Shareholder’s right to terminate a letter of comfort issued to a company

Pursuant to a recent judgment of the Federal Court of Justice, a parent company having issued a letter of comfort (Patronatserklärung) to its subsidiary which is in a financial crisis may terminate this letter of comfort if the parties – explicitly or implicitly - agreed upon a right of termination.

Liability of members of the supervisory board of a German GmbH

The German Federal Court of Justice (BGH) ruled that members of the supervisory board of a German GmbH (limited liability company), are, unlike the members of the supervisory board of a German AG (joint stock corporation), not liable in the event that the company effects payments while being overindebted or illiquid.

Deductibility of losses arising from shareholder loans

The Federal Ministry of Finance gave its opinion in a letter dated 21 October 2010 (file no.: IV C 6 - S 2244/08/10001) on the question of the implications of the revised German Limited Liability Company Law (GmbHG) which came into effect on 1 November 2008 for the deductibility of losses arising from shareholder loans as subsequent acquisition costs in the framework of § 17(2) German Income Tax Act (Einkommenssteuergesetz).

Place of jurisdiction in cases of financial loss by investors

The German Federal Supreme Court of Justice (BGH) has ruled that German investors can file a claim before a domestic court even if the bank account from which the money was transferred is located in a foreign country.

Termination of an “Internet Systems Contract”

The right to terminate an “Internet Systems Contract” pursuant to Sec. 649 German Civil Code (BGB) may not be validly excluded in general terms and conditions of the contractor.

Compensation claim in the event of conditional post-contractual non-compete clauses

If in an employment contract the employee undertakes to conclude a post-contractual non-compete clause upon the employer’s request at a later, undefined date, a conditional non-compete clause will arise. Following resignation, the employee may refrain from competitive activity and claim compensation for non-competition in respect of this – even if the employer never calls for the conclusion of the non-compete clause.

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and a happy new year