1. Introduction
The term “company burial” refers to the tacit dissolution of a company, usually a GmbH or UG (limited liability), in order to avoid the official and costly liquidation process.
This practice, often viewed as a gray area, aims to make the company disappear from the commercial register without going through the legally required dissolution steps in accordance with Sections 65 ff. GmbHG.
A key motivation for this is to avoid the costs and time that regular liquidation proceedings entail. Likewise, the fact that bankruptcy has already occurred and/or a lack of potential buyers can be a motivation for a company funeral.
However, this approach involves considerable risks, particularly in terms of damage to creditors, as they are often stuck with their claims.
The legislature has therefore deliberately enshrined “punishment norms” which can be triggered in the event of a company funeral.
The variants of a company funeral and possible liability issues will be discussed below.
2. Variants of a company funeral
There are different methods and variations of conducting a corporate funeral, each with its own risks and complexities:
a. Transfer of company shares
A common method of corporate burial is to transfer company shares to a third party.
This party, often referred to as a “straw man,” is typically a person who has no intention of continuing the business or paying off the debts.
Through this transfer, the original shareholders attempt to evade responsibility and liability for the company’s obligations.
However, this can have legal consequences, particularly if the transfer is viewed as an attempt to disadvantage creditors.
b. Disposal of assets and dismissal due to lack of assets
Another method is to remove or conceal the assets of the GmbH.
This can be done through various transactions aimed at minimizing or hiding the company’s assets.
An application for insolvency is then often filed, which is rejected due to the company’s alleged lack of assets (rejection due to lack of assets).
This practice may be considered fraudulent (and may also constitute criminal offenses), particularly if it is intended to harm creditors.
c. Relocation of headquarters to non-EU countries
Relocating the company headquarters to a country outside the European Union is another option.
By taking this step, companies are attempting to evade German jurisdiction and the associated legal obligations.
However, this method can be complex and often requires collaboration with foreign partners.
It can also pose legal risks, particularly if it is seen as an attempt to evade liability or legal obligations.
d. Appointment of a foreign managing director
Appointing a foreign director who has no actual connection to the company is another method of corporate burial.
This step is often taken to cover the tracks and make prosecution by creditors or authorities more difficult. The foreign managing director usually only serves in name and does not take an active role in the company’s management.
Here too, there are significant legal risks, particularly if the appointment is interpreted as a means of evading responsibilities.
3. Legal provisions against company burials
German law provides for various regulations intended to prevent such practices and hold those responsible accountable:
- § 138 BGB: This paragraph declares void all measures and contracts that violate good morals, which applies to many aspects of corporate funerals.
- Liability of management: The management can be held liable under Section 826 BGB (immoral damage) and Section 823 Paragraph 2 BGB in conjunction with Section 15a, b InsO, especially in the event of delaying insolvency.
- Liability of the shareholders: Shareholders can be held responsible via Section 35 Paragraph 1 Sentence 2 GmbHG and in turn via Sections 826, 823 BGB and Sections 15 a, b InsO.
- Liability of instigators and accomplices: Section 830 of the German Civil Code (BGB) provides for liability for those who are involved in the company funeral as instigators or accomplices.
4. Conclusion
A company funeral can have significant legal consequences for everyone involved, including directors, shareholders and even external consultants.
The supposed simplicity and cost-effectiveness of this method is disproportionate to the potential civil and criminal liability risks.
It is therefore strongly advisable to follow the legally prescribed route of liquidation in order to protect both the rights of creditors and the integrity of the economic system.
This article does not represent specific and individual legal advice, but rather only provides a rough initial overview of the very complex legal matter described. You can only obtain legal certainty for your specific case constellation through coordinated examination and advice from an expert lawyer.
I would be happy to assist you as a lawyer and specialist lawyer for a legal assessment and assessment of your case and represent your interests assertively and resolutely. the management, suppliers, the D&O insurance and/or the (co-)shareholders. Please feel free to contact me by phone or write to me.
I advise nationwide on site or via Zoom as a specialist lawyer in the legal areas of corporate law, tax law and insolvency law, especially in the cities and metropolitan areas around Stuttgart, Heilbronn, Karlsruhe, Freiburg, Ulm, Augsburg, Munich, Frankfurt, Wiesbaden, Saarbrücken, Kaiserslautern, Bonn, Wuppertal, Duisburg, Nuremberg, Münster, Saarbrücken, Düsseldorf, Cologne, Dortmund, Hanover, Kassel, Leipzig, Dresden, Bremen, Hamburg and Berlin.
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