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Contesting the Distribution of a Profit Carried Forward to the Sole Shareholder of a Limited Liability Company

If the sole shareholder of a limited liability company (GmbH) decides to carry forward the annual profit to new account, this can be equivalent to a loan in economic terms. This was recently clarified by the Federal Court of Justice (BGH).


The BGH ruling is based on the following facts: If a sole shareholder of a GmbH carries forward an annual profit to a new account, the profit carried forward forms equity to which the company is entitled in accounting terms. Only when the decision is made to distribute the profit does the shareholder have a claim against the GmbH for payment in cash, which is to be booked as debt capital.

This process can become relevant under insolvency law, because claims arising from the repayment of a shareholder loan or those arising from legal acts which correspond economically to such a loan are subordinate to the other insolvency creditors. If such a claim is settled against the shareholder before the GmbH becomes insolvent, the insolvency administrator can contest the payment and demand repayment to the GmbH from the shareholder. The only question is whether the profit carryforward initially left standing is economically equivalent to a shareholder loan.

In the case decided by the BGH, a sole shareholder of a GmbH decided in September 2009 to carry forward the profit from 2008 to new account. Only on December 1, 2009 did he decide to distribute the profit to himself. The money was transferred to the shareholder eight days later. At the end of March 2010, the GmbH filed for insolvency. The insolvency administrator demanded repayment of the distributed profit from the shareholder. He was of the opinion that the profit carried forward, which had been temporarily left with the company, did not constitute a loan, but was a legal act that was economically equivalent to such a loan.

The ruling of the BGH of July 22, 2021 - IX ZR 195/20

The BGH followed the opinion of the insolvency administrator and allowed the action for payment - as did the previous instances. By initially deciding, when adopting the resolution on the appropriation of profits, not to distribute the annual profit to himself but to carry it forward to new account, the sole shareholder makes a financing decision in favor of the company. This financing decision constitutes a legal act which is economically equivalent to a loan. The shareholder may not pass on the risk associated with the granting of a loan to the creditors. The sole shareholder has the power at any time to effect the dissolution of the profit carried forward and the distribution of profits to himself. The decisive factor is that the shareholder has (temporarily) left a sum of money to his company and that the company has additional financial resources as a result.

Practical advice

The decision of the BGH is consistently in line with earlier decisions on insolvency law. At least for the sole shareholder of a GmbH, the decision is consistent and protects the creditors from circumvention schemes. There is no significant difference whether the shareholder distributes the profit immediately and later makes it available to the GmbH again as a loan, or whether he leaves the profit carried forward temporarily.

For practical purposes, the ruling emphasizes that shareholders of a GmbH should always take into account the possible risks of avoidance in the event of insolvency when making any financing decision. In case of doubt, they should make the decision on the appropriation of profits when they are clear about the issue of profit distribution.

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