Oxford University Comparative Law Forum
Lowering the Corporate Veil in Germany: a case note
on BGH 16 July 2007 (Trihotel)
Charles Zhen Qu* and Björn Ahl**
(2008) Oxford U Comparative L Forum 4 at ouclf.iuscomp.org | How to cite this article
In the recent Trihotel case, the German Federal Court of Justice
has substantially modified its previous position on lifting the
corporate veil, by which shareholders can become liable towards company
creditors. The present case note argues that the tort-based new
approach will not only afford company creditors with adequate
protection but also direct German company law jurisprudence towards a
greater regard for fundamental principles of company and insolvency
Table of contents
How the interests of company creditors are best protected when the
company becomes insolvent because of the misfeasance of the company
controllers is an issue which courts in all jurisdictions are facing.
In Germany, this issue is particularly relevant where the company in
question is a limited liability company (a Gesellschaft mit
beschränkter Haftung or GmbH for short), which is roughly
equivalent to what is in common law jurisdictions called a private
Until recently, the Federal Court of Justice of Germany (Bundesgerichtshof,
BGH) had resolved the issue through two different approaches, both of
which entailed, to a different extent, something that can be viewed as
lifting of the corporate veil. The first of these is the 'qualified de
facto group' approach. The second, which was adopted in the
beginning of the 21st century after the BGH abandoned this
notion of a 'qualified de facto group', was termed as the
'liability for destroying the company's existence' approach. In its
decision of a recent case, Trihotel, the BGH developed a
third approach which does not involve veil-lifting, through
reconceptualizing the notion of company destruction liability.2 The
purpose of this article is to assess the means of protection provided
for company creditors under the new approach through a close
examination of the Trihotel case, and to place this in the
comparative context of common law notions of company creditor
protection. As the new approach has been developed through rejection or
reconceptualization of the two previously used concepts, the following
will provide a brief introduction to these two superseded approaches.
Liability within 'qualified de facto
Liability within qualified de facto groups is a concept
that the BGH has developed in considering the liability of the
controlling shareholder of a GmbH for the company's debt through an
analogous application of the provisions governing enterprise groups in
Germany's Stock Corporations Act (Aktiengesetz, AktG). We will
therefore first have to take a look at how the AktG deals with such
enterprise groups for stock corporations, which are similar to public
(limited) companies in common law jurisdictions.
The so-called 'de facto' or 'non-contractual' groups are
one of two different types of enterprise groups that are regulated
under the enterprise group provisions in the AktG, the other being the
so-called 'contractual groups'. Contractual groups are formed through
controlling agreements and profit-and-loss transfer agreements among
different companies that intend to form company groups. The purpose of
forming this type of enterprise groups is to maximize tax advantages.3 A
non-contractual or 'de facto' enterprise group is formed where
dependent enterprises are joined together under the uniform management
of a controlling enterprise.4 Such an arrangement becomes a
'qualified de facto group' where the controlling enterprise
abuses its controlling position when seen from an objective point of
The relationships among enterprises within contractual groups are
governed by §§ 300ff AktG, whereas de facto groups
are regulated under §§ 311ff. There are, on the other hand,
no statutory provisions on GmbH groups. The law on GmbH groups has
therefore been developed by case law and literature, largely through
analogous application of provisions governing enterprise groups in the
the above-mentioned provisions, the most relevant are §§ 302,
311 and 317. § 302 requires the controlling enterprise to settle
an annual deficit of its subordinate enterprises. § 311 prohibits
the controlling enterprise from using its influence to induce a
subordinate enterprise to enter into a transaction that is
disadvantageous to the subordinate enterprise without being given
compensation. Where no such compensation is provided, § 317 grants
to the aggrieved subordinate enterprise a claim for damages against the
In a number of earlier cases, the BGH held a controlling person of a
GmbH group liable for the debt of a company within the group, based on
the notion of 'liability within a qualified de facto group'
through an analogous application of the above-mentioned AktG
provisions. Examples include the Video case7 and the TBB
where the Court upheld the claim of the creditor of a subordinate
company against the controlling person of the GmbH group. In both
cases, the defendants were natural persons who controlled the group as
shareholders and directors, and the Court treated them as the
'controlling enterprise' for the purpose of an analogous application of
§ 302 AktG.
This concept of 'liability within a qualified de facto
group' was severely criticized for lack of any precise definition9 and for
the uncertainty which it created as to whether a party would be liable
under § 302 AktG. A more perturbing problem of the 'liability
within a qualified de facto group' approach, however, is that
it is rather questionable whether an analogy should be drawn from a
contractual stock corporation group to a de facto limited
liability company (GmbH) group. The problem of the analogy is that it
leads to an application of provisions governing contractual groups of
stock corporations to situations where relationships among companies in
a company group are not at issue. In both the Video and TBB
cases, the so-called 'controlling enterprise' was not really an
enterprise but a natural person who had controlling influence in a
company within the group, which was not really a stock corporation
The qualified de facto group approach leads to a lifting of
the corporate veil by making the controlling person liable for a
'subordinate' company's debt.
Liability for destroying the company
It was probably in reaction to this criticism that the BGH abandoned
the 'qualified de facto group' approach in favour of the concept of
"liability for destroying the company's existence" at the beginning of
the 21st century.11 The BGH's change of mind was
indicated first in an obiter dictum that the Court made in
the Bremer Vulkan case.12 In that case, Bremer Vulkan Verlag
AG was both the sole shareholder of MTW GmbH and the controlling
company of a corporate group. MTW had received a sum of money from the
State. Rather than keeping this money within the assets of MTW, Bremer
Vulkan stashed this sum into the central treasury of the company group
under its control. Both the company group and MTW then became
insolvent. The claimant, a state agency, then sued the members of the
management board of Bremer Vulkan.
The Court observed obiter dictum that MTW should be
protected neither through an analogous application of §§
291-310 AktG (on contractual stock corporation groups) nor of
§§ 311-317 (on de facto groups). Such protection
should rather be based on the doctrine of capital maintenance and the
company's right to continuing existence.
The capital system under the G,mbHG is constituted by, broadly,
three elements. The first is the requirement of a fixed minimum share
The minimum amount of share capital required under GmbHG, is € 25,000.14 The
second is the obligation on the part of the incorporators to pay their
capital contribution in full.15 The third is the prohibition against
repayment of capital contributions to shareholders.16 The main anti capital
withdrawal provisions are §§ 30, 31 GmbHG. § 30
prohibits the withdrawal of capital contributions, whereas § 31
requires a defaulting shareholder to repay to the company the capital
contribution that he has wrongfully withdrawn.
The company's right to continuance requires that the controlling
shareholder should pay due consideration to the company's interests
when interfering with the company's assets or business opportunities.
Such due consideration would be lacking if the company becomes unable
to meet its obligations because of the shareholder's interference with
This is the concept of liability for company destruction.18 Having
caused the company's destruction would, however, render the defaulting
shareholder liable for the company's debt only if the company's ability
to discharge its debt towards the creditor cannot be restored by
enforcing claims against the shareholder under § 30, 31 GmbHG.
'Company destruction', being a judicially developed basis of liability,
therefore was subsidiary to §§ 30, 31 GmbHG.19
This company destruction liability approach to the defaulting
shareholders' liability for the company's debt received its first
application in the KBV case.20 In that case, the claimant had
entered into a contract to provide services to KBV GmbH (KBV). After
the claimant had performed its part of the contract, KBV entered into a
transaction with a third party, L GmbH (L), which had the effect of
depriving KBV of part of its assets. This transaction was entered into
by A, who was one of KBV's two shareholders, with the consent of B, the
other shareholder in KBV, who was also this company's Managing
Director. No insolvency proceedings were initiated against KBV because
of its lack of assets. The unavailability of KBV's assets was caused by
that company's transaction with L, which was procured by A and B.
The claimant brought an action against, inter alia, A and B.
The Court held that the two shareholders were obliged to compensate the
claimant for the loss that it had suffered because of its inability to
recover from KBV. The Court's ruling was based on two concurrent
doctrinal bases. The first is liability for company destruction, and
the second is the delict of intentional infliction of loss in violation
of good morals (contra bonos mores) under § 826 BGB, the
German Civil Code.
On the first ground, the Court ruled that the privilege of limited
liability granted to the shareholders of a private company under
§13 para. (2) GmbHG was subject to the precondition that the
company's assets must be committed to the preferential satisfaction of
company creditors for as long as the company exists.21 Shareholders had
access only to the surplus in the company coffers, i.e. assets which
were not required for fulfilling the company's obligations.22 An act
on the part of a shareholder to siphon off the company's assets without
taking into account the company's ability to discharge its debt
obligations amounted to an abuse of the legal form of the company. The
consequence of this abuse is the loss of the shareholder's privilege of
limited liability, but only to the extent that the loss suffered by the
company in consequence of this interference with the company's assets
is not made good by remedies under §§ 30, 31 GmbHG, the
effect of which has been discussed above.23 As concerns delictual liability for
violation of good morals, the Court held that A and B had deliberately
and contra bonos mores harmed the interest of the claimant,
who was a creditor of the company. The harmful action of the
shareholders was contra bonos mores because it constituted
an abuse of the legal form of a company.24
The contra bonos mores rule in § 826 BGB establishes
liability for damages if a person wilfully causes damage to another in
a manner contrary to good morals. § 826 is one of the general tort
provisions in the BGB. It was intended from the outset to be an
'all-purpose residual provision'.25 The types of situations that have
been litigated under this provision include misstatements, obtaining
court decisions by fraud, inducing breach of contracts, malicious
falsehood, abuse of rights, passing off, wrongful use of monopoly
power, and other underhand activities.26
In order to establish this liability under § 826 BGB, the
claimant must plead and if necessary prove four elements. These are:
(1) the claimant has suffered damage;
(2) this damage was caused by the conduct of the defendant;
(3) that conduct was contra bonos mores; and
(4) the defendant intended to cause the damage.27
In our situation the claimant is a creditor of the insolvent
company. It is quite easy to prove the first three elements. The
creditor suffers a loss because the insolvent company cannot pay. The
shareholders caused this loss through their interference with the
company's assets. For the reasons explained above when establishing
'company destruction' liability, the abuse of the corporate form also
amounted to conduct contra bonos mores.
The fourth element, intention, is normally the one which is most
difficult to establish under § 826 BGB. This is, however, not the
case in the present context. It is sufficient that the defendant
shareholder was aware that the act which gives rise to liability would
render the remaining company capital inadequate, which in turn was
likely to injure the interest of the claimant company creditor.28
Liability for company destruction no longer a
self-contained cause of action
In the Trihotel case, which came only five years after
its decision in KBV, the BGH changed its mind once again on
shareholders' liability for the company's debts where the company is
In essence, where the company is insolvent and the insolvency
administrator has decided not to proceed with the insolvency process
for lack of company assets, an aggrieved company creditor no longer has
a direct cause of action against a defaulting shareholder.30 In Trihotel,
the defendant was the managing director of three companies, namely,
A-GmbH, J-GmbH, and W-Hotel-GmbH. He did not hold shares in any of the
three companies. The shares in A-GmbH were rather held by the
defendant's wife (48%) and J-GmbH (52%) respectively. The defendant's
mother was the sole shareholder of J-GmbH, which also held 90% of the
issued shares in W-Hotel-GmbH. The remaining shares in W-Hotel-GmbH
were held by the defendant's mother.
A-GmbH had run a hotel business within premises that were leased
from the defendant. The defendant terminated the lease agreement five
months before it would have expired. The property was subsequently
leased to W-Hotel-GmbH. Thereafter, A-GmbH continued to manage the
hotel business on behalf of W-Hotel-GmbH, for 40% of the latter's
turnover. The turnover payable by W-Hotel-GmbH to A-GmbH was
subsequently reduced to 28%. In the meantime, in order to meet the
financial needs of A-GmbH, the defendant's mother had given a loan to
that company. The same company agreed to transfer its inventory to the
defendant's mother as security.
The financial situation of A-GmbH deteriorated and insolvency
proceedings followed. The Appeal Court of Rostock held the defendant
liable for the bad debts of the company towards its creditors on the
ground that he had destroyed the debtor company (A-GmbH). The court
believed that the defendant had done so through interference with
A-GmbH's assets on at least two occasions. First, the security
assignment of A-GmbH's inventory to the lender (the defendant's
mother), was excessive when compared to the value of the loan. Second,
the premature termination of his lease contract with A-GmbH was
The BGH, however, decided that the Appeal Court had erred in its
judgment when holding that these two transactions amounted to abusive
interference with A-GmbH's assets. The BGH pointed out that the Appeal
Court's conclusions were based on assumptions that were not supported
by available evidence, and that the effect which these transactions
might have had on the subsequent insolvency of A-GmbH could only be
determined with the help of expert opinions.32 The BGH therefore
referred the case to the Appeal Court and requested it to reconsider
the case after having obtained such expert evidence, and by giving
regard to the new notion of company destruction liability which the BGH
outlined in the same case.33 The following sections will show how
this new notion differs from the previous concept of company
destruction liability (A), why the old approach had to be abandoned
(B), and the wider significance of the changed notion of company
destruction liability when seen in a comparative context (C).
A. The new notion of company destruction liability
Although the BGH decided to abandon its previous company destruction
liability approach, it has not given up this capital maintenance based
approach to the liability of defaulting shareholders. On the contrary,
the Court decided that company destruction liability should continue in
both name and content.34
The Court, however, shifted the basis of this liability and developed a
concept which differs from its predecessor on both doctrinal and
practical levels. On a doctrinal level, company destruction liability
is no longer treated as an independent basis of liability which is
subsidiary to liability for wrongful withdrawal of capital under
§§ 30 and 31 GmbHG. It is now seen as a special category
within the delict of intentional infliction of loss contra bonos
mores under § 826 BGB.35 One practical difference is that
claims under § 826 BGB and under §§ 30-31 GmbHG are
concurrent. This means - as opposed to the previous concept - even if a
claim under §§ 30-31 GmbHG can be established, § 826 BGB
The other important practical effect is that a disappointed creditor
of the company cannot invoke § 826 BGB, because the tort is
committed against the company, not the creditor, as it is the company's
(and not the creditor's) assets which have been tampered with. The
primary victim of the tort is the company. Although it may be possible
to establish that a company creditor is a secondary victim of the tort,37
allowing direct actions by company creditors would contravene the
separate entity doctrine enshrined in § 13 GmbHG.38
The most important practical difference is therefore that a
disappointed creditor of the company can no longer sue directly an
abusive shareholder under company destruction liability. No longer will
such abusive interference with the company's assets lift the corporate
veil in the sense that a shareholder becomes directly liable for the
Under the new approach, the creditor can only sue the company itself.
The only recourse which the disappointed creditor of an insolvent
company has against the abusive shareholder is indirect. The creditor
must first establish the claim against the company and then enforce it
by a motion of attachment to have the company's claim against the
abusive shareholder transferred to the creditor.40
B. The new approach: why the change?
Four interrelated reasons for the shift to a new concept of company
destruction liability can be gleaned from the judgment of the BGH.
First, the old company destruction approach is internally inconsistent
and conceptually fuzzy.41
Company destruction liability was intended to fill the gaps left in the
provisions on statutory capital maintenance, §§ 30 and 31
GmbHG. § 30, it will be recalled, prohibits shareholders from
receiving payments out of their capital contribution. § 31
provides that the company has a claim for restitution of the payments
received against a shareholder who has contravened § 30. These two
provisions, however, will not always restore the company to the
position which it held prior to the contravention of Art 30. The
contravention may have caused collateral damage, or the extent of the
damage may in other ways not be reflected sufficiently in the company's
Company destruction liability was created to fill these gaps.
Abusive shareholders were to lose their privilege of limited
liability under § 13 GmbHG. They were, at least in theory, to
become fully liable to the company's creditors. This could produce
injustice in certain situations. For example, if the company was
already in deficit or already over-indebted before the defendant
shareholder's interference took place, the shareholder would be liable
for losses not resulting from the interference, and the creditors would
be better off than if the interference had not taken place.43 The BGH
had responded to this flaw by allowing the shareholder to prove that
the company would have become insolvent even without the interference,
in which event the shareholder would be liable only to the extent that
the actual loss suffered by the creditors exceeded the loss they would
have suffered if the shareholder had acted lawfully throughout.44
However, while this limitation avoided some injustice, it was
inconsistent with the main doctrinal basis which the BGH had initially
identified for company destruction liability, namely that the
shareholder should lose the privilege of limited liability because of
This inconsistency may well have been a main reason for the BGH'
rejection of its old approach.
Second, the notion of company destruction liability was developed
in order to extend the application of the statutory capital maintenance
It was meant to fill gaps in the protection of company assets under
§§ 30 and 31 GmbHG. Such an enlarged capital maintenance
regime was, however, difficult to reconcile with the previous rule
which allowed company creditors (and not just the company) to sue an
abusive shareholder. As it is only the company itself which has a cause
of action against the defaulting shareholder under §§ 30 and
31, that company should also be the only party who has standing under
the enlarged capital maintenance regime.
Third, the Court also clarified in its judgment in Trihotel
that an abusive interference with the company's assets by a shareholder
is neither conceptually nor functionally an abuse of corporate form.47
However, the Court, did not expand on why interference with the
company's assets did not amount to an abuse of corporate form, and
rather referred to an article written by Zöllner in support of
Zöllner has stated that a case of abuse of legal form can be made
out only if the legal form is used to conceal certain facts.49 If this
test is applied, a deprivation of a company's assets which has affected
the company's state of solvency can hardly be understood as an abuse of
the legal form. Corporate form in this situation is not used to conceal
anything or deceive anybody.
It can be inferred from Zöllner's view, which the BGH has cited
with approval, that the corporate veil should be lifted only where
corporate form is abused and the corporate form is not abused if it is
not used to conceal anything. This appears to be consistent with the
views that common law courts have expressed in more recent cases that
involved an issue on veil-lifting. One of the tests that commonwealth
courts have employed in considering whether the corporate veil should
be lifted was whether corporate personality had been used as a 'mere
facade concealing the true facts'.50 If abusive interference with the
company's assets does not amount to an abuse of corporate form, then
the corporate veil should not be lifted. Where the corporate veil is
not lifted, it is doctrinally impossible to hold a shareholder directly
liable to a company creditor.
Fourth and finally, the old company destruction liability concept is
inconsistent with the principle that a company possesses a separate
legal personality, a fundamental company law principle enshrined in the
Subjecting a shareholder who has committed a wrong against the company
to a direct action by a company creditor who has allegedly suffered a
consequential loss contravenes the company law principle that
protection of company creditors must be mediated through the company.52 Where
there is no reason to disregard the company's personality, there is no
ground to deviate from the separate personality principle enshrined in
§ 13 GmbHG. The creditor's debtor is the company, not the
shareholders of that company.
C. Implications of the new approach
The level of doctrinal integrity of the new approach is much higher
than that of the previous notion of company destruction liability. The
new approach does not suffer from the internal inconsistency and
conceptual fuzziness that the old approach was fraught with.53
Treating company destruction as a category under § 826 BGB enables
the courts to protect company creditors' interests from shareholders'
abusive meddling of company assets without having to agonize over the
doctrinal dilemma between the need for stripping the delinquent
shareholder of his privilege of limited liability and the absurd
consequence that may follow.54
One noticeable feature of the BGH's decision on the delictual aspect
is that company destruction is treated as a delict which is actionable
by the company only. This is a conscious choice of the BGH, not a
natural consequence of the fact that liability is placed under §
826 BGB. As this provision makes a party liable for intentionally
inflicting loss on another contra bonos mores, it could also
cover directly the loss which an abusive shareholder intentionally
inflicts on the company's creditors. And as § 826 BGB is generally
thought to be capable of protecting both the interests of the company
and that of the company creditors,55 one could argue that company
creditors should also be allowed to sue the shareholders directly under
The BGH's decision that a claim for company destruction liability
under § 826 BGB can be brought only by the company itself must
therefore be attributed to a different doctrinal basis. This is found
in the fundamental principle of company law, enshrined in the GmbHG,
under which a company has a legal personality which is separate from
that of its shareholders, with the consequence that shareholders are
not subject to direct actions by creditors. The constitutionality of
courts disregarding such a principle which parliament has set out in a
statute has been called into question even in common law jurisdictions
when discussing the courts' power to disregard a company's own legal
Apart from this 'matter of principle', there are practical legal
reasons why creditors should not have standing to sue shareholders when
the company is in the state or on the verge of insolvency. Heydon has
expressed the view, endorsed by the Australian High Court in a recent
Australian case, Spies v R,57 that (in the common law context):
there is a duty of imperfect obligation owed to
creditors: the directors58
must bear their interest in mind, and breaches of the duty cannot be
forgiven without their consent, but they cannot enforce that duty save
to the extent that the company acts, on its own motion or through a
Heydon did not explain why the obligation was imperfect. One of the
reasons, however, must be that "any claim brought by a liquidator
should be for the benefit of the liquidation assets generally, to be
distributed among the creditors and members in accordance with their
statutory ranking and entitlement."60 Giving remedial advantages to a
given creditor or to particular categories of creditors may adversely
affect the interests of other creditors who, under insolvency law and
policy considerations, deserve equal protection.61 The BGH's indication
in Trihotel that they may still be willing to consider
stripping shareholders of their privilege of limited liability in cases
where the remaining assets of the
company were 'stashed away' for the purpose of injuring the interest of
a single remaining creditor62 supports this view. Lifting of the
corporate veil in those circumstances would obviously not affect
company creditors' right to pari passu participation.
On a practical level, the BGH's new approach to the notion of
company destruction liability is not likely to compromise the interest
of an individual creditor to any significant extent. It is even
arguable that the new approach is beneficial to company creditors.
Normally, an insolvency administrator will proceed with an action
against any allegedly abusive shareholder where such an action is
promising according to the administrator's professional judgment. An
insolvency administrator will normally decide not to proceed only if
such a claim does not have a reasonable likelihood of success and is
therefore unlikely to increase the assets of the company.63 At
least where this professional judgment of the administrator is sound, a
direct action by a creditor will not be of much assistance.
Perhaps what is most commendable about the BGH's decision in Trihotel
is the Court's appreciation how important it is to avoiding lifting the
corporate veil for more than is strictly necessary. Any veil-lifting
encroaches on the basic company law principle that a company has a
legal personality which is separate from that of its shareholders and
the possibility of finding a theory on the constitution of exceptions
to this principle probably does not exist.64 Lifting the corporate
veil should therefore be treated as the last resort when all other
avenues have been exhausted.65 Trihotel exemplifies how a
type of cases that had previously been decided by lifting the corporate
veil to a certain degree can instead be disposed of by application and
creative development of other private law and company law rules. With
this judgment from Germany's highest court in civil matters, it is
highly likely that Trihotel will reorient company law
jurisprudence to a new direction where fundamental company law
principles such as the doctrine of the separate legal personality are
not disregarded unless it is absolutely impossible find a solution on
the basis, or through a legitimate extension, of other rules.
(East China Normal); LLB, LLM NSW, PhD ANU, Senior Lecturer, Murdoch
University Law School.
Dr. iur. (Heidelberg), Assistant Professor, City University of Hong
Kong Law School. The authors gratefully acknowledge the helpful
comments made on earlier drafts of this article by Dr. iur. Markward
Schemitsch, Mr Bruce Bott, Ms Katrin Giesen and the anonymous referees.
One of the reasons is that the creditors of a limited liability
company, i.e., Gesellschaft mit beschränkter Haftung
(GmbH), are not as well protected as those of a stock corporation which
is roughly equivalent to what in common law jurisdictions is called a
'public company'. The latter are regulated under the Stock Corporations
Act (Aktiengesetz, AktG), where by company creditors who are
unable to obtain their claims against the company are given standing to
sue shareholders who are in breach of capital maintenance provisions:
Art 62 (2) AkG, No similar standing is provided under the Limited
Liability Companies Act (GmbHG). For the meaning of private and public
companies, see P Davies, Gower and Davies' Principles of Modern
Company Law (7th edn, Thomson Sweet & Maxwell, London 2003)
12ff and P Redmond, Companies and Securities Law: Commentary and
Materials (4th edn, LBC, Sydney 2005) 113ff.
BGH, judgment of 16 July 2007, II ZR 3/04, available at: http://www.bundesgerichtshof.de;
for a discussion of the case see: H Altmeppen, 'Abschied vom
'Durchgriff'im Kapitalgesellschaftsrecht' (2007) Neue Juristische
Wochenschrift 2657-2660; E Schanze, 'Gesellschafterhaftung für
unlautere Einflussnahme nach § 826 BGB: Die Trihotel-Doktrin des
BGH' (2007) Neue Zeitschrift für Gesellschaftsrecht 681-686.
Volhard and A Stengel, German Limited Liability Company (John
Wiley & Sons, NY 1997) 255.
Volhard and Stengel (n 3) 261.
Volhard and Stengel (n 3) 264.
Volhard and Stengel (n 3) 253.
BGH judgment of 23 Steptember 1991, BGHZ 115, 187.
BGH judgment of 29 March 1993, BGHZ 122, 123. See S M Bartman and J
Roest 'Piercing the Corporate Veil in the Netherlands and Germany: A
Convergent Legal Development' in K Boele-Woelki, et al (eds) Comparability
and Evaluation: Essays on Comparative Law, Private International Law
and International Commercial Arbitration (Martinus Nijhoff,
Dordercht, The Hague 1994) 3, 6.
Wooldridge, 'Controlling Shareholders' Liability in German Private
Companies' (2005) 26(9) Comp Law 286, 286.
Wooldridge (n 9) 286; Hänisch (n 10) 19.
Wooldridge (n 9) 286.
BGH judgment of 17 September 2001, BGH Neue Juristische Wochenschrift
§ 5 GmbHG.
§ 5 GmbHG. Note, however, that the recent reform of the GmbHG
introduced the so-called Unternehmergesellschaft
(haftungsbeschränkt) (UG) (entrepreneur company (limited
liability) - with a minimum capital of only € 1. The UG must save 25%
of its annual profits, which are not distributable but must be
accumulated. As soon as the shareholders increase the stated capital to
€ 10, 000, the UG (haftungsbeschränkt) will convert into
a fully fledged GmbH, which is not obliged to comply with the profit
accumulation requirement. For further information on the
above-mentioned company law reform, see M Beurskens and U Noack, 'The
Reform of German Private Limited Company: Is the GmbH Ready for 21st
Century?' (2008) 9(9) Germany Law Journal, available at http://www.germanlawjournal.com/article.php?id=989.
§ 9 GmbHG.
§§ 30, 31 GmbHG.
M Shilling, 'The Development of a New Concept of Creditor Protection
for German GmbHs' (2006) 27(11) Comp Law 348.
The term of 'liability for company destruction' (in literal
translation: liability for existence destruction), however, has been
criticized by German commentators as misleading. The argument goes that
the characteristic attribute of this concept is not destruction of the
existence of a company but the causing of the company's insolvency. The
notion of insolvency and that of company destruction have to be kept
separate, as the destruction of a company is caused by the official act
of deleting the company from the company register. This may happen
several years after the realization of the liability. Often insolvency
does not lead to a destruction of the existence but to the maintenance
of the existence by way of restructuring the company or by setting up
an insolvency plan etc. This means that the destruction of the
company's existence is not a condition of this kind of liability: W
Zöllner, 'Gläubigerschutz durch Gesellschafterhaftung bei der
GmbH', in: B Dauner-Lieb et al (eds), Festschrift für Horst
Konzen zum siebzigsten Geburtstag (Mohr Siebeck, Tübingen
2006) 999, 1003.
BGH, GmbHRundschau 2007, 930, para 17.
BGH judgment 24 June, 2002, Neue Juristische Wochenschrift 2002, 3024.
BGH Neue Juristische Wochenschrift 2002, 3024.
BGH Neue Juristische Wochenschrift 2002, 3025.
Text to n 17.
BGH Neue Juristische Wochenschrift 2002, 3024, 2005; Hänisch (n
10) 21; Shilling (n 18) 348.
B S Markesinis and H Unberath, The German Law of Obligations, Vol
II, The Law of Torts, A Comparative Introduction (3rd edn, OUP,
Oxford 1994) 894.
Markesinis and Unberath (n 27) 896-898.
K Rebmann, et al, (ed), Münchener Kommentar zum
Bürgerlichen Gesetzbuch, Band 5 (4th edn Verlag C H Beck,
München 2004), § 826 BGB, Rn 5; Hänisch (n 10) 17.
Münchener Kommentar (n 29) §826 BGB, Rn 5.
BGH, judgment of 16 July 2007, GmbHRundschau 2007, 930.
For circumstances in which an aggrieved creditor may be allowed to
pursue the errant shareholder direct, see text to ns (65, 66).
BGH, judgment of 16 July 2007, GmbHRundschau 2007, 930, para. 12.
BGH, GmbHRundschau 2007, 930, para. 47-54.
BGH, GmbHRundschau 2007, 930, para 52.
BGH, GmbHRundschau 2007, 930, para 16. The word 'content' here means
the notion of company destruction as conceived of in BGH's previous
decisions and the criteria for the establishment of the liability, see
BGH, GmbHRundschau 2007, 930, para 16.
BGH, GmbHRundschau 2007, 930, Preamble (b), para 31; See text to n 28.
Under the old approach company destruction liability was subsidiary to
§§ 30, 31 GmbHG, meaning that a the claim by an aggrieved creditor
against the defaulting shareholder on the basis of 'company
destruction' was activated only where §§ 30, 31 GmbHG were
not applicable or where a successful claim by the company
against the defaulting shareholder under §§ 30, 31 GmbHG did
not restore the company's ability to discharge its liability.
BGH, GmbHRundschau 2007, 930, para 26.
BGH, GmbHRundschau 2007, 930, para 36. Allowing direct actions by
company creditors will also upset the insolvency rule in relation to pari
passu participation by all company creditors. See text to n 63.
Text to n 25.
BGH, GmbHRundschau 2007, 930, para 36. See also M Goetz, 'The Federal
Court of Justice's concept for piercing the corporate veil due to
destruction of a German limited liability company', Client Newsletter
9/2007, Rechtsanwaltskanzlei Goertz, available at www.goertz.net.
BGH, GmbHRundschau 2007, 930, para. 20.
BGH, GmbHRundschau 2007, 930, para. 
B Dauner-Lieb, 'Die Existenzvernichtungshaftung-Schluss der Debatte?'
(2006) Deutsches Steuerrecht 2034, 2041.
Shilling (n 18) 350.
Text to n 25.
BGH, judgment of 16 July 2007, GmbHRundschau 2007, 930, para. 33.
BGH, GmbHRundschau 2007, 930, para 28.
Zoellner (n 19).
Zoellner (n 19) 1008.
Woolfson v Strathclyde Regional Council  SLT 159 at 161
per Lord Keith of Kinkel; Re Polly Peck International plc (in
admin)  2 All ER 433 at 447 per Robert Walker J; Trustor
AB v Smallbone (No 2)  1 WLR 1177 at 1185-1186 per Sir
Andrew Morritt V-C. See also Lee Sow Keng v Kelly McKenzi Ltd
 3 HKLRD 517. Note, however, that it is almost impossible to
reconcile the decided common law cases on the prerequisite for a
lifting of the corporate veil: see text to n 69.
BGH, judgment of 16 July 2007, GmbHRundschau 2007, 930, para 33.
BGH, GmbHRundschau 2007, 930, para 33.
Text to n 43.
Text to n 45.
E Schanze, 'Gesellschafterhaftung für unlautere Einflussnahme nach
§ 826 BGB' (2007) Neue Zeitschrifr für Gesellschaftsrecht
R Tomasic and S Bottomley, Corporations Law in Australia
(Federation Press, Sydney 1995) 62.
35 ACSR 500 at 526. The full court did that indirectly through
endorsing the opinion that Gummow J expressed in Re New World
Alliance Pty Ltd; Sycotext Pty Ltd v Baseler (1994) 122 ALR 513 at
550. Gummow J'cited Heydon (see n 62 below) in formulating His Honour's
view in the above-mentioned case.
The focus of similar common law cases is the duty of directors, who, in
equity, owe various heads of duties to the company.
J D Heydon, 'Directors' duties and the company interests' in P Finn
(ed) Equity and Commercial Relationships (Law Book, Sydney
1987) 120, 131. Cf R Grantham, 'The judicial extension of directors'
duties to creditors' (1991) JBL 1.
L S Sealy, 'Directors' weird' responsibilities - problems conceptual,
practical and procedural' (1987) 13 Monash U L Rev 165, 185. Cf R
Grantham, 'The judicial extension of directors' duties to creditors'
(1991) JBL 1. However, Sealy's view seems to have gained the support in
recent common law cases: Spies v R (2000) 35 ACSR 500; Geneva
Finance Ltd (Receiver and Manager Appointed) v Resource & Industry
Ltd (2002) 20 ACLC 1, 427.
On creditors' right to pari passu participation, see the
comments by Gaudron, McHugh, Gummow and Hayne JJ in Spies v R
(2000) 35 ACSR 500 at 526 and Em Heenan J's view in Geneva Finance
Ltd (Receiver and Manager Appointed) v Resource & Industry Ltd
(2002) 20 ACLC 1, 427 at 1, 438.
BGH, judgment of 16 July 2007, GmbHRundschau 2007, 930, para 33.
BGH, GmbHRundschau 2007, 930, para 37.
D French, S Mayson and C Ryan, Mayson, French & Ryan on
Company Law (24th edn, OUP, Oxford 2007) 139; R Baxt, K Fletcher
and S Fridman, Corporations and Associations: Cases and Materials
(9th edn, Butterworths 2003) 194.
This is the attitude of the common law courts: Austin and I M Ramsay, Ford's
Principles of Corporations Law (13th edn, Butterworths, Sydney
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