Personal Liability for Payments After Insolvency
If a GmbH (German limited liability company) encounters financial difficulties, its managing director is required to determine without delay whether illiquidity or overindebtedness has occurred. The potential financial consequences of an inadequate review are illustrated by the judgment of the OLG Düsseldorf (Higher Regional Court of Düsseldorf) dated 16 April 2026 – 12 U 25/25. The court ordered the managing director to pay EUR 1.24 million to the insolvency administrator; it is not known whether this decision has already become final.
The insolvency administrator had sought reimbursement of payments made from the company’s assets after it had become insolvent. Contrary to the court of first instance, the Higher Regional Court largely upheld the claim, although the subsequent course of the proceedings—such as a possible review by the Bundesgerichtshof (BGH, Federal Court of Justice)—currently remains uncertain.
The Company’s Financial Development
The GmbH concerned manufactured components for tracked vehicles. Since 2013, its annual financial statements had already shown deficits not covered by equity. At the end of 2017, the deficit amounted to approximately EUR 93,000. The annual financial statements expressly indicated that the company was overindebted on its balance sheet.
Nevertheless, the managing director assumed that the company had a positive going-concern outlook. Together with a business owner who was a friend of his, he prepared a business plan for 2018. The tax adviser responsible for preparing the annual financial statements reviewed the documents and indicated, in substance, that he had no objections to the proposed course of action.
However, the tax adviser had not been expressly instructed to assess whether the company was overindebted under insolvency law. There was also no current statement of assets and liabilities or comprehensive liquidity plan. The GmbH continued its business activities in 2018. During that period, more than EUR 1.2 million was credited to its business account, which was already overdrawn. The company did not file for insolvency until 2019.
Commercial Balance Sheet as Evidence of Overindebtedness
Negative Equity Does Not Replace an Insolvency-Law Assessment
Balance-sheet overindebtedness does not automatically establish that the company is also overindebted within the meaning of § 19 InsO (German Insolvency Code). According to the decision of the OLG Düsseldorf, however, negative equity reported continuously in the commercial balance sheet constitutes significant evidence of overindebtedness under insolvency law.
The commercial balance sheet does not replace a separate assessment of the company’s financial position under insolvency law. However, it may provide specific grounds for an immediate and careful review. If, in subsequent liability proceedings, the managing director is unable to provide a plausible explanation as to why the company was not overindebted despite the balance-sheet shortfall, this may result in personal liability.
According to the court’s findings, to make a prima facie case of overindebtedness, it is initially sufficient for the insolvency administrator to submit the relevant annual financial statements. At this stage, the insolvency administrator is not required to prepare a complete overindebtedness balance sheet.
Hidden Reserves Must Be Substantiated
Among other things, the managing director relied on hidden reserves in the company’s fixed assets. In particular, he referred to the value of its existing machinery. The OLG Düsseldorf found that this information was insufficient.
The assessment cannot be based solely on an assumed market value or carrying amount. Rather, the decisive factor is the amount that could actually be realised through a prompt sale, taking into account the associated costs. Hidden reserves can therefore offset a balance-sheet deficit only if their amount is substantiated in a sufficiently transparent manner.
Requirements for Subordination Agreements and Going-Concern Outlooks
Restriction on Enforcement of Shareholder Loans
The treatment of shareholder loans was also relevant to the assessment of overindebtedness. According to the decision, a simple subordination agreement is insufficient for the relevant liability to be disregarded in that assessment.
An effective restriction on enforcement is required. For the period preceding the opening of insolvency proceedings, the creditor must already have undertaken to enforce its claim only on a subordinated basis. In the case decided, there was no verifiable evidence of such an agreement. Moreover, the managing director continued to have his own loan claims repaid, which, in the court’s view, indicated that no genuine restriction was in effect.
General Annual Planning Was Insufficient
The plan prepared for 2018 essentially contained general revenue expectations and the assumption that costs would decrease. It did not include specific information on shareholder loans, liquidity requirements or existing orders.
The court did not consider this to constitute a sound going-concern outlook. Such an outlook requires a reliable assessment of the company’s future financial development. Broad expectations and assumptions that have not been further substantiated are insufficient.
External Advice Does Not Eliminate Responsibility
The tax adviser had prepared the annual financial statements but had not been expressly instructed to assess whether the company was insolvent. His oral assessment therefore did not exonerate the managing director.
According to the standards set out in the decision, reliance on external advice requires, in particular, that:
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an independent adviser be expressly instructed to assess whether the company is insolvent,
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the adviser be provided with all documents required for that assessment,
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the outcome of the assessment be documented in writing, and
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the managing director independently review the outcome for plausibility.
Responsibility for monitoring the company’s financial position therefore remains with its management. Mere oral approval of a general annual plan replaces neither an assessment of the company’s ability to pay its debts nor an evaluation of potential overindebtedness.
Incoming Payments to an Overdrawn Business Account
After the company became overindebted, numerous payments continued to be made to creditors. In addition, customer payments were credited to the GmbH’s overdrawn business account. These credits initially reduced the debit balance owed to the bank.
The OLG Düsseldorf therefore treated the credits as payments to the account-holding bank and as detrimental to the insolvency estate. The possibility that the company may subsequently have been able to draw on the credit facility again did not alter this classification. In the court’s view, this did not merely constitute a substitution of creditors.
Significance of the Decision for Managing Directors
The judgment demonstrates the liability implications of warning signs in a company’s financial statements. Deficits not covered by equity, recurring losses and increasing liquidity problems may trigger specific duties of review for management. Relevant factors include, in particular, a current statement of assets and liabilities, realistic liquidation values, the effectiveness of any subordination agreements and a substantiated going-concern outlook.
Particular risks may arise if payment transactions continue despite the company potentially being insolvent. This applies not only to actively initiated bank transfers but, under certain conditions, also to customer payments made into an account with a debit balance.
The assessment of potential insolvency and the resulting risks of personal liability always depends on the circumstances of the individual case. Companies, managing directors, shareholders and investors can obtain an assessment of their specific issues from MTR Legal as part of its insolvency law advisory services.
