Quotation Gelter, Martin, Roth, Jürg. 2007. Subordination of Shareholder Loans from a Legal and Economic Perspective. CESifo DICE Report - Journal for Institutional Comparisons 5 (2): 40-47.




In closely-held corporations, the owners of a significant amount of shares sometimes try to avert an impending bankruptcy by informally extending a loan, in the hope of financing a successful rescue attempt. For creditors, the continued operations of the company may result in a dissipation of even more liquidation value due to perpetuated and increased risk. For various reasons, courts and legislators are sometimes inclined to subordinate such loans in bankruptcy, or to require their treatment as equity. This article gives a brief overview of the legal basis of subordination in Germany, Austria, Italy, Spain, and the United States, and provides references to the laws of a number of other countries. It also explores the incentive effects of subordination, which are partly beneficial and partly detrimental, and discusses possible implications for legal reform, including the recent German legislative proposal.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal CESifo DICE Report - Journal for Institutional Comparisons
Language German
Title Subordination of Shareholder Loans from a Legal and Economic Perspective
Volume 5
Number 2
Year 2007
Page from 40
Page to 47
URL http://www.cesifo-group.de/DocCIDL/dicereport207-rr1.pdf


Gelter, Martin (Former researcher)
Roth, Jürg (Bill Isenegger Ackermann Rechtsanwälte, Switzerland)
Civil Law and Civil Procedure Group V (Civil, Business and Insolvency Law) AB (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5208 Company law (Details)
5224 Comparative law (Details)
5238 Civil procedure law (Details)
5300 Economics (Details)
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