A person appointed as a managing director of a company bears the duties of that office. The appointment is decisive, not the subsequent entry in the commercial register. German criminal law does not stop there. In a number of offences it asks who actually runs a company and attributes the duties of the corporate body to the person who has taken over that position without a formal appointment. Conversely, neither economic influence nor advice nor the exercise of shareholder rights establishes criminal liability on its own. This article explains, under German law, the conditions under which a person can be criminally responsible as a de facto managing director (faktischer Geschäftsführer), where the line to mere influence runs, and which duties under insolvency law, social security law and tax law are at the centre of that assessment. It is written for managing directors, for people who actually run a business, and for shareholders, advisers and investors. The German figure is sometimes loosely compared with the shadow director of English company law, but it is a concept of German law with its own requirements and should not be equated with any foreign legal figure.
Why the entry in the commercial register is not decisive
Many offences of German business criminal law are so-called special offences. They are not addressed to everyone but to persons holding a particular position of duty. The duty to file for insolvency under section 15a of the German Insolvency Code (InsO) rests on the members of the body representing the company. Bankruptcy under section 283 of the German Criminal Code (StGB) presupposes the status of debtor, which in the case of a company is attributed to its representative body under section 14 paragraph 1 number 1 StGB. Withholding social security contributions under section 266a StGB requires the status of employer. For delayed filing for insolvency and for bankruptcy the Federal Court of Justice (Bundesgerichtshof) understands the member of the representative body to include not only the person formally appointed but also the person who has actually taken over that position, and the same applies through section 14 StGB to the employer duties under section 266a StGB. The judgment of the Federal Court of Justice of 27 February 2025 (5 StR 287/24) summarises this line in paragraphs 14 and 21 and makes clear that the criminal responsibility of de facto corporate bodies does not rest on an appearance created by acting externally but on the actual assumption of the position of a corporate body.
The legal figure is therefore not a tool for holding every influential person to account. Its purpose is to prevent responsibility from hiding behind a straw man who is managing director on paper but does not manage the business. In the classic wording of the courts it concerns the person who has actually taken over the management with the consent of the shareholders and who has a clear preponderance over the formally appointed managing director. That description marks the starting point but does not replace the examination of the individual case. In 2025 the Federal Court of Justice made clear that it is wrong from the outset to replace the question of a de facto corporate position with the schematic working through of a list of criteria. The features familiar in practice, such as determining company policy, deciding on staff, negotiating with lenders or controlling the bookkeeping, remain indicators for the assessment of the evidence. What matters, however, is to what extent someone has taken over the tasks typical of a corporate body that actually arise in the specific company. Anyone relying on the fact that a certain number of these features are not met therefore does not yet have a defence in hand. Nor does the mere absence of an entry in the commercial register provide one.
The attribution is anchored in section 14 StGB. Paragraph 1 covers representative bodies and legal representatives, paragraph 2 covers persons instructed by the owner of a business or by another authorised person to run a business in whole or in part, or expressly instructed to perform the owner’s tasks on their own responsibility, provided they act on the basis of this instruction. Paragraph 3 makes paragraphs 1 and 2 applicable also where the legal act that was intended to establish the power of representation or the mandate is invalid. The provision therefore contains several routes of attribution, each with its own requirements, and does not create a general fiction for every informal activity or mere exertion of influence. Whether the inclusion of persons who act purely de facto without any act of appointment is compatible with the wording of the criminal statutes is discussed critically in legal literature. The criminal courts nevertheless apply the figure in settled case law. For each individual offence it must therefore be examined whether the person concerned held the duty presupposed there or whether that duty is attributed to him or her under section 14 StGB. If the position of duty is missing, that does not exclude criminal liability in every case. A person who assists the offence of a person under a duty or who induces it may be liable as an accessory or instigator, in which case the sentence is to be mitigated under section 28 paragraph 1 StGB because the special personal characteristic is absent in the participant.
Influence, advice and shareholder instructions are not yet management
The opposite direction is just as important. A shareholder may influence the management. Through the shareholders’ meeting a shareholder can give the managing director binding and even very detailed instructions, because German limited company law expressly provides for this. In the judgment of 27 February 2025, at paragraph 19, the Federal Court of Justice emphasises that a purely internal influence of a shareholder on the appointed managing director does not lead to de facto management, because such indirect steering does not correspond to the typical role of a representative body and does not violate the allocation of competences under company law. For companies that are actively trading, representing the company externally remains one of the essential features of a corporate position. A person who has taken over the management and who determines the company’s legal transactions in a way that is recognisable to outsiders actually occupies the position of a managing director. A person who advises in the background, checks figures, makes recommendations or prepares decisions does not yet manage the business.
The 2025 decision concerned a special situation that must not be transferred to the ordinary case. The defendant had taken over companies that had already ceased trading, installed an inexperienced straw managing director and stripped the companies of their remaining assets in order to shake off their creditors. For such company burials (Firmenbestattungen) the Federal Court of Justice held that the absence of external representation has only very limited significance, because the company no longer participates, or barely participates, in legal transactions anyway. This statement is expressly limited to companies without trading activity. At the same time the court formulated a second idea that has significance beyond company burials. Certain tasks are assigned exclusively to the representative body under the allocation of competences in company law and are removed even from the shareholders’ power to instruct, such as bookkeeping and accounting, the preservation of capital and the filing of the insolvency petition. A person who takes control over the performance of precisely these duties leaves the area of permissible influence. The regional court had convicted the defendant only of aiding and abetting. On the prosecution’s appeal the Federal Court of Justice set that conviction aside and remitted the case without itself finding that the defendant was a principal. The judgment contains no general statement about advisers, investors or family members.
In practice a number of recurring situations arise, which are deliberately described here in general terms. There is the former owner of a family business who remains present in the company after handing it over to the next generation. Whether he merely advises and exercises his shareholder rights or whether he continues to run the day-to-day business himself, hires staff, approves payments and appears to banks and customers as the real boss is decisive for his position. There is the investor or advisory board chair who requests reports, exercises rights of consent and supports strategic decisions. Such rights are regular instruments at the level of shareholders and investors and do not become management because they are exercised intensively. There is the restructuring adviser or interim manager who is given far-reaching tasks in a crisis. For that person it depends on whether he works within an advisory mandate and decisions remain with the appointed body, or whether he himself disposes of assets under a power of attorney, appears externally as the person in charge and the managing director merely implements his instructions. And there is the group structure in which central functions such as finance, tax or human resources set requirements for subsidiaries. Here too a distinction must be drawn between an intra-group service and control function and the assumption of the corporate management of a subsidiary. In none of these situations can the answer be derived from the label of the role. It follows from the overall picture of what the person actually did.
Duty to file for insolvency and delayed filing
The most important application in practice is delayed filing for insolvency (Insolvenzverschleppung). Under section 15a paragraph 1 InsO the members of the representative body or the liquidators of a legal entity must file a petition to open insolvency proceedings without culpable delay as soon as the company is illiquid or over-indebted. The petition must be filed at the latest three weeks after illiquidity occurs and six weeks after over-indebtedness occurs. These periods are maximum periods. The duty to act without culpable delay means that they may be used only as long as serious efforts with a prospect of success are being made to remove the grounds for insolvency or to prepare the petition. Anyone who treats them as a generally available waiting period misunderstands the content of the duty. A person who fails to file the petition or files it late is punished under section 15a paragraph 4 InsO with imprisonment of up to three years or a fine. If the person acts negligently, paragraph 5 provides for imprisonment of up to one year or a fine. Under paragraph 6, a person who files an incorrect petition can be punished only if the petition to open proceedings has been rejected as inadmissible by a court decision that has become final. This restriction also applies to negligence under paragraph 5. For a limited liability company (GmbH) without a managing director, paragraph 3 contains a separate rule under which every shareholder is also obliged to file, provided he or she knows of the grounds for insolvency and of the absence of management. The duty to file applies in particular to GmbHs and to other legal entities and partnerships with legal capacity covered by section 15a InsO, subject to the statutory exceptions. It does not apply to every entrepreneur.
Illiquidity and over-indebtedness are legal terms defined in sections 17 and 19 InsO. A temporary liquidity squeeze, a late customer payment or a strained balance sheet do not on their own amount to grounds for insolvency. Whether such grounds exist must be examined in the individual case on the basis of the ability to pay and the going-concern prognosis. Readers who wish to look at the criminal risks in a corporate crisis as a whole will find our article on criminal liability risks and defence in corporate insolvency. The present article is limited to the question of who is bound by these duties. According to the case law of the Federal Court of Justice, the de facto managing director can be a suitable perpetrator of delayed filing for insolvency. The Federal Constitutional Court (Bundesverfassungsgericht) dealt with this legal figure in an order of 16 August 2021 (2 BvR 972/21), but only in passing. The constitutional complaints were not accepted for decision because they were inadmissible. In paragraph 25 the chamber did not object, under the constitutional standard of review, to the specific classification of the complainant in that case as a de facto managing director. In paragraph 26 it expressly left open whether applying the offence of delayed filing to de facto managing directors is compatible at all with the limits of the statutory wording under Article 103 paragraph 2 of the Basic Law, because this had not been raised in the complaint, and it pointed to critical voices in legal literature. The decision therefore does not amount to a constitutional endorsement of the legal figure. Nor does it by itself exclude responsibility. The fundamental question has not been decided by the Federal Constitutional Court.
The prohibition of payments in section 15b InsO must be distinguished from the duty to file. After illiquidity or over-indebtedness has occurred, the members of the corporate body who are obliged to file may no longer make payments on behalf of the company unless the payment is compatible with the care of a prudent and conscientious manager. Under paragraph 4, breaches lead to a duty to reimburse the company. Section 15b InsO is not a criminal offence but a civil liability provision. Paragraph 8 contains a special rule for tax payment obligations, which under certain conditions are deemed not to have been breached if those obliged to file comply with their duty under section 15a InsO. This does not amount to a general release towards other creditors. Which payments are still permissible in a crisis cannot be answered in general terms. Shifts of assets in a crisis become relevant under criminal law above all through the bankruptcy offences in sections 283 and following StGB, whose punishability additionally requires under section 283 paragraph 6 StGB that payments have been suspended, that insolvency proceedings have been opened or that the petition has been dismissed for lack of assets.
Social security contributions and the status of employer
Section 266a StGB makes withholding social security contributions a criminal offence and ties it to the status of employer. In the case of a GmbH the employer is the company. Its duty is attributed under section 14 StGB to the managing director and, in accordance with the principles set out above, also to the person who has actually taken over the corporate position. The statute treats employee contributions and employer contributions differently. Under paragraph 1 the mere withholding of employee contributions is already punishable, irrespective of whether wages were actually paid. For the contributions to be borne by the employer, paragraph 2 additionally requires that incorrect or incomplete information about facts relevant to social security law is given to the collecting agency or that the agency is, in breach of duty, left in ignorance of such facts. The mere non-payment of the employer’s share therefore does not satisfy the offence. Whether an employer status exists at all is a question of social security law that leads to difficult distinctions in the case of freelancers, subcontractors and platform work. We explain these questions separately on our page on section 266a StGB and bogus self-employment.
For personal responsibility, intent is decisive. In its order of 24 September 2019 (1 StR 346/18) the Federal Court of Justice abandoned its earlier case law and held that intentional conduct exists only if the person concerned, beyond knowing the factual circumstances, has also understood the evaluations of labour and social security law at least in a layperson’s parallel assessment. The person must at least have considered it possible that he or she is an employer and that a duty to pay contributions follows from this, and must have accepted the breach of that duty. A mistake about the status of employer or about the duty to pay contributions is accordingly a mistake of fact within the meaning of section 16 paragraph 1 StGB, which excludes intent. Conditional intent suffices, and certain knowledge is not required. At the same time the order makes clear that a claimed mistake is not irrefutable. The court weighs how clear the indications of an employer status were, how experienced the person is in business, whether the business model was designed from the outset to circumvent social security obligations and whether duties to make enquiries were breached. The complexity of the legal position or the involvement of an adviser therefore does not automatically lead to impunity. These are circumstances that can speak for or against a mistake in the individual case.
Tax duties, power of disposal and tax evasion
In tax law the separation of the legal figures is even more important. Under section 34 paragraph 1 of the German Fiscal Code (AO) the tax duties of a company are to be fulfilled by its legal representatives, that is the appointed corporate bodies. In addition, section 35 AO covers the person who acts as a person with power of disposal (Verfügungsberechtigter) in his or her own name or in the name of another. Such a person has the duties of a legal representative to the extent that he or she is legally and actually able to fulfil them. A person regarded as a de facto managing director under criminal law is therefore not automatically a person with power of disposal within the meaning of tax law. Both figures have their own requirements.
The Federal Court of Justice described the requirements of section 35 AO in detail in paragraphs 80 to 88 of its judgment of 9 April 2013 (1 StR 586/12). A person with power of disposal is anyone who, on an overall view of the circumstances, can legally and economically dispose of funds attributable to another and who appears externally as such. Purely factual control is not enough. A person who can merely exert economic pressure, for instance as a lender, is therefore not yet a person with power of disposal. The ability to dispose must have been legally conferred. On the other hand, an indirect legal power of disposal is sufficient. A person who can have the duties of the legal representative fulfilled by appointing the corresponding corporate bodies, or who by virtue of a legal relationship can steer the represented entity and dispose of its funds, can be a person with power of disposal. Appearing externally need not take place towards the tax office or in tax matters. It is sufficient that the person makes it recognisable to a limited public, for instance in the shareholders’ meeting, that he or she can dispose of the assets. A person in the background who lets straw men bound by instructions act externally is therefore not protected merely because he or she personally signs nothing. Such a person is, however, only bound under section 35 AO if the dependence on instructions becomes recognisable at least to a limited public. These standards of tax law must be kept apart from the qualification of the external appearance requirement developed in 2025 for company burials. They apply independently of it.
How much depends on the specific power of disposal is shown by the judgment of the Federal Fiscal Court (Bundesfinanzhof) of 20 February 2024 (VII R 16/21). According to that decision a preliminary custodian (vorläufiger Sachwalter) in debtor-in-possession proceedings is in principle not a person with power of disposal, because he or she merely supervises the debtor and the power of disposal remains with the debtor. In the case decided, however, the custodian had taken over the cash management, opened a trust account in his own name and processed all payments of the company through it. Only this fiduciary position, in the view of the Federal Fiscal Court, gave him the legal and economic power of disposal and at the same time the external appearance that section 35 AO requires. The decision does not say that custodians, restructuring advisers or interim managers are generally liable for taxes. Rather it shows that the role alone decides nothing and that what matters are the powers actually conferred.
For tax evasion under section 370 AO a distinction must be drawn between active conduct and omission. A person who under paragraph 1 number 1 makes incorrect or incomplete statements to the tax authorities can be a perpetrator without being personally liable for the tax or obliged to file a return. A person who causes an incorrect return to be filed, approves it or participates in it can therefore also be a perpetrator or co-perpetrator. The mere fact that someone caused or approved a return does not, however, prove that person’s status as perpetrator. What matters is the attributable contribution and the intent. The position is different for tax evasion by omission under paragraph 1 number 2. Here only a person who, in breach of duty, leaves the tax authorities in ignorance and thereby breaches his or her own duty to disclose facts relevant to taxation can be a perpetrator. In 2013 the Federal Court of Justice held that the element of breach of duty refers solely to the conduct of the perpetrator and that another person’s breach of duty cannot be attributed even where the conditions of co-perpetration would otherwise be met. For the person in the background it follows that his or her status as perpetrator depends on whether he or she is personally subject to a duty to file, which in the case of a company must be determined under section 34 or section 35 AO. If that duty is absent, liability for aiding and abetting or instigation remains possible. In the 2013 judgment the Federal Court of Justice changed the conviction in some of the cases from perpetration to aiding and abetting for precisely this reason.
On the subjective side the perpetrator must know the tax claim in principle and in amount, or at least consider it possible, and must want to reduce it. Intent to evade tax does not require certain knowledge of the tax claim either in principle or in amount. Conditional intent suffices. A person who mistakenly assumes that no tax claim has arisen is under a mistake of fact within the meaning of section 16 paragraph 1 StGB. Where tax evasion by omission is alleged, intent must also encompass the person’s own position of tax responsibility. A mistake about this normative element of the offence can exclude intent. What matters is whether the person understood, at least in lay terms, the significance of the relevant circumstances and their legal assessment. By contrast, active false statements do not require a personal duty to file a tax return. Whether such a mistake actually existed is a question of the assessment of the evidence, for which professional advice, documented decisions and the conduct towards advisers and authorities can become significant. The difficulty of a tax question does not by itself establish the mistake.
Tax liability must be distinguished from criminal liability. Under section 69 AO the persons named in sections 34 and 35 AO are liable if tax claims are not assessed or fulfilled, or not in time, as a result of an intentional or grossly negligent breach of their duties. Section 70 AO can make the represented person or entity liable for tax shortfalls and tax advantages wrongly granted, provided that person or entity is not itself the tax debtor. This requires a person covered by section 34 or section 35 AO to commit tax evasion or a grossly negligent tax understatement, or to participate in tax evasion, while performing their duties and thereby become a tax debtor or a person liable for the tax. A represented natural person is not liable under this rule for an offence by their legal representative if the represented person has obtained no financial benefit from it. Paragraph 2 also provides an exception where the represented person or entity has carefully selected and supervised the offender. Section 71 AO makes the person liable who commits tax evasion or participates in it. These liability provisions do not require a criminal conviction and do not replace one. A liability notice is not proof of guilt, and a discontinued criminal investigation does not exclude a claim under the liability provisions. Both procedures run side by side under their own rules. Our overview of criminal tax law describes the course of a criminal tax investigation in context.
A supplementary aspect, the place of management
In international structures a further question is added to those described so far. Under section 10 AO the place of management is the centre of the top-level management of the business, and under section 12 sentence 2 number 1 AO the place of management is deemed to be a permanent establishment. Whether a company incorporated abroad is subject to unlimited tax liability in Germany or has a permanent establishment here can depend on where the day-to-day management is actually exercised. According to the case law of the Federal Fiscal Court the decisive place is where the will that governs the management is formed and where the measures of some importance necessary for the management are ordered. This refers to the day-to-day business, not to the extraordinary transactions that concern the fundamental direction of the company and typically lie at the level of shareholders or investors. The question whether someone is a de facto managing director or a person with power of disposal does not answer the question of the place of management. These are different questions of attribution with different requirements. A person who prepares decisions of a foreign company from Germany or who takes fundamental decisions as an investor does not thereby shift its place of management to Germany. Conversely, a person who actually runs the day-to-day business of a foreign company from Germany can create a place-of-management permanent establishment here.
The German tax administration has summarised its view on the concept of permanent establishment in the circular of the Federal Ministry of Finance of 18 June 2026, which replaces the earlier draft of February 2026 and which, according to its paragraph 165, applies in all open cases unless statutory provisions provide otherwise. Under paragraph 143 of that circular the exercise of management functions in a home office can create a place-of-management permanent establishment without any need for a fixed place of business over which the company has power of disposal. Different rules therefore apply to the place of management than to the fixed place of business, for which the Federal Fiscal Court, in two judgments of 18 December 2024 (I R 47/21 concerning the double taxation treaty with Switzerland and I R 39/21), requires an overall assessment of geographical and temporal permanence, power of disposal and rootedness and demands as a general requirement a minimum duration of six months also for the business activity carried on there. Anyone who wanted to infer from those decisions that no place-of-management permanent establishment can ever arise without the company’s own office premises would be mixing up the two questions. The ministry circular is an administrative view. It binds the tax offices, not the courts, and leaves the examination under the applicable double taxation treaty untouched. German tax liability of foreign companies does not follow from all this in general terms but only from the actual circumstances of the individual case.
What is examined in proceedings and what those affected can do
Investigating authorities frequently assemble the allegation of de facto management from many individual circumstances, from e-mails, chat messages, calendar entries, bank mandates, approval processes, minutes and witness statements. Each of these circumstances can mean something different in its context. A request for approval can be a recommendation, process language or a binding instruction. The legal assessment must therefore place each piece of evidence in one of the three categories this article has described. Is it permissible shareholder or investor activity, is it advice and preparation, or is it the actual assumption of tasks typical of a corporate body? For the tax side it must be clarified separately whether a legally conferred power of disposal existed and whether the person appeared as a person with power of disposal. For intent it must be clarified what the person knew and considered possible at which point in time.
For those affected it makes sense to secure the existing documents early and completely, in particular articles of association, rules of procedure, powers of attorney, bank documents, minutes of shareholders’ and advisory board meetings, advisory and service agreements and the correspondence showing who actually took decisions. These documents are valuable because they reflect the overall picture truthfully. The documents should be preserved in their original form. Retrospective falsification could itself have criminal consequences. Legitimate future improvements to the corporate organisation remain possible. Anyone who, as a managing director, shareholder, adviser or investor, is confronted with the allegation of having actually managed a company should obtain legal advice before making any statement to investigating authorities. Whether responsibility exists can be neither affirmed nor denied in general terms. It depends on the actual circumstances, and these can only be assessed on the basis of the files and the documents. Rudolph Rechtsanwälte defend clients in German business and tax criminal proceedings and advise companies on the questions of demarcation described here. Our page on business criminal law gives an overview of this work. For a first contact please use our contact page.