Table of Contents
- 1 1. What is delaying insolvency?
- 2 2. What is the penalty for delaying insolvency?
- 3 3. Are private individuals or sole proprietors also threatened with a penalty for delaying insolvency?
- 4 4. How can delaying insolvency be prevented?
- 5 5. Conclusion
- 6 What are the legal implications for managing directors if a company is both insolvent and over-indebted but fails to file for insolvency within the required timeframe?
1. What is delaying insolvency?
Delaying insolvency (formerly delaying bankruptcy) occurs when a company is insolvent or over-indebted, but the insolvency is not reported in a timely manner.
Delaying bankruptcy is one of the most common crimes in German commercial criminal law. According to Section 15a of the Insolvency Code (InsO), the management of a company must immediately, However, at the latest within three weeks of the onset of insolvency or six weeks of determining over-indebtednessfile for bankruptcy. Failure to do so could result in massive criminal and civil consequences.
- Insolvency within the meaning of Section 15a Paragraph 1 InsO is the most common reason for insolvency and occurs when the company is no longer able to pay its due invoices due to a lack of liquidity (Section 17 Paragraph 2 InsO). Specifically, according to current case law, one speaks of insolvency if the company is unlikely to be able to pay 90% of its total liabilities due within a period of three weeks.
- Over-indebtedness occurs when a company’s liabilities are higher than its assets. According to Section 19 Paragraph 2 InsO there is a balance sheet Over-indebtedness – even if the assets no longer cover the debts – but not in exceptional cases if, based on the circumstances of the individual case, it is largely likely that the company will continue to operate in the next 12 months (so-called “positive continuation forecast”).
2. What is the penalty for delaying insolvency?
Delaying bankruptcy often has massive criminal and civil consequences.
Criminal consequences
German criminal law provides that the offense of delaying insolvency is fulfilled Imprisonment sentence of up to three years or one Fine before (Section 15a Paragraph 4 InsO). However, it is not the company itself that is punished, but rather its representative body, for example the managing director of a GmbH. The penalty in a specific individual case depends heavily on the seriousness of the crime, in particular on the amount of damage. A fine can be very high and can exceed 100 daily rates. In particularly serious cases, for example if fraud is also involved, a prison sentence can even increase to up to five years. Fraud occurs, for example, in cases in which the person obliged to submit the application continues the business undeterred despite the company’s insolvency, even though payment of the services received is clearly no longer possible.
Negligence can also lead to criminal prosecution, although the punishment is milder. Managing directors who violate their duty of care under Section 43 GmbHG can also be prosecuted. The maximum sentence in these cases is one year.
A notice: Bankruptcy courts must refer each individual case of commercial bankruptcy to the public prosecutor’s office. This then checks whether there is an initial suspicion.
Delaying insolvency is also often associated with other crimes, such as bankruptcy according to Section 283 of the Criminal Code, the violation of accounting obligations according to Section 283b of the Criminal Code, favoring creditors according to Section 283c of the Criminal Code and the withholding and embezzlement of wages according to Section 266a of the Criminal Code.
Delaying bankruptcy expires after five years.
Civil law consequences
In practice, the civil law consequences of delaying insolvency are usually more significant than the criminal consequences. Because personal liability risk is often immense, business managers should always be aware of the risk of their own actions. In addition, managing directors generally cannot free themselves from the civil liability claims of creditors even by initiating personal insolvency.
According to Section 823 Paragraph 2 of the German Civil Code in conjunction with Section 15a InsO, the person obliged to submit the application must compensate the company’s creditors for damages resulting from the late or omitted application. The same applies if the insolvency application is incorrect. The managing director is liable for both intent and negligent behavior.
Danger: Applicants are also liable under civil law for damages resulting from typical insolvency crimes, such as fraud.
In certain cases, persons other than the managing directors may also be held liable. provided they are aware of the company’s insolvency. This can affect, for example, credit institutions or shareholders. In such situations, liability for intentional immoral damage in accordance with Section 826 of the German Civil Code (BGB) comes into consideration.
3. Are private individuals or sole proprietors also threatened with a penalty for delaying insolvency?
In Germany, the criminal offense of delaying insolvency only affects companies for which no natural person is externally liable with their private assets.
These include in particular the following legal entities:
- Limited Liability Company (GmbH)
- stock corporation (AG)
- European company (SE)
- Registered cooperative (eG)
Important: It is not the legal entity itself that is liable to prosecution, but rather its representative body, as it is obliged to draw up an insolvency agreement. So it is not the GmbH itself that is liable to prosecution, but rather its managing director.
If none of the personally liable partners in partnerships is a natural person, delaying insolvency is also possible in civil law partnerships (GbR) or limited partnerships (KG).
Private individuals, on the other hand, are not subject to the same strict regulations and can voluntarily apply for consumer insolvency proceedings if they are insolvent. Private individuals are therefore not threatened with criminal prosecution for “delaying insolvency”.
A notice: Sole proprietors are also not subject to an application requirement and therefore cannot be prosecuted for delaying insolvency.
4. How can delaying insolvency be prevented?
In order to prevent delaying insolvency, managing directors should always have a precise overview of the economic situation of their company. Early warning systems and regular liquidity checks can help to identify payment difficulties at an early stage.
One of the main risks for managing directors is ignorance of the legal situation. Many business managers do not even know whether and under what conditions they are subject to the criminal risk of delaying insolvency. It is not uncommon for those obliged to file for insolvency to misjudge the company’s insolvency and incorrectly classify the impending insolvency as only a temporary crisis. The existence of a delay in insolvency often only becomes clear after a late insolvency application has already been filed. If there are signs of impending insolvency, it is advisable to quickly seek professional advice and check whether filing for insolvency is necessary.
5. Conclusion
- Delayed insolvency usually occurs when a company is insolvent or over-indebted, but the insolvency is not reported in a timely manner.
- An application for insolvency must be filed immediately, but no later than three weeks after insolvency occurs and six weeks after over-indebtedness is determined.
- Delaying filing for bankruptcy is punishable by a prison sentence of up to three years or a fine.
- The civil law consequences of delaying insolvency are often even more significant than the criminal consequences, since the managing directors are personally liable and cannot free themselves from liability through personal bankruptcy.
- In order to avoid delaying insolvency, managing directors should always have a precise overview of the economic situation of their company and file for insolvency in a timely manner in the event of insolvency or excessive indebtedness.
What are the legal implications for managing directors if a company is both insolvent and over-indebted but fails to file for insolvency within the required timeframe?
1. Can you explain the differences between insolvency and over-indebtedness in the context of delaying insolvency? What are the consequences for a company if it is both insolvent and over-indebted yet fails to file for insolvency?
2. The penalties for delaying insolvency can be severe, both criminally and civilly. How might a company’s reputation be affected if it is discovered that they have delayed filing for insolvency? And what measures can managing directors take to protect themselves personally from potential legal repercussions?
3. It is often the managing directors who are held criminally liable for delaying insolvency. As a legal expert, do you think this is an effective deterrent, or could there be unintended consequences for smaller companies where the managing director is also a significant shareholder?
4. Your article mentions that filing for insolvency should be done within three weeks of insolvency or six weeks of over-indebtedness, but what are some common reasons why companies might delay filing for insolvency even after these deadlines have passed?
5. Преобразование из GmbH в AG может быть одним из способов избежать личного уплаты долгов в случае неудачи GmbH. Однако это преобразование не беспечно. Какие препятствия могут возникнуть перед преобразованием, а также какие меры нужно предпринимать, чтобы избежать преследования последующим образом?
6. Кроме преобразования компании, есть ли другие способы, которые компаниями можно воспользоваться для предотвращения задержек банкротства? Например, какие меры могут компании предпринять, чтобы сохранить ликвидность и продолжить деятельность, когда они могут испытывать финансовые трудности?
7. Во-первых, что должен сделать менеджмент компании, когда становится ясно, что она может всего за три недели до банкротства? Во-вторых, возможно ли сокращение численности сотруд
