Undercapitalization

In the under-capitalization is a problem from the corporate law. A society is then undercapitalized if it has too little equity. When this is the case, can not be fast rules. It is rather on a variety of factors such as the individual business model, fixed assets, the creditworthiness and business sales. For example, an airline AG will certainly be under-capitalized with a capital of € 50,000, a simple print (such as a GmbH & Co. KG), but probably not.

A distinction is made between nominal and material undercapitalization. A nominal capitalization is when Although overall there is sufficient capital, the equity ratio, however, is too low, so that the company ultimately lives only on loans. Strictly speaking, these are but to no thin capitalization situation; Thus, by the term undercapitalization usually the material undercapitalization meant, so the case that a total of too little capital is available ( equity plus debt).

In the under-capitalization of conflict of interest between shareholders and company creditors culminates. For the company's creditors, it is important that the company has a high level of equity or equity above the approximate shareholder loans. Because otherwise, the Company is - broadly speaking - without substance and the risk of default, the creditor extremely high, as soon as worsened the liquidity situation of the company. However, there is an incentive to leave the company as little equity for the shareholders. Because the profits of the Company standing alone to them in full, even if they have only minimally invested capital; falls the company into bankruptcy, they have lost only this minimum amount. In addition there are tax considerations.

• Company law