Liability of the Managing Director and the Shareholder in the GmbH (Private Limited Company) in Crisis

Abstract

The insolvency of a company does not arrive suddenly. Normally, insolvency precedes a crisis. At present, the term “crisis” is defined in § 32 a sec. 1 of the Gesetz betreffend die Gesellschaften mit Beschränkter Haftung (GmbHG – Private Limited Companies Act) as the point when the company does not receive any credits according to the usual conditions in the particular market and when the shareholders provide the company with further shareholder capital instead of debt capital. Besides the rules governing shareholder capital substitution, which will be omitted due to the upcoming reform of private limited companies, there are few legal guidelines that regulate the standards of conduct for managing directors and shareholders in the case of a crisis. In particular, § 49 sec. 3 GmbHG needs to be singled out. This paragraph establishes an obligation to call a shareholder meeting if more than half of the capital stock is lost. If an adverse balance arises because of the payouts to the shareholders, the protections of §§ 30, 31 GmbHG will intervene. An adverse balance results when there is insufficient capital to cover the liabilities, ownership's equity, and guaranteed capital. However these protections often do not suffice.