Under Article 2467 of the Civil Law, the reimbursement of a loan granted by partners to a limited liability company is postponed over the reimbursement of a loan granted by other company creditors.
Further, if a company issues a loan one year prior to a company's bankruptcy, the loan must be repaid to the company.
This rule also applies if there is an excessive imbalance between a company's debt and net assets or if a company's financial situation requires an increase of company capital.
The abovementioned rule also applies to companies that belong to a group (Article 2497 of Civil Code) and loans granted by shareholders to companies owned by a limited number of shareholders whose shares are not listed on the stock exchange (Supreme Court of Cassation Decision 16291/2018).
In a recent decision (12994/2019), the Supreme Court of Cassation held that:
- the postponement of loan reimbursements to company partners or shareholders applies not only in cases of court-assessed insolvency, but also if a company experiences temporary financial difficulties; and
- company management must refuse to reimburse loans to partners or shareholders if the company was experiencing financial difficulties when the loan was granted or the reimbursement was requested.
This decision is important as it extends the postponement rule's scope beyond a company's bankruptcy (Supreme Court of Cassation Decision 25163/2017) to a company's temporary financial difficulty.
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