Insolvency Criminal Law in Germany

Insolvency Criminal Law in Germany

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Germany is a country open to business and is a popular country in which to open a company. However, running a business brings about its own risks, and this page will examine how insolvency criminal law offences can take place and how they are regulated.

Many business leaders outside of Germany are unaware of these offences, and our insolvency lawyers at S&E are available to advise you in such situations.

If you require expert legal assistance in insolvency criminal law matters in Germany, please do not hesitate to contact our firm directly.

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Strategic thinking is required in cases of insolvency criminal law.

At S&E, we are a full-service law firm and will give you the complete picture.

Insolvency Criminal Law: Legal Advice relating to Potential Offences

As soon as a company gets into financial difficulties, new risks arise, especially for the company’s representatives. These risks can result in insolvency-based criminal activity and other white-collar crimes. Business leaders are often not aware of these risks to the necessary extent. Knowing precisely what the offences consist of plays a critical role in ensuring that the actions of the company representatives do not lead to the commission of insolvency criminal offences.

To provide an idea of how such criminal offences are regulated, here is a list of where one can find the law specific to certain violations. For this list, the InsO is the German Insolvency Statute, whereas the StGB is the German Criminal Code. The list is as follows:

Should there be a suspicion of a criminal offence, the next step is to inform the public prosecutor. The public prosecutor’s office is notified of every insolvency proceeding based on the orders on civil matters notifications. It checks the existence of initial suspicion.

If such suspicion is accepted, a corresponding investigation procedure is initiated. Should there be enough suspicion and evidence to launch a case, the accused can end up in court on charges relating to criminal insolvency law.

At Schlun & Elseven Rechtsanwälte, we are a full-service law firm that advises clients across a wide range of legal fields in Germany. Our insolvency experts work alongside our business criminal defence lawyers when analysing cases. By applying expertise in different legal areas, our team will find solutions tailor-made for our clients and their situation.

Delay in Filing for Insolvency

A delay in filing for insolvency involves delaying or incorrectly filing an insolvency proceedings application. Such delay is punishable under the Insolvency Code (InsO). § 15a InsO stipulates the respective obligation to apply to legal entities and companies without legal personality.

Accordingly, in the event of insolvency or over-indebtedness of the company, a request for the opening of insolvency proceedings must be submitted by the legal entity’s representatives without culpable hesitation, but at the latest three weeks after the occurrence of the insolvency or over-indebtedness.

According to § 15a, Paragraph 4, InsO, anyone who does not make this application, does not make it in time or does not make it correctly is liable to prosecution. As a penalties framework, section 15a (4) InsO provides for imprisonment for up to three years or a fine. If the offender acts negligently, the penalty is imprisonment for up to one year or a fine.

Accordingly, the starting point for criminal liability for intentional or negligent delay in filing for insolvency is the existence of an obligation to file for insolvency due to insolvency or over-indebtedness of the company.

There are various methods for determining insolvency or over-indebtedness. A distinction must be made between business management and economic crime methods. According to the business method, all liabilities due are determined on a specific date, and liquid funds are compared with these, which regularly causes difficulties for law enforcement authorities.

According to the white-collar crime method, which is also admissible in criminal proceedings, all indications are considered, allowing the conclusion that the liquidity situation is critical. Signs include non-payment of due liabilities, non-payment of social security contributions, many reminders and foreclosures, outstanding wage claims, loan terminations, return debit notes, overdraft of credit lines and tax arrears.

The team at S&E will analyse your case closely and provide straightforward guidance regarding how best to proceed considering the facts of the situation facing you.

Defence Services in Insolvency Criminal Cases

Our criminal defence services aim to discontinue the proceedings without an incriminating trial, obtain an acquittal, or the lowest possible sentence if this is not possible.

A successful defence against the allegation of delay in filing for insolvency is often achieved by drawing up a liquidity balance sheet and submitting receipts regarding the due date or lack of conflict of interest of the claims or subsequent agreements on instalments or deferral of payment. This is due to the reasoning that receivables that are not due may not be taken into account in the assessment of insolvency.

A managing director’s liability for delay in filing for insolvency arises if the managing director, contrary to their statutory duty, fails or deliberately omits filing for insolvency in good time despite the company’s readiness to file for insolvency and thereby harms existing or even new creditors.

In the event of imminent insolvency, it is questionable which payments the managing director is still allowed to make, which they must complete and which they may no longer make under any circumstances. If insolvency or insolvency is imminent, liability due to a reduction of assets according to § 64 Limited Liability Act, liability due to delay in filing for bankruptcy according to § 823 BGB, in conjunction with § 15a Insolvency Code, and general liability of the managing director, according to § 43 Limited Liabilities Act, may arise.

Considerable liability reduction serves to safeguard the interests of creditors and to protect the assets of the GmbH. The main aim is to satisfy creditors evenly and to prevent the preferential treatment of individual creditors.

If the managing director has paid out company assets or arranged for payment without authorisation, they are obliged to repay or compensate in the form of managing director liability.

The aim of the defence may also be to convince the prosecuting authority or the court that the offences were committed negligently, as the penalty imposed by law in these cases is much lower.

Due to the considerable risks involved, the defendant of a delay in filing for insolvency should engage a lawyer for the criminal defence as early as possible. Our experienced lawyers will be happy to assist you in this respect.

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Practice Group: German Insolvency Law

Practice Group:
German Insolvency Law

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