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Distributions to Shareholders and Fraudulent Transfer Law

Legal regimes of limited liability serve different functions governed by distinct normative principles. The enabling function of limited liability aims at facilitating investment in risky activities and at organising principal/agent-relationships within the firm. In this area, choice of law may readily be allowed. At the other end of the spectrum, the protective function of limited liability regimes serves the objective of protecting outsiders from externalisation of risk. In this area, choice of law is much more problematic. Fraudulent transfer law belongs in the latter group, whereas corporate law belongs in the former. However, the German version of a limited liability regime cuts across these distinctions by including the protective function in the normative scope of corporate law, thereby downgrading the law of fraudulent transfers. As will be become apparent, this structural feature explains most of the differences that emerge when comparing the German law of fraudulent transfers with its American counterpart. The recent case law of the ECJ poses a major challenge to the traditional approach. It seems that the best way to deal with the challenge is for German law to develop towards the American model.