The German Federal Court of Justice (BGH) has made a referral to the European Court of Justice (ECJ) concerning the question of whether a director of an English limited company which predominantly operated its business in Germany and over the assets of which insolvency proceedings have been opened in Germany, pursuant to Art 3 para 1 European Insolvency Regulation, can, like the director of a German GmbH, be held liable for forbidden payments pursuant to German corporate law or insolvency law.

In the case in question, the Court held that the director made payments which were forbidden payments to the disadvantage of the insolvency assets under German insolvency law following the occurrence of the inability to pay, for which he would be liable as the director of a German GmbH pursuant to § 64 Limited Liability Companies Act (GmbHG). The appeal court (lower instance) applied § 64 GmbHG as a liability rule to the defendant although the defendant was not a director of a company with limited liability under German law, but instead the director of a limited company according to the law of England and Wales. The BGH is also of the view that the comparability of these German and English company forms justifies the treatment of a director of an English limited company in relation to forbidden payments under insolvency law, in the same way as the director of a German GmbH.

Pursuant to Art. 4 para. 1 European Insolvency Regulation, the insolvency law of the Member State in which the insolvency proceedings are opened shall apply to the insolvency proceedings and its effects, irrespective of the Member State in which the company is established and registered. In the present case, the limited company had its centre of main interests in Germany, so the insolvency proceedings were opened in Germany. The BGH regards  § 64 GmbHG, which regulates the personal liability of German GmbH directors in cases of insolvency, as a provision of insolvency law, and is therefore of the opinion that the application to an English limited company is also permissible under EU law. The interpretation concerning whether a German rule is characterised as being insolvency law or corporate law is incumbent on the ECJ and not the German Courts. The ECJ has not yet made a decision on this question. If, contrary to the opinion of the highest court in Germany, the ECJ takes the view that this amounts to a corporate law rule, the application of the liability rule of German GmbH law to directors of an English limited company – irrespective of its centre of main interests – would be excluded. The decision of the ECJ on this question can therefore be eagerly awaited.