Corporate Debts of a Limited Company's Director
According to a recent judgment of the German Federal Supreme Court (BGH, II Reference Number 243/11 of the 19.06.2012), the director of a limited company
GRP Rainer Lawyers Tax Advisers, Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart www.grprainer.com elaborate: The director of a limited company is legally liable to acquit payments due after insolvency or after ascertainment of over-indebtedness. Such a liability of the limited company's director is nevertheless conditioned by the latter's indebtedness. Mere negligence can be reason enough hereto; but lacking know-how is yet no excuse.
The Federal Supreme Court determined the duties of a director regarding the financial examination upon signs of an upcoming indebtedness crisis. A director of a limited company must always check up on the economic situation of the company, especially on the insolvency stage. A director has handled carelessly when he neglects to acquire the necessary information and knowledge needed for the financial examination if he has the obligation to apply for insolvency.
Even the director of a limited company can thus be liable for damages. As representative of the limited company, he is subject to fiduciary duties toward the company according to § 43 section 2 of the German Companies Act (GmbHG). The director is furthermore responsible for the adequate and orderly payment of public charges and taxes and- in case of insolvency- for filing for insolvency in due time. If he does not fulfill the abovementioned duties, he can be considered liable hereto. Therefore, much attention should be paid to this matter.
Even the limited company runs certain liability risks.
If trouble arises within an existing corporation, you should seek an attorney who is able to help you overcome the problem thanks to his broad overview. It is of great importance to take action, under such circumstances, on the early stage: only then you and your corporation may avoid possible damages.
He can help you establish a limited company, draw the articles of association, with the change of business partners, and, if necessary, with its liquidation.
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