A managing director (e.g. of a GmbH, AG, or GmbH & Co. KG) must obtain independent professional advice without delay at the first signs of a crisis, unless they have sufficient knowledge to assess the company's illiquidity or over-indebtedness themselves. Following a BGH ruling dated 27 March 2012, the standard of care for managing directors of a company in crisis has been further tightened and made more specific: personal liability of the managing director can only be avoided if an assessment of the company's "insolvency status" has been formally commissioned; issuing a general advisory mandate is not sufficient. The background is that, upon the occurrence of illiquidity or over-indebtedness, the managing director must file a petition for insolvency on behalf of the company without delay. If the managing director continues to make payments after insolvency has occurred, they are personally liable with their private assets and may also face criminal consequences. Please contact us in good time regarding the assessment of "insolvency status".
Frequently asked questions
Frequently asked questions
When must a managing director seek external advice in a crisis?
As soon as signs of a crisis emerge and the managing director does not personally possess sufficient knowledge to assess illiquidity or over-indebtedness, they must promptly obtain independent professional advice. This follows from the heightened duty of care specified by the BGH in its ruling of 27 March 2012. Any delay may give rise to personal liability.
Is a general consulting engagement sufficient to avoid managing director liability?
No. According to the BGH ruling of 27 March 2012, a specific review of insolvency status must be commissioned. A merely general consulting engagement is not sufficient to release the managing director from personal liability.
What consequences does a managing director face for payments made after insolvency has occurred?
If the managing director continues to make payments from company assets after illiquidity or over-indebtedness has occurred, he is personally liable with his private assets for these amounts. In addition, criminal consequences may arise, for example for delaying insolvency proceedings (Insolvenzverschleppung).
When must the managing director of a GmbH or AG file for insolvency?
If the company becomes illiquid or over-indebted, the managing director is obliged to file for insolvency without undue delay. Any delay results in personal liability and criminal law risks.
Which corporate forms are subject to the stricter liability obligations of managing directors?
The duties to assess insolvency and to file for insolvency in due time apply to managing directors of limited liability entities such as GmbH, AG, and GmbH & Co. KG. In all these constellations, a breach of duty can lead to personal liability and criminal consequences.