Retroactive amendment of hidden non-cash contributions by the MoMiG: Federal Court of Justice decision and its significance for practice
The ruling of the Federal Court of Justice (BGH) of March 22, 2010 – Ref. II ZR 120/08 – occupies a central position in the discussion on the constitutionality of retroactive changes to the law on hidden non-cash contributions by the Act to Modernize the Law on Limited Liability Companies and to Combat Abuses (MoMiG). The decision brings clarity to a long-disputed issue of corporate and capital raising and has significant implications for the practice of corporations and their shareholders.
Historical classification and objectives of the legislative amendment
The problem: Hidden non-cash contributions as a means of circumvention
Before the amendment by the MoMiG, the so-called hidden non-cash contribution was subject to strict regulations. Due to the prevailing case law and legislation at the time, cases where a cash contribution was formally made but economically offset by a contribution in kind were classified as hidden non-cash contributions. This could lead to a double payment obligation—a requirement that in practice caused considerable uncertainties and difficulties, particularly in company acquisitions and restructurings.
MoMiG approach: Modernization and legal certainty
With the entry into force of the MoMiG on November 1, 2008, Section 19 IV GmbHG was introduced. Among other things, the aim was to eliminate uncertainties regarding capital raising and to clarify the principle of contribution. The amendment made it clear that the cash payment in hidden non-cash contributions is generally recognized, provided the company can dispose of the amount contributed as cash and the asset can be valued.
Retroactivity of the amendment: Constitutional law dimensions
Normative scope and temporal applicability
According to its wording and explanatory memorandum, the legislative amendment also covered situations that had arisen before the MoMiG came into force. Thus, the amendment had genuine retroactive effect, as cases that were already completed, but not yet finally decided upon entry into force, were to benefit from the new—more favorable for those concerned—regulation.
Standards of constitutionality
The retroactive effect of laws is generally subject to constitutional limits, in particular with regard to the rule of law and the principle of legal certainty. In its decision, the BGH reviewed whether the retroactive application of Section 19 IV GmbHG is compatible with constitutional principles.
Result: The BGH denied a violation of the prohibition of retroactivity. The amendment significantly benefits the shareholders, as it abolished a previously existing, often considered unreasonable, double obligation. Since no legitimate interests of third parties—in particular, creditors of the company—would be unacceptably impaired, the retroactive effect is constitutionally permissible.
Practical consequences of the decision
Impacts on existing cases
The decisive factor is that for all cases not yet finally decided—even if they arose under the old law—the new legal situation applies. This reduces uncertainties and disputes in practice. Shareholders who previously faced the risk of a double payment obligation can now rely on the new regulation in these scenarios.
Significance for M&A and corporate practice
The decision strengthens legal certainty and predictability in corporate transactions, the admission of new shareholders, and capital measures. Companies and investors benefit from a clear legal framework that reduces liability risks and facilitates the legal structuring of non-cash contributions.
Legal classification of future structures
The clear regulation of how to deal with hidden non-cash contributions creates planning certainty for notaries, companies and their advisors, and establishes key guidelines for drafting and reviewing articles of association and capital measures.
Open questions and outlook
Limits of retroactive effect
Although the BGH has declared the retroactive effect permissible in the specific case, the question of where the constitutional boundaries lie in detail will remain a major issue for retroactive legislative changes in the future. Especially when significant legitimate interests of third parties might be involved, the applicability of retroactivity must always be critically examined in each individual case.
Pending and future proceedings
It cannot be ruled out that individual cases with particularly unique circumstances may lead to further judicial clarification. Nevertheless, the present decision provides the decisive guidelines for interpreting the amendment.
Conclusion
The BGH’s decision on the constitutionality of the retroactive amendment of hidden non-cash contributions by the MoMiG is of considerable significance for company law and transactional practice. It creates legal certainty retrospectively for cases from November 2008 onward, reduces liability risks, and simplifies capital raising.
Companies, investors, and high-net-worth individuals dealing with structural corporate issues, capital measures, or restructurings are faced with a significant objectification and clarification of the legal framework. Should any questions arise in connection with hidden non-cash contributions or the application of the amendment, well-founded legal advice can assist in ensuring legally compliant action. The lawyers at MTR Legal are at your side for this purpose, with their comprehensive understanding of legal developments and current case law.
