German Ltd.: Enforcement of compensation claims against the managing director of a Limited without assets

Company law

The German Supreme Court dealt with an interesting case on 17.10.2023 (AZ II ZR 72/22). A Ltd. in liquidation, whose application to open insolvency proceedings had been rejected due to a lack of assets, had filed a lawsuit against its former managing director under Section 64 GmbhG (old version) for compensation for the payments he had made as the company had already been insolvent. The Ltd. had assigned the claims to a financing shareholder by way of security, but nevertheless acted in its own name based on the shareholder's express authorization.

After the lawsuit had been largely upheld at first instance, the Court of Appeal dismissed the lawsuit as inadmissible as the Ltd. was no longer the owner of the claim and the prerequisites for the voluntary representative action were not met. According to the Court of Appeal, the lack of prospect of the company continuing as a going concern precluded the existence of an interest worthy of protection required for the voluntary status of litigant. The German Supreme Court took a different view and held that the action was admissible, as the assertion of claims for compensation pursuant to Section 64 GmbHG (old version) constituted an exceptional circumstance worthy of protection. The provision also serves the interests of creditors in the case of insolvency without assets, as its purpose is to increase the company's assets.

The Supreme Court also took the opportunity to clarify that the assignment of the Ltd. claims for compensation against the managing director would be invalid if the company did not receive equivalent consideration for the assignment. In the absence of consideration, the creditor protection intended under § 64 GmbHG (old version) would be frustrated

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