Insolvency criminal law
Allegations of insolvency offences make up a large part of all white-collar criminal proceedings. In approximately every second case of corporate insolvency, criminal investigation proceedings are initiated in addition to civil insolvency proceedings. The insolvency courts are obliged to submit a case to the public prosecutor’s office if there are indications from the file that justify the suspicion of a criminal offence in the run-up to insolvency.
In most cases, criminal investigations are directed against the managing directors and/or shareholders of a GmbH on suspicion of delaying insolvency proceedings. Their good intentions and hopes to get the company going again in the run-up to insolvency are often not rewarded. On the contrary: Once permanent defaults have occurred, practitioners in business do not always gain the understanding of judges and public prosecutors. Unlike the merchants “at the front”, the civil servants assess the economic capacity to act on paper alone – and only afterwards, when everyone is smarter.
1. Economic consequences of insolvency
A conviction for an insolvency offence can have even more far-reaching consequences for the affected company employees. Thus there is a personal civil liability according to § 64 GmbHG for payments after insolvency or overindebtedness. According to § 6 GmbHG a conviction for an insolvency offence can stand in the way of a future activity as a GmbH managing director. Tradespeople are threatened with the withdrawal of their trade licence (cf. § 35 GewO).
Insolvency administrators pay particular attention to claims to rescission under insolvency law. If, at the time of the insolvency application, the company has only a small amount of assets, the insolvency proceedings may be terminated due to a lack of assets. Insolvency proceedings are only possible in such cases if the insolvency administrator succeeds in proving that claims for rescission exist, i.e. in the period before insolvency, for example, claims were paid that should no longer have been paid. The conditions of a civil law challenge overlap to a large extent with the conditions of criminal insolvency offences. For this reason, insolvency administrators often work towards conducting criminal proceedings against the managing directors and/or shareholders of the insolvent company.
2. Delayed insolvency
The most frequent criminal charge in connection with the crisis of a company is the accusation of delaying insolvency proceedings pursuant to § 15a InsO. This paragraf is quickly fulfilled, because a managing director is obliged to file for insolvency within a very short period of three weeks after the first signs of a permanent business crisis. If he does not comply with this obligation, there are considerable risks of criminal liability. This is usually accompanied by the risk of civil liability that threatens the very existence of the company.
The prerequisite for the obligation to file for insolvency is the so-called maturity for insolvency. This occurs when a company is insolvent or overindebted.
Overindebtedness is assumed if the debtor’s assets no longer cover the existing liabilities, unless the continuation of the company is predominantly probable under the circumstances (see § 19 Para. 2 InsO).
The definition of over-indebtedness was revised in 2012 in view of the economic crisis. According to the current version of the law, a so-called positive continuation prognosis can lead to an economic negation of overindebtedness, although the balance sheet is already formally negative. For overindebtedness, it therefore depends on the forecast as to whether the company will be in a position to raise sufficient money to meet its payment obligations within a certain period of time.
Due to the fact that the focus is on economic standards, considerable uncertainties often arise in practice, which – depending on the perspective and procedural situation – can have an effect to the advantage or to the disadvantage of a targeted managing director.
In the legal discussion of overindebtedness, particular attention must be paid to whether all items that cannot be capitalized under commercial or tax balance sheet regulations (e.g. tangible assets) were taken into account in the insolvency receivables list. Different evaluation methods often lead to different results. In addition, there is ample scope for evaluation of hidden reserves, letters of subordination, waiver of claims or letters of comfort.
For defence, the fact that a managing director often does not know all the facts on which the company valuation is based offers a wide margin of manoeuvre.
According to the legal definition, insolvency occurs when a debtor is not in a position to meet the due payment obligations. It is generally assumed when a company has stopped making payments. The mere deferral of payment, i.e. the shortage of liquid funds that can be remedied in the short term, must be deferred from insolvency. In the process of accrual and deferral, it must be examined whether solvency can be restored, for example, through loans, the addition of equity capital, income from normal business operations or the sale of assets.
3. Conclusion
For the assessment of the economic background, in particular the so-called maturity for insolvency, a whole series of circumstances are important in insolvency criminal law. Commercial criminal defence lawyers who work in insolvency criminal law must have a profound knowledge of civil and commercial law as well as tax law in order to be able to deal with the facts adequately.
