7 June 2019
According to German law, managing directors of limited liability companies are personally liable for payments that have been made despite insolvency. This can lead to widespread liability.
For example, where third party payments are made to a business account of the insolvent company, if the account has a negative balance, a director may be liable, since such a payment constitutes a payment by the insolvent company to the bank. Therefore, a managing director should principally direct payments to a credit account of the company, in order to avoid liability.
There are exceptions to this, for example, if the bank is secured by collateral, eg a blank assignment (Globalzession). The Higher Regional Court of Hamburg has recently made a further exception, where a third party payment held to be an advance payment in favour of the insolvent company.
The ruling shows that the rules on liability for payments made during insolvency are complex. Every managing director should redirect payments to accounts held in credit, if the company is illiquid.
Nevertheless, the details of liability remain uncertain. As the court admitted an appeal, it is unclear, if the Federal Court of Justice (BGH) will accept the decision making of the Higher Regional Court.