Cash Pooling Under the Revised German Private Limited Companies Act (GmbHG)

Abstract

Following the 24 November 2003 decision of the Bundesgerichtshof (BGH - Federal Court of Justice) the legal framework for upstream loans granted by companies in the legal form of a Gesellschaft mit beschränkter Haftung (GmbH - Private Limited Company), i.e., loans by the GmbH to its direct and indirect shareholders or to an affiliate of such shareholder, has remained uncertain. The ruling of the BGH led to a broad spectrum of interpretations by legal scholars and practitioners – some even predicted the end of cash pooling arrangements for German corporations – which made it difficult for managers of a GmbH to continue existing cash pooling arrangements without changes to their original scope and conditions.