New judgment: Deregistration of a GmbH i. L. possible despite pending taxation procedures

Even if not all taxation procedures have been completed, registry courts are in certain cases under obligation to deregister a GmbH (limited liability company) in liquidation. This was determined by the Higher Regional Court (Oberlandesgericht, OLG) Jena in a recent judgment (judgment of 20 May 2015, ZIP 2016, 25 et seq.)

1.     Facts of the case: Typical and therefore of particular relevance

The facts the judgment is based on reflect a situation occuring daily in German registry courts. It is hence of particular relevance for practice:

A company, organized as a GmbH, is to be terminated and for this purpose shall undergo controlled liquidation. This was decided by the shareholders. The dissolution of the company is applied for with the commercial register by the managing directors, and the mandatory notification of the company’s creditors (Sect. 65 para. 2 GmbHG [German Law on limited liability companies]) is published in the Federal Gazette, which, in general, initiates the so-called “restrictive year” (Sect. 73 GmbHG). During this 12-month-period, the creditors of the company in liquidation have time to assert possible claims.

So far legal practice has assumed that deregistration of a company can – at the earliest – be applied for after expiration of the restrictive year. With the new judgment referred to above this could change and
many companies affected could hence avoid substantial delays and associated additional costs.

2.     Deregistration already prior to end of the restrictive year? Quintessence of the OLG Jena judgment

In its judgment the OLG Jena deals with the question whether deregistration of a company is already permissible prior to the expiration of the restrictive year (or rather without adherence to such a limitation period): To what extent are pending taxation procedures of the responsible tax authorities preventing deregistration – as frequently practiced by the registry courts? In this regard, the second part of the judgment is of particular interest.

2. a. When is the restrictive year mandatory?

In the first part of its judgment, the OLG Jena clarifies that deregistration of a company prior to the expiration of the restrictive year or rather without adherence to such a period, is principally possible in exceptional cases only. It is hence not sufficient that all known creditors of the company were already satisfied. After all, the restrictive year is to enable potential creditors of the company to assert claims that were not known at the time of the creditor notification. To that extent, liquidators are strongly advised to wait for the restrictive year to expire, as otherwise pursuant to Sect. 73 para. 3 GmbHG they are liable for (rashly) distributed assets which are then not accessible anymore for (potential) creditors.

Deregistration of a company prior to the expiration of the restrictive year is possible only if the company no longer holds any distributable assets. In this case, possible unknown creditors are no longer relevant, at least as regards the company’s liability for its debts. This lack of assets is to be confirmed by the liquidators in the appropriate application for registration with the commercial register.

If such application is lacking such confirmation, the registry court can refuse deregistration until such confirmation is submitted or until the restrictive year has expired.

In this respect, the OLG Jena clarifies that pending legal claims always prevent premature deregistration. Eventually, distributable assets could still be earned as a result of such pending claims.

2. b. Deregistration despite pending taxation procedures

However, the second partial aspect the OLG Jena addresses with its judgment is of much more interest. Irrespective of the expiration of the restrictive year, deregistration is often only effected once the responsible tax authorities have approved such deregistration and have informed the inquiring registry court of the completion of all taxation procedures regarding the respective company.

The period between inquiry with the tax authorities and their response to the registry courts can last to several months. Should not all taxation procedures have been completed, the waiting period (up to deregistration) is accordingly extended. In total, this registry court practice can delay deregistration of a company by several years, which leads to substantial additional costs in the context of the liquidation.

With its judgment of 20 May 2015, the OLG Jena has rejected this practice of the registry courts, at least when it comes to subsequent payments of taxes potentially owed by the company. This practice is inadmissible if the GmbH in liquidation has, as determined by the registry court, ultimately closed down and no longer possesses distributable assets. This depends primarily on the liquidators confirmations submitted in the application for deregistration with the commercial register. In line with the principles of civil law it is hereby irrelevant whether the tax authorities have fiscal claims against the company. Such fiscal claims do not impede deregistration in the commercial register.

Only if the company could still assert claims from taxation procedures against the fiscal authorities on its part, and thus might acquire further distributable assets, pending taxation procedures would prevent deregistration. If no tax refunds are to be expected, the registry courts have to deregister the company, even if the tax authorities have not yet completed taxation procedures. This even applies, if subsequent tax liabilities of the company are to be expected due to pending taxation procedures.

3.     Résumé: Strong argument pro deregistration

Whether this opinion of the OLG Jena will influence the registry court practice or whether the registry courts will continue their present practice, remains to be seen, as the jurisdiction of the German OLGs is not uniform to that extent. With judgment of July 1, 2015 (NZG 2015, 953) the OLG Hamm, for instance, generally rejects deregistration of a GmbH in liquidation during pending tax procedures; i.e., also in case subsequent payments of taxes are to be expected.

However, in practice the judgment of the OLG Jena provides a strong argument, to support a request for deregistration with the responsible registry courts, if necessary also by taking legal action. Precondition in any case is that no tax refunds are to be expected and no other assets exist anymore.