ArticlesReduction of Share Capital: Ineffective Protection of Creditors

In our previous article we dealt with the concept of the reduction of share capital and its distinctions; in our next article with the procedure to be followed, its techniques and conditions. Here we will be concerned with the issue of reduction from a critical, slightly different, point of view: that of the protection of creditors. Also, the (legal) results and its (in)efficiency.

Creditor Protection

Field of application

The protective provisions for creditors are basically for cases of actual reduction—that is, when the released corporate property is to be paid out to shareholders. They also concern the cases where the reduction of the capital is done by (total or partial) exemption of the shareholders from the obligation to pay share capital, which was undertaken but did not take place in the end (Article 30 §4 Law 4548/18 ) .

Content Of Protection

The creditors of SAs have one, only, way to protect themselves in case of an actual reduction of its share capital – provided, of course, they learn about it: the creation of dykes regarding the payment to the shareholders of the released capital.

Specifically, as long as the relevant conditions are met, a claim is made by each shareholder, against the SA, for the payment of the product of the reduction attributable to them. This payment, however, cannot take place before the deadline for submission of objections by the creditors has passed without the latter submitting any objections, or (if such objections are submitted) after the provisions of the law have been complied with.

Objections of Creditors with Overdue Debts

As follows from the regulation of the law (article 30 §1), creditors whose claims became overdue before the publication of the decision of the SA to reduce its share capital are protected (article 29 §4 law 4548/2018 – see our previous article). But it is argued (and rightly so) that those whose claims became overdue by the time of the relevant payment to shareholders are also protected.

Therefore, it is not possible for any payment to take place to the shareholders of the SA from a possible reduction of its share capital, before the expiry of the deadline within which the company’s creditors have the right to submit their relevant objections; the most important: before the claims of the creditors who will submit such are fully paid or even settled. With this specific choice, the legislator: (a) limits, to reasonable levels, the range of protected claims (b) foresees the possibility of settlement – and not only the payment – of overdue claims.

However, the specific arrangement seems to be undemanding to involuntary creditors (those, e.g., who were damaged by tort). The latter will probably not have the resources and/or the knowledge to monitor the SA’s actions and/or raise objections in a timely manner. But one could argue that, at least in part, they are protected by the provisions on the minimum share capital limit as well as by their right to take action against the guilty natural persons.

The Submission of Objections

Method of Submission and Content of Objections

There is no legislative provision regarding the procedure to be followed for submitting the above objections by creditors, their standardization and/or any minimum content. It is preferable, however, for reasons of proof, that their submission takes place in writing. Even better: with an extrajudicial letter, so that there is no question of proof – especially as regards the content and the deadline for their submission. Especially, in terms of content, it is important that they mention (and prove) the due date of the claims presented as well as the time when they became due.

Time to File Objections

The specific objections of the creditors should be submitted to the SA within a period of forty (40) days (instead of 60 under the previous law) from the publication of the corporate decision to reduce the share capital (Article 29 §4 Law 4548/2018 – see our previous article) . As the starting point of the specific deadline, we should consider the date of its publication on the website of the Business Registry. (Article 12 of Law 4548/2018) and not on the company’s website.

Objections of Creditors of Undue Claims

Creditors, however, of the SA with undue claims are also protected from the consequences of the reduction of its share capital (Article 30 § 2) . They, too, are entitled to submit objections to the company against making payments of released corporate property – due to a reduction in its share capital. It is enough that the satisfaction of their demands is indeed put at risk.

The submission of the objections of the specific creditors should take place within thirty (30) days from the publication of the decision to reduce its share capital. Regarding the procedure and content of their submission, the same applies, respectively, as we already mentioned immediately above.

In the event that objections are submitted by the creditors with undue claims, the SA is entitled to pay them off beforehand, provide them with sufficient collateral or a combination of those two options. Any disputes will, out of necessity, be resolved judicially.

The Judicial Resolution of Objections

According to the law: “the court shall rule on the validity or otherwise of the objections of the creditors of non- due claims…including those concerning the adequacy of the collateral offered by the company” (Article 30 §3, Section a).

The letter of the law seems to capture only the claims of creditors holding claims that are not due. However, unfounded claims may also be those which are presented, e.g., as overdue – but without them actually being overdue. Such demands (made in bad faith) may be intended, simply, to frustrate the completion of the process of reducing the SA’s share capital. It is supported, and rightly so, that the proportional application (also in this case) of the judicial procedure concerning the objections of creditors of undue objections should apply.

Competent Court And Procedure

The competent court for the resolution of the specific disputes is the Single-Member Court of First Instance of the seat of the SA; through non-contentious procedures.

During the adjudication of the relevant application of the SA, it is possible for the creditors who submitted their objections to intervene and object.

The Judicial Ruling

The competent court decides on the merits or not of the creditors’ objections. It is possible that the creditors with non-due claims can prove that making the payments in view of the remaining corporate assets (after making the reduction – taking into account any securities they already have) jeopardizes the satisfaction of their claims. The decision that will be issued, in this case, will allow the payment of the released amounts due to the reduction, on the basis of meeting conditions or providing sufficient collateral that it determines.

It is not required, however, that the insurances are granted by the SA itself. It is possible (also for) third parties to provide them (e.g. the shareholders). The specific third parties are, in fact, entitled to intervene in the relevant trial, so that it becomes possible for the court to order the provision of the securities in question on their part.

In case of objections from several creditors, one decision is issued for all of them, in order to avoid contradictory decisions. It is possible, at least theoretically, for there to be additional, pending, but timely, submitted objections. In this case, the decision that has been issued can (and should) be reformed so that the payments to the shareholders become permissible.

The Legal Results

Early Payment

In case the SA makes payments of released corporate property to the shareholders without complying with the conditions of the law, the relevant payments are invalid. This is a relative nullity in favor of the creditors of the SA, as specified above.

In the case of invalidity of the aforementioned payments, the shareholders must return the amount they collected to the SA, in accordance with the provisions of unjust enrichment. In fact, the relevant claim of the SA against the shareholders can be exercised by the aforementioned creditors.

The law does not establish a special liability of the Board of Directors in case of invalid payment. It may, however, be classified as a tortious liability of its members and/or the shareholders who benefited (according, e.g., to the provisions on the fraud of creditors).

It is, of course, accepted that the aforementioned invalidity of early payments is curable. It can, in particular, be cured if the above-mentioned period of forty days has passed. Provided, that is, no objections are raised. In the event that such are submitted, a remedy occurs, if after the payments: (a) overdue receivables are paid or settled, (b) non-overdue receivables are prepaid or sufficient insurances are provided or finally, in case of a non-consensual solution, the terms of the issued judicial ruling.

The Decision on the Reduction

Given what was mentioned above, it appears that the objections concern the payment of the released corporate property. On the contrary, the reduction decision is not affected by them. Its validity starts from the observance of the publicity formalities.

However, in the case of the actual reduction, the claim of the shareholders for the collection of its product presupposes the observance of the protective provisions for creditors.

On the contrary, in the case of a nominal reduction, from the publication of the decision, the new nominal value of the shares applies. Any pending replacement of old titles with new ones is not of relevance.


It is a given that SA’s creditors (with overdue or non-due claims) need protection in the event of a reduction in its share capital. It would not be possible for the legislator not to provide it to them. But the protection is, on a practical level, controversial. Which lender will spend even a part of their time in the search for the possibility that their debtor-SA has proceeded to reduce its share capital (and its return to the shareholders) in order to fraud them? However, given that this is the only means provided to them by the law, the creditor of the SA must: be, i.e., constantly alert.-

Stavros Koumentakis
Managing Partner


P.S. A brief version of this article has been published in MAKEDONIA Newspaper (May 29th, 2022).


Disclaimer: the information provided in this article is not (and is not intended to) constitute legal advice. Legal advice can only be offered by a competent attorney and after the latter takes into consideration all the relevant to your case data that you will provide them with. See here for more details.

Stavros Koumentakis
Nikis Avenue & 1, Morgenthau st., 54622 Thessaloniki
(+30) 2310 27 80 84

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