The insolvency proceedings on the assets of various affiliated companies of the Austrian Alpine group, which have already been opened in 2013, has caused numerous legal conflicts in diverse legal areas, such as accounting law, criminal law, capital markets law and insolvency law. Recently, with its ruling 6 Ob 154/19v of 23 April 2020, the Austrian Supreme Court (Oberste Gerichtshof, OGH) has added a further element to these legal mosaics relating to the law of loans replacing equity.
The Austrian law on loans replacing equity resembles in many aspects to the former legal situation in German law (which nevertheless has been substituted by the MoMiG by a legal regime based exclusively on insolvency law, at least from the point of view of substantive law), being tied to the granting of a shareholder loan in the economic crisis of the company, barring its repayment during this period und furthermore subordinating the claim on the repayment of the loan. For the indirect granting of loans in corporate groups, the Austrian Act on Equity Replacement (Eigenkapitalersatz-Gesetz, EKEG) contains special rules that make also the indirect vertical granting of loans (vid. § 8 EKEG) as well as the indirect horizontal granting of loans (vid. § 9 EKEG) subject to the aforementioned provisions. For latter constellation, which is covering especially the granting of loans between sister companies, § 9 par. 1, 2nd sentence EKEG provides the granting sister company a right to take recourse against the joint mother company, if it has granted the loan following the mother companies‘ instructions.
So far, it was highly debated if the right to take recourse may also be applicable analogously in the events of an indirect vertical granting of loans. Some legal scholars as well as the first instance court in the present case rejected such an application by analogy, stating that this constellation was already covered by the direct application of the statutory provisions pursuant to §§ 5; 8 EKEG, consequently lacking need for any application by analogy. In addition, they pointed out that the right to take recourse under § 9 par. 1, 2nd sentence EKEG always required the existence of a hidden repayment of contributions to the company’s share capital, which was lacking in the cases of a vertical granting of loans. To the contrary, other scholars interpreted § 9 par. 1, 2nd sentence EKEG as a general principle of law in the sense that in the events of an indirect granting of loans, such group company should bear the economic burden of the granting of the loans that had caused it and had taken advantage of it, in the case of a granting of loans following instructions of the mother company consequently latter. Prominent authors even argue for construing a general right to claim compensation for detrimental instructions in corporate groups based on this provision, also beyond the scope of the provisions on equity replacing loans.
The OGH has now answered the question in a way that the right to take recourse is also applicable in the events of a vertical granting of loans within corporate groups, however without taking a position on the further question if the provision may also serve as a basis for construing a general right to claims compensation for detrimental instructions in corporate groups. Consequently, the Spanish mother company FCC of the Austrian insolvent subholding of the Alpine group must reimburse the amount of the loan that latter has granted to its subsidiary, the also insolvent sub-subsidiary of the Alpine group responsible for its operative activities, in the event the granting of that loan had been caused following instructions. The previous instances will now determine if this was the case.
In our view, the insinuations made by the OGH to see in § 9 par. 1, 2nd sentence EKEG a general principle of law as to the correct economic allocation of the transfer of assets within a corporate group, indicate that the provision is also applicable beyond the Act on Equity Replacement. To that regard, Austrian law would adhere to a predominant evolution in comparative law, because nowadays a general right to claim compensation for detriments caused by the mother company is common to a large extent (vid. § 311 German AktG as well as the decision of the Spanish Supreme Court (TS) nº695/2015 of 11/12/2015 pointing towards that solution).
However, because the relation between § 9 par. 1, 2nd sentence EKEG to the general rules on Austrian law on the preservation of share capital remain unclear, latter protecting not only the companies‘ share capital but their whole assets in a very severe manner uncommon in comparative law, and hidden repayments of contributions to the share capital are declared void, either way cross-border corporate groups should refrain from using Austrian GmbHs as subsidiaries. This has been proven once more in the present case. If the Spanish mother company had run the subholding the legal form of for instance a German limited liability company with a sole shareholder, it would not be exposed to such an obligation to reimbursement (vid. § 30 par. 1 2nd sentence German Act on Limited Liability Companies (GmbHG), §311 of the German Act on Stock Companies is not applying in the case of GmbHs). Because even if one supports the BGH’s view to classify the German provisions on shareholder loans under private international law as insolvency law, in our view such a classification must be ruled out for § 9 par. 2nd sentence EKEG, being applicable in the present case as part of the Austrian lex concursus. Because different from the German law, this provision of Austrian law is not necessarily related to insolvency proceedings, but to the contrary rather based on the character of the shareholder loans replacing equity and the shareholder’s funding responsibility under company law. Also, a classification as tort law must be ruled out, because the infliction of damage through the tools of the law of corporate groups represents an aliud compared to the general obligation of neminem laedere of common tort law.
An extension of § 9 par. 1, 2nd sentence EKEG to companies governed by another lex societatis is consequently not possible and for various reasons would not be compatible with the legal requirements deriving from the liberty of establishment. Because the right to reimbursement under the EKEG is destined to compensate the damage caused by interference operated by instruments provided by corporate law in the internal relationships in corporate groups, and unlike the rules on subordination of shareholder loans or avoidance actions, is not aiming at the protection of the sub-subsidiary’s creditors, but at most to those of the subsidiary (subholding in the present case). However, the subholding’s creditors are aware of its legal form and consequently are held to ensure their claims by way of self-protection, in the event they deem it necessary. Furthermore, as far as companies governed by the laws of a Member State of the EU or the EEA are concerned, pursuant to Art. 17 par. 1 lit r) of the Accounting Directive, shareholders loans are usually visible in their annual individual accounts, so that creditors lack any need for paternalistic protection imposed by any mandatory statutory provisions of the State where there principal place of business is located.
Florian Deck, 21. February 2020
