Shareholder Loans in Corporate Insolvency – A New Approach to an Old Problem

The treatment of shareholder loans in corporate insolvency is a controversial issue in many jurisdictions. On both sides of the Atlantic, lawmakers and courts have struggled to answer the question if and under what circumstances shareholder loans should be treated differently from loans granted by outsiders. In particular, the difficulties turn on three issues: (i) whether shareholder loans should rank pari passu with the claims of outside creditors or whether they should be subordinated; (ii) whether the repayment of shareholder loans should be subject to specific restrictions, particularly in the vicinity of insolvency; and (iii) whether specific restrictions should apply to secured shareholder loans.