Managing Director and Supervisory Board Responsibility in Light of the Insolvency Filing Obligation: Key Points from the Neckermann Case
The Regional Court of Frankfurt am Main recently addressed the liability risks of management and supervisory bodies in connection with payments made prior to the filing for insolvency (judgment of 03.05.2021, file no.: 2-21 O 182/17). The court’s appraisal serves as an opportunity to examine in greater detail the parameters of liability and the scope of action for corporate bodies in economically strained situations.
Requirements and Limits of Corporate Body Liability in Case of Insolvency Maturity
The Insolvency-Related Payment Prohibition Obligation
Pursuant to Section 64 GmbHG (old version, now: Section 15b InsO), managing directors are obligated, from the occurrence of insolvency or over-indebtedness, not to make any payments that are not consistent with the diligence of a prudent manager. Violations can lead to extensive personal liability. In principle, this liability covers all payments made from company assets after the occurrence of material insolvency.
Special Features in the Period Prior to Filing
The exact point in time from which such obligations apply is regularly the subject of judicial clarification. In the Neckermann case, claims were asserted against former managing directors and supervisory board members due to payments made prior to the insolvency filing. The court emphasized that, within the framework of stock corporation and limited liability company law, corporate body liability cannot be retroactively extended to payments made before the formal insolvency application as long as insolvency maturity has not been unambiguously established.
Standards of Review and Burden of Proof Allocation
Necessity of a Clear Establishment of Insolvency
The court highlighted that liability of management or supervisory board members for payments prior to the initiation of insolvency proceedings only comes into consideration if it can be proven with sufficient clarity that the grounds for insolvency already existed. The burden of proof for insolvency maturity during the period relevant for liability generally lies with the claimant.
Importance of Corporate Organization and Decision-Making Processes
With regard to the decision-making processes for which they are responsible, corporate bodies must be granted a margin of discretion, particularly with respect to judgments on economically reasonable measures during a corporate crisis. The supervisory board is responsible for monitoring management; a direct obligation to approve payments—as a prerequisite for liability—must be specifically provable.
Implications for the Practice of Corporate Management
Practical Effects of Judicial Standards
The key reasoning of the judgment is pioneering for crisis management in companies: managers and supervisory bodies are required, at the first signs of impending insolvency, to establish transparent review and documentation processes. Nevertheless, such actions provide protection only as long as insolvency maturity has not been objectively established and an insolvency filing is not mandatory.
Limited Retroactivity of Corporate Body Liability
The ruling makes it clear that liability for old payments prior to the date of the insolvency filing is generally excluded if insolvency maturity is not proven. Blanket liability in favor of the insolvency estate against decision-making bodies is not warranted under current supreme court jurisprudence.
Conclusion and Outlook
The decision of the Regional Court of Frankfurt sets an important orientation framework for management and control bodies. It emphasizes the necessity of a careful, case-by-case examination of insolvency maturity and highlights the limits of personal liability. As a result, the existing legal certainty for corporate bodies in critical phases of business is reinforced.
For decision-makers, investors, and creditors, a reliable assessment of insolvency-related risks prior to filing remains fundamental—especially against the background of complex liability structures and the multitude of potential grounds for claims.
Current legal developments and precedents clearly show that assessing individual liability situations requires expert support. If you have further questions regarding the responsibilities of management and supervisory bodies in the context of insolvency risks, the lawyers at MTR Legal are happy to provide advice.
