Application of Sec. 64 GmbHG to the director of a limited company

In this case, the European Court of Justice (ECJ) had to consider a preliminary ruling request by Germany’s Federal Court of Justice (FCJ). A limited company (Ltd) under English and Welsh law had become insolvent. Erfurt Local Court had opened insolvency proceedings regarding the company’s assets. The company was entered in the Companies Register in Cardiff and had a German branch office entered in the Companies Register of Jena Local Court. The centre of the company’s main business interests was in Germany. The liquidator filed a claim seeking reimbursement from the director of the company based on Sec. 64 ss. 2 GmbHG old version, since she had allegedly made payments borne by that company after the company became insolvent. The FCJ called on the ECJ to clarifz whether Sec. 64 ss. 2 GmbHG old version (Sec. 64 ss. 1 GmbHG new version) can be applied to managing directors of companies which were formed according to the law of another EU Member State but have the centre of their main interests in Germany and whether such a claim could infringe freedom of establishment within the meaning of Art. 49 TFEU and Art. 54 TFEU.

Pursuant to Art. 4 ss. 1 of Regulation No 1346/2000 (EU Insolvency Regulation), the law applicable to insolvency proceedings is the law of the Member State within the territory of which such proceedings are opened. According to Art. 3 ss. 1 EU Insolvency Regulation, the courts of the Member State within the territory of which the centre of a debtor’s main interests is situated shall have jurisdiction to open insolvency proceedings, in this case Germany. The ECJ now held that Sec. 64 ss. 2 GmbHG old version represents an insolvency-law provision within the meaning of Art. 4 ss. 1 EU Insolvency Regulation, which can be applied to managing directors of foreign companies in the event of insolvency proceedings being opened in Germany. To ensure the validity in practice of Art. 4 ss. 2 EU Insolvency Regulation, the wording (“law of the Member State within the territory of which such proceedings are opened …”) must be interpreted so that the scope of application covers firstly the prerequisites for opening insolvency proceedings; secondly the rules for determining the persons obliged to apply for the opening of these proceedings; and thirdly the consequences of an infringement of this obligation. According to the ECJ, national provisions such as Sec. 64 ss. 1 and the first sentence of ss. 2 GmbHG, which penalise a breach of the duty to apply for the opening of insolvency proceedings, should therefore, from this perspective, also be considered as falling within the scope of Art. 4 EU Insolvency Regulation.

The ECJ also held that the application of this provision to the organs of a limited company under English and Welsh law does not infringe the freedom of establishment guaranteed under European law. The application of a national provision such as the first sentence of Sec. 64 ss. 2 GmbHG concerns neither the formation of a company in a particular Member State nor its subsequent establishment in another Member State. According to the ECJ, this provision of national law applies only after the formation of the company within the context of its activities, specifically either from the date on which it is considered insolvent under the national law applicable according to Art. 4 of the EU Insolvency Regulation or from the date on which it is established that the company is over-indebted according to this national law.