For numerous companies the financial year ended on 31 December 2019. Generally, the company’s managing directors are obliged to prepare the corresponding annual financial statements within certain time limits according to § 264 of the German Commercial Code (“Handelsgesetzbuch“, “HGB“). However, in the crisis of the company, these periods may be considerably shorter. Therefore, especially foreign shareholders of German corporations and their respective tax advisors (who are actually preparing the annual accounts for most of German companies) are strongly advised to observe the relevant regulations in order to minimize their own liability risks.
For example, in its corresponding notes on annual financial statements for companies in crisis (line 76 with reference to (criminal!) decisions of the Federal Constitutional Court (“Bundesverfassungsgericht“, “BVerfG“) of 1978 and the Federal Supreme Court (“Bundesgerichtshof“, “BGH“) of 1961), the Federal Chamber of Tax Consultants (“Bundessteuerberaterkammer“) recommends that “the preparation of annual financial statements for companies in economic crisis must take place within 2 to 3 months after the end of the financial year.” (In the above-mentioned judgments it was even stressed, though, that, ” in principle, an annual balance sheet is not too late if it is prepared up until 10 weeks after the end of the financial year”). Accordingly, the tax advisor, who has been been made obligated to explicitly point out any existing reasons for insolvency with the ruling of the BGH of January 2017 (for more details, see here), should press for the first indications of the existence of reasons for insolvency to be made that the executive bodies of the company concerned do not withdraw to the maximum periods granted by the legislator. Instead, in such cases annual financial statements should be available after two to three months at the latest.
In the aforementioned ruling from 2017, the BGH also gives indications as to when, in its opinion, the existence of a crisis can be assumed:
- “As soon as there are indications of economic difficulties, the ability to continue as a going concern [§ 252 HGB] must be examined in more detail.
- “Particular attention should be paid to signs that could constitute grounds for insolvency.”
- “This may be the case, for example, if the company is making substantial losses, has too little equity capital or is experiencing liquidity problems.
- “A further indication is the balance sheet over-indebtedness.”
If the tax adviser can identify such crisis features in the documents submitted to him by the client, he should therefore press for the annual accounts to be prepared very quickly. This is also against the background that any restructuring measures have a better chance of success the earlier they are scheduled.
zur Verlautbarung der Bundessteuerberaterkammer zu den Grundsätzen für
die Erstellung von Jahresabschlüssen in Bezug auf Gegebenheiten, die der
Annahme der Unternehmensfortführung entgegenstehen, März 2018
BGH, 31.01.1961 – 1 StR 463/60
BVerfG, 15.03.1978 – 2 BvR 927/76s
BGH, Urt. v. 26.01.2017 – IX ZR 285/14
(all documents in German)