Judgment of the Munich I Regional Court: Annual financial statements of Wirecard AG for the years 2017 and 2018 declared null and void
By judgment dated May 10, 2022 – Case No.: 5 HK O 15710/20 – the Munich I Regional Court declared the annual financial statements of Wirecard AG for the financial years 2017 and 2018 as well as the corresponding consolidated financial statements and management reports null and void. The court’s substantive decision marks another significant step in the legal and economic process of addressing one of the biggest accounting scandals in German economic history.
Legal assessment of the nullity of annual financial statements
The judicial declaration of nullity of annual financial statements under § 256 sentence 1 AktG is a serious action in corporate law. As a consequence, the relevant financial statements and reports are considered invalid from the outset. The reason for such a measure is fundamental violations of accounting regulations, which are intended to present an accurate picture of a company’s assets, financial, and earnings position.
In the case of Wirecard AG, investigations and factual findings revealed that the financial statements contained substantial false information regarding assets. Notably, significant positions related to the so-called “trust accounts” were reported, and corresponding revenues were recognized, although these likely did not actually exist. This was substantiated both by the insolvency proceedings and by criminal investigations, although the presumption of innocence continues to apply to all natural persons affected.
Consequences for shareholders, creditors, and capital market participants
The nullification of the annual financial statements is not just a formal legal consequence, but has far-reaching practical implications. For shareholders of the former Wirecard AG, the basis for all resolutions passed during this period that rely on the audit and accuracy of the annual financial statements is retrospectively invalidated. The same applies to the calculation bases for dividends or other profit distributions. Furthermore, actions for rescission and declarations of nullity in connection with other general meeting resolutions are possible.
Creditors, investors, and other capital market participants must bear in mind, when assessing claims, entitlements, and damages actions, that the company’s financial statements for the relevant years have no legal validity whatsoever. Issues of liability concerning board members and auditors remain at the center of ongoing civil and criminal proceedings, some of which have not yet been concluded.
Role and responsibility of the auditors
A central focus of the legal proceedings is, not least, the role of the auditors who issued the certified accounts for Wirecard AG. The audit function pursuant to § 317 HGB is a fundamental component of corporate governance for listed companies. If, over the course of several years, they fail to identify serious errors—or even confirm the existence of assets that are not actually there—this raises significant legal and regulatory questions for the profession and the affected audit firms. Corresponding claims have already been filed against auditors and their professional indemnity insurers.
Current status of proceedings and outlook
With its ruling, the Munich I Regional Court establishes a clear position on how to deal with the disputed annual financial statements and at the same time sends a signal to accounting practices of capital market-oriented companies. At the same time, it must be noted that appeals may be filed against the decision and that not all factual and legal questions have been definitively resolved. Various criminal and civil proceedings are also ongoing, in which the responsibility and potential claims against former board members and other parties are still to be examined. The criminal investigations and proceedings are being conducted under the presumption of innocence.
Women and men from companies, shareholder groups, as well as interested investors who are confronted with these topics in the context of commercial and accounting law, directors’ liability, or corporate governance issues can find support for in-depth legal questions at a law firm specializing in business law. The lawyers at MTR Legal, with their experience in national and international business environments, are happy to make themselves available for further discussions.
