool-free
account. (3) The laws of some countries provide that the increase of share capital
cannot be registered unless the funds paid as consideration for shares or the in-
crease of share capital are freely disposable by the company.^197 In Germany, the
BGH has, in two cases,^198 held that funds were not freely disposable by the com-
pany because of zero balancing. Formally, consideration for the increase of share
capital was cash. In reality, however, share capital was increased for a considera-
tion other than cash (verdeckte Sacheinlage). Again, the issuing company can
mitigate this risk by ensuring that payments are made to a pool-free account from
a pool-free account.
(i) Which accounts and funds should be pool-free? The firm should ensure that
there are pool-free accounts for assets that may legally be used only in certain
ways. For example, there should be pool-free accounts for external funding that
can only be used in certain ways under the firm’s contractual covenants and other
undertakings. In addition, legal risk can be mitigated if there are pool-free ac-
counts for monies that will be paid as consideration for shares that will be issued
by the company or for an increase in share capital.^199 A third example is govern-
ment subsidies that can only be used for a certain purpose.^200
Mitigation of risk. The main ways for the firm to mitigate legal risk in a cash
concentration (effective or “real” cash pooling transaction) are therefore as fol-
lows: a contractual framework that balances the costs and benefits between the
bank and the participating companies and between the participating companies;
regular disclosure of information to all participating companies; credit limits for
(^193) For a more critical view, see Vandsø Jacobsen S, Lindekilde Schmidt C, Cash Pooling i
selskabsretlig belysning, NTS 2002:4 p 458.
(^194) Article 27 of Directive 77/91/EEC (Second Company Law Directive).
(^195) See also Cahn A, Kapitalaufbringung im Cash Pool, ZHR 166 (2002) pp 283–285.
(^196) Articles 10(2) and 10(3) of Directive 77/91/EEC (Second Company Law Directive).
(^197) See, for example, § 19(1) GmbHG.
(^198) BGH, judgment of 16.1.2006 - II ZR 75/04 and II ZR 76/04; BGH, judgment of
10.7.2006 - II ZR 238/ 04.
(^199) For these problems, see Cahn A, Kapitalaufbringung im Cash Pool, ZHR 166 (2002) pp
278–306; Blöse J, Cash-Management-Systeme als Problem des Eigenkapitalersatzes,
GmbH-Rundschau 14/2002 pp 675–678.
(^200) Cahn A, Kapitalaufbringung im Cash Pool, ZHR 166 (2002) p 283: “Schließlich können
Mittel, die einem Konzernunternehmen, von dritter Seite zweckgebunden zur Verfügung
gestellt werden, von der Einbringung in den Pool aufgenommen werden, wenn sich die
Übertragung auf das Zielkonto mit der Zweckbindung nicht vereinbaren ließe.”