1. Introduction
In corporate management, crises and bankruptcies are times of increased demands and risks. Particularly in the area of tax obligations, negligent or uninformed management can quickly lead to serious legal consequences for the managing director himself but also for the company.
This guide highlights the liability risks that directors face in times of crisis and offers strategies to mitigate and avoid these risks.
2.) The crisis period and the increased tax management obligations
During a corporate crisis or in the run-up to insolvency, the demands on management become significantly more stringent.
The management is obliged to ensure complete accounting, to calculate taxes due correctly and to pay them on time.
At this stage, special attention is required as financial constraints must not lead to neglect of tax obligations.
For management, this time can certainly be described as a “hot phase”.
3.) Violation of tax obligations and liability under Section 69 AO and their assertion against the management
According to Section 69 of the Tax Code (AO), managing directors are personally liable for the company’s taxes that are not paid.
This liability comes into effect in particular if it can be proven that there has been an intentional or grossly negligent violation of tax obligations.
In such cases, the tax authorities can take direct action against the managing directors, which can result in considerable financial burdens.
In practice, this is done directly to the managing director via a liability notice in accordance with Section 191 AO.
4.) Liability relief and liability avoidance
There are mechanisms to reduce liability risks, such as the principle of proportional repayment, which aims to ensure equal satisfaction of all creditors in the event of tight budgets. However, the technically correct implementation of this principle is difficult in practice.
What is important here is a transparent and fair distribution of the available funds.
Additionally, proactive communication with tax authorities and obtaining tax advice can reduce liability. Because if a lawyer and/or tax advisor is on board, they or their liability insurance are liable for incorrect decisions and implementation in this phase.
5.) Tension between tax liability and corporate liability
Particular attention should be paid to the tension between tax liability according to Section 69 AO and liability under corporate law, for example according to Section 15a of the Insolvency Code (InsO). While tax liability relates to taxes, corporate liability often concerns broader responsibilities that also include the interests of other creditors.
Here, management may have to perform a balancing act that can only be carried out correctly with expert legal advice to avoid personal liability.
6.) Proactive protection of management
One way to minimize the personal risk of managing directors is to take out D&O insurance (Directors and Officers Liability Insurance). This insurance offers protection against liability claims that may result from perceived or actual wrong decisions by management.
In addition, as already stated above, the support of expert advisors is generally advisable from a liability minimizing perspective.
Comprehensive and proactive communication and documentation towards shareholders, (co-)managing directors, suppliers, etc. is also potentially advisable for management in such phases.
7.) Conclusion
The responsibility of management in times of crisis and insolvency is immense and requires a careful and informed approach, especially when dealing with tax obligations. By understanding the legal framework, proactive measures and appropriate hedging strategies, managing directors can significantly reduce the risk of personal liability and thus contribute to stabilizing the company’s situation.
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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