Alle Rechtstipps

Managing Directors Liability During the Coronavirus Crisis

23.06.2020

(updated on

07.04.2026

)

Min. read

If a company is insolvent, that is, if it is unable to pay its debts as they fall due (insufficient funds to cover all due liabilities) or overindebted (liabilities exceed the company’s assets and there is no positive continuation prognosis), the managing directors may no longer make any payments from the assets of the company. If the managing director nevertheless makes such payments, he is personally liable with his private assets. There is also a risk that this conduct may fulfil criminal offences, for example because the application for insolvency is filed late.The COVInsAGThe Act on the temporary suspension of the duty to file for insolvency and on limitation of the liability of governing bodies in the case of insolvency caused by the Covid 19 pandemic, the COVInsAG, enables companies to suspend the duty to file for insolvency if the statutory requirements are met. It is presumed in favour of the company concerned that the insolvency is due to the effects of the coronavirus pandemic if the company was not insolvent on 31 December 2019. We have already provided a detailed explanation of this in our article on insolvency in the coronavirus crisis (link in the original German text).Consequences of the suspension of the duty to fileThe risks of liability and criminal sanctions for the managing director are as follows.Liability for delayed filing of insolvency under section 823 paragraph 2 of the Civil Code in conjunction with section 15a of the Insolvency Code ceases to apply. In addition, section 2 of the COVInsAG provides for exclusion of avoidance in respect of payments made. Payments made in the ordinary course of business, for example to maintain or resume business operations, are also deemed to be consistent with the care of a prudent and conscientious managing director.Liability and criminal risks for the managing directorIf a company becomes insolvent, the provisions of the Insolvency Code continue to apply.The managing director is entitled, but not obliged, to file an application with the competent local court for the opening of insolvency proceedings. If this is done during the suspension period, the managing director could become liable to the shareholders of the company because their shares then become practically worthless.If the managing director fails to pay the employees contributions to social security, he continues to commit a criminal offence even under the rules introduced by the COVInsAG. However, the managing director can obtain financial support in the form of short time working allowance.The company’s obligation, on the instructions of the managing director, to pay taxes also continues to apply during the suspension period. The managing director can, however, negotiate individually with the competent tax offices about possible deferrals.The managing director must also not incur new liabilities at the expense of the company if it is insolvent, without informing the contractual partners of the situation. Failure to do so gives rise to criminal liability for fraud by incurring obligations within the meaning of section 263 of the Criminal Code.Acts by the managing director that qualify as offences relating to bankruptcy or the disposal of goods subject to retention of title also remain criminal and are therefore also prohibited.ConclusionThese questions are often difficult for managing directors to deal with without advice and support, particularly with regard to questions of liability and criminal risks.Attorney at law Hans Jörg Briest and his team in Berlin have been advising and supporting companies and managing directors in crisis situations for many years, including during the coronavirus pandemic.

Managing Directors Liability During the Coronavirus Crisis

Ihr Ansprechpartner für Arbeitsrecht

Sie benötigen arbeitsrechtliche Beratung?

Weitere Rechtstipps