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Created on Thursday, 18 January 2007 00:00

Last Updated on Friday, 28 December 2012 18:40

Liability for Shareholders on Capital Stock

Surely, I need not explain that a German limited liability corporation needs a minimum capital stock. After completely filling this equity stock, the liability of the shareholder usually stops. But what is the case after a proprietor transferred property to the company and borrows it back? This property will have lost value whenever returned. What now?

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The OLG in Celle (re 9 U 172/05) of April 26, 2005, clarified this situation in legal discussions. Following §§30, 31 GmbHG, the corporation must always have the signed capital. If the proprietor returns an asset reduced in value, he will personally be liable for the difference between the new worth of the asset and signed capital. He must add liquid cash to meet this difference.

However, there is one exception to this rule. In this case, this asset would have also lost value if it remained in the company’s realm. An example: Your private Rolls Royce actually belongs to your corporation. Since your chauffeur had his day off and you, nevertheless, could not resist driving, you broke, um drove out and caused an accident. The car wrecked. Therefore, when your co-shareholders find out about this, they will have all the rights to demand that you finance the company a new Rolls Royce.