17 August 2020
R&I update - August 2020 – 3 of 3 Insights
The German Federal Court of Justice (Bundesgerichtshof) recently decided that an insolvency administrator must not rely on the business judgment rule laid down in section 93(1) of the German Companies Act. Section 93(1) provides that a director is not liable to the company if the director reasonably believes that he is well-informed and is acting in the best interests of the company.
If the creditors decide to maintain the company as a going concern, it's the insolvency administrators, not the managing directors, who have to make the business decisions. When it comes to the administrator’s liability on the basis of sections 60 and 61 of the German Insolvency Act (Insolvenzordnung, InsO), the Bundesgerichtshof made clear that:
In our view, this judgment will also apply to company directors in special debtor-in-possession proceedings under section 270 seqq. of InsO (Eigenverwaltung). In these proceedings, the court does not appoint an insolvency administrator and the debtor remains in charge of the insolvency estate. Directors who are managing the company as debtors-in-possession can be held liable under sections 60 and 61 of InsO. The managing directors should be aware that they will not be shielded by the business judgment rule in relation to their personal liability.
Bundesgerichtshof, 12 March 2020, IX ZR 125/17
by Nick Moser
by Karen Wat