German limited company (GmbH)- Liability of former managing director for breach of duty to file for insolvency

Company law

In its judgment of 24 July 2024 (ref. no. II ZR 206/22), the German Federal Court of Justice (BGH) ruled that a managing director who has left the company may also be liable under section 823(2) of the German Civil Code (BGB) in conjunction with section 15a of the Insolvency Statute (InsO) for losses suffered by new creditors who entered into contractual relationships with the company only after his departure. The prerequisite for this is that the risk situation associated with the delay in filing for insolvency still existed at the time the damage occurred.

The German Federal Court overturned the judgement of the Higher Regional Court and confirmed that the liability of a former managing director for delay in filing for insolvency is not limited to damages that occurred before he left the company. Rather, the former managing director is also liable pursuant to Section 823 (2) BGB in conjunction with Section 15a InsO to creditors who entered into a contractual relationship with the company after his resignation, insofar as the risk situation created by the failure to file for insolvency continues to exist.

Although the managing director's duties as an executive body and thus also his duty to file for insolvency in accordance with Section 15a (1) InsO cease to apply upon termination of his position as an executive body, this does not lead to a retrospective curing of breaches of the duty to file for insolvency that have already been committed. The German Federal Court had ruled that the breach of the obligation to file for insolvency by a former managing director was still a contributory factor for subsequent contracts concluded by the company, as these contracts would not have been concluded if the insolvency application had been filed.

A dismissed managing director now also bears the risk of having to assume liability for damages that only occurred after his dismissal if he had previously breached the obligation to file for insolvency.

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