Personal Liability of Managing Directors in the Insolvency of a German GmbH — Also Applies to German AGs

In the insolvency of a German customer, a supplier and creditor is always faced with the problem that, in the customer’s insolvency proceedings, the supplier will often have to accept a reduction of its claim that varies from case to case and will usually have to be satisfied with an insolvency quota. The supplier’s shortfall loss is therefore often substantial. In addition, insolvency proceedings in Germany regularly take several years.

Our many years of experience representing Hungarian creditors in German insolvency proceedings show, however, that German legal practice may, depending on the circumstances of the case, also offer insolvency-damaged creditors an additional and effective means of redress: asserting the personal liability of the managing directors or board members of the insolvent German company — such as a GmbH, GmbH & Co., AG or AG & Co. — for the creditor’s loss under German damages law.

Our experience in the field of German corporate insolvencies shows a recurring pattern: the ordering of goods or services from suppliers whose invoices are later no longer paid because of the insolvency often already takes place during the liability-relevant phase of insolvency, in which the German customer — measured against the relatively strict standards of the German Insolvency Code — would no longer have been permitted, under insolvency law, to order the creditor’s goods or services. In all such cases, the managing directors or board members of the insolvent German company are personally liable under German law to compensate the injured supplier for the shortfall loss caused by the insolvency.

A final judgment obtained by us in this regard from the Regional Court of Munich I in summer 2017, including the facts and reasoning and now final and binding, is available for download as a PDF.