A small business with the same name can create liability for a Ltd. company
The German Federal court of justice (BGH - judgment from 05.07.12 - II ZR 116/11) recently ruled on the preconditions of a company's continued liability according to Â§ 25 of the German commercial code (HGB).
GRP Rainer Lawyers Tax Advisors, Cologne, Berlin, Bonn, Düsseldorf, Hamburg, Munich, Stuttgart, Frankfurt www.grprainer.com explain: Limited liability companies sharing the same name as individual enterprises can be liable for bad investment advice. A limited liability company can be liable for bad investment counseling by an individual enterprise with the same name.
§ 25 HGB regulates the liability of the buyer. Substantial for identifying a company's continued liability is the ongoing business. If the companies remain essentially the same in name and in their activities, this is true even when the old company is abandoned and a new one is founded. This company becomes liable for the dealings of the old company, should one of these companies show a continuity of business traffic to a third party. These criteria will be applied in the determination of liability for the GmbH to examine, if a connection exists between it and the previous business.
The addition of the label "GmbH" was not considered, as in the above mentioned case the clients had the impression that they were dealing with one and the same company. The new company is liable for the actions of the old company in accordance with § 25 HGB in light of this. But it is still possible for the company to become liable, should the § 25 HGB not be applicable. If it appears to belong to the original enterprise, the GmbH should consider the claims against them to be valid. In this case, a law of liability can be applied. If it appears to a third party that the new company is a direct successor, is legally responsible for the previous enterprise or comprises a unit with it, similar to § 25 HGB for this case. Legal claims can then be made against the GmbH. The GmbH should not be able to claim non-partisanship because it is not the right party.
A lawyer proficient in this area will check extensively on a case by case basis what claims you are entitled to, and against whom they can be made. Furthermore, the lawyer can help you make the right decisions for the future. If you have been affected by bad investment counseling, then talk to an experienced corporate lawyer.
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