While the shareholders of a limited liability company (GmbH) do not have much to lose—except their capital—the managing director of a GmbH is exposed to a wide range of personal liability claims. In practice, this very often leads to the (shareholder) managing director also having to file for bankruptcy after the GmbH has gone bankrupt, as he or she is unable to pay the liability claims. The shareholder is only liable if there is no managing director. The most important and most common liability provisions in practice will be briefly discussed here.
1.
Case law requires the managing director of a limited liability company (GmbH) to constantly monitor whether the company is entering critical waters. If this is the case, the GmbH managing director must, if necessary, check on a daily basis whether the company is on the verge of insolvency or not. Signs of this include an increasing number of reminders or even court orders for payment and enforcement measures, as well as mounting debts.
2.
By far the most important reason for insolvency in practice is insolvency (Section 17 InsO). This occurs when the company is unable to settle its currently due liabilities, whereby an outstanding gap of 10% is accepted, and the company is also unlikely to be able to overcome this "inability to pay" in the next three weeks. In this forward-looking assessment, not only the expected incoming payments must be taken into account, but also the payment obligations already known today (in practice, often taxes, rents, leases, wages, and ancillary wage costs).
In addition, the reason for insolvency due to over-indebtedness (Section 19 InsO) is much less significant in practice and much more complicated, so details will not be discussed here. As long as equity is shown on the liabilities side of the balance sheet and no "deficit not covered by equity" is reported, everything is still fine.
3.
If there is a reason for insolvency, the managing director is obliged to file for insolvency within three weeks at the latest (section 15a InsO). The three-week period is intended to give the managing director the opportunity to avert insolvency by taking appropriate restructuring measures.
While many people are aware of the three-week period, most are unaware that insolvency triggers a payment prohibition, which prohibits the managing director from making payments from the company's assets unless they are directly related to the restructuring and/or preparation of insolvency proceedings. This payment prohibition takes effect immediately and not only after the three-week period has expired. This means that even costs necessary for normal operations are prohibited. In practice, this often leads to high liability sums, sometimes in the seven-digit range, because the managing director must reimburse the insolvency estate for the payments for which he or she is responsible. This is now regulated in section 15b of the Insolvency Code (InsO); until 2021, this regulation was standardized in several laws for the respective companies. The term "payment" has been interpreted very broadly by the courts, so that deposits into a debit account are also included.
4.
A liability provision originating in criminal law (Section 266a of the German Criminal Code (StGB)) concerns employee contributions to statutory social security, which the managing director must pay on behalf of the company. If he fails to do so or does not do so on time, this leads to criminal liability and liability for the outstanding contributions to the social security institutions. This liability only applies to the employee contributions, not to the employer contributions that are due at the same time, which may remain in arrears.
In this case, the employee contributions to social security (unlike income tax) must be paid even if the wages are not paid. This may seem somewhat contradictory, but it is the legal regulation and is generally accepted.
5.
In contrast, income tax only has to be paid if wages are paid, so that in the case of partial wage payments, only the proportionate income tax is payable. If the managing director pays the wages, he must ensure that the income tax due on the due date (tenth of the following month) can also be paid. If necessary, according to the BFH, only reduced wage payments may be made.
6.
In criminal law terms, in addition to the aforementioned Section 266a of the German Criminal Code (employee contributions to social security) and the delay in filing for insolvency pursuant to Section 15a of the German Insolvency Code, reference should also be made to Section 283b of the German Criminal Code. According to this provision, anyone who fails to prepare the company's balance sheet or fails to do so on time, or who neglects the bookkeeping, is liable to prosecution, although criminal liability only arises if insolvency is also involved.
It is largely unknown that, according to commercial law provisions, the balance sheet of a small limited liability company must be prepared by June 30 of the following year. The 2024 balance sheet must therefore be available by June 30, 2025. The fact that the tax office grants longer deadlines is irrelevant in this respect.
This criminal provision is also dangerous because, if certain limits are exceeded, it means that the managing director cannot obtain residual debt discharge in his private insolvency proceedings. This makes debt relief almost impossible for him and personal insolvency proceedings hardly worthwhile.
7.
It is therefore important to be careful and to act in a timely and appropriate manner. We would be happy to advise you on this.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.