Going into the summer (holidays) the outlook for the German economy is not good – to put it neutral: As already sketched out in May (here), Germany’s economic data shows some severe cracks and it seems indeed that the (recessionary) train is now advancing fast. Let’s look into it in some more detail:
While the public hype about “start-ups”, i.e. (more or less) innovative business start-ups that pursue aggressive growth strategies, is unbroken, a current PwC study shows that in recent years numerous so-called “fintechs” (i.e. start-ups that (at least allegedly) want to introduce disruptive business processes into the financial world through digitalisation) have already run out of steam (here). However, the awakening after bankruptcy can, though accompanied by less public fanfare than the start, sometimes be very bitter for the former founders. Namely, when it comes to personal liability. In this context it is worthwhile noticing that the German Federal Supreme Court (“Bundesgerichshof”, “BGH”) in a decision of 2007, which still dealt with the consequences of the so-called “New Economy” imploding at the beginning of this century, explicitly raised the duties for managing directors of start-ups in the crisis. Against this background, the following brief might help to avoid a rude awakening.
If executives are suspected of having enriched themselves at the expense of the company, a criminal liability according to § 266 StGB (“Strafgesetzbuch“, German Criminal Code) is regularly brought into play. Since two fundamental decisions of the German Federal Constitutional Court (“Bundesverfassungsgericht“, “BVerfG“) in 2010 and 2012, however, the courts have been considerably more hesitant with a corresponding conviction. This tendency is exemplified by the recent decision of the LG Hamburg to discontinue the proceedings against the imposition of money charges (here) despite the previous annulment of the acquittals against various bankers of the failed HSH Nordbank, and by a recent decision of the Berlin Court of Appeals (“Kammergericht“, “KG“) which cleared three former functionaries of the Kassenärztliche Vereinigung (a body of medical professionals organising the payment processes for the profession) of the allegation of breach of trust (here).
It seems that the silver lining at Germany’s economic sky in March (here) and April (here) were indeed nothing more than the lights of the (recessionary) train advancing fast. Already a superficial review of Germany’s economic data shows some severe cracks in the success story of the last years – although it still stands to question whether an actual downturn is already “around the corner”. Still some indicators (insolvencies, ZEW) are positive:
In a recent ruling of the German Federal Court of Justice (“Bundesgerichtshof“, “BGH“, the BGH continues a decision from 2016 (see here) according to which a serious, albeit ultimately unsuccessful, attempt to restructure the debtor can dispense with both the creditor’s intention to discriminate against the debtor and the opponent’s knowledge of this intention – and thus barr an avoidance action.
It doesn’t have to be the so-called “Panama papers” or the documents on “Luxembourg leaks” that fall into the employee’s lap – often unintentionally and rather accidentally. But how should an employee behave if s/he becomes aware of irregularities in the company? Given the potentially far-reaching consequences of (unreported) irregularites, the question “What does this concern me?” seems to be rather misplaced for managing directors as well as for ordinary employees alike. In the following, I would therefore like to make a few comments and give some hints as to the “correct” behaviour in the event of irregularities within a company.
In February 2019, the German economy – if not paralysed (as in the last month, cf. here) – presented disappointing early indicators such as orders and production while other (rather lagging) indicators such as unemployment or corporate insolvencies still show record-low-levels. Let’s look at the development in more detail:
Not surprisingly, at least for the experts, the German Federal Civil Court (BGH) decided in April 2018 that (at least) the “Chief Restructuring Officer” (CRO) (“Eigenverwalter” = managing director responsible to guide the company through the DIP-insolvency procedure) is liable in the same way as an insolvency administrator for contracts concluded with creditors while under insolvency protection.