In principle, managing directors without significant shares in the German company are allowed to step down at any time and without justification also in the corporate crisis. However, they may be held personally liable for any damages to the company if this results from the resignation. If the employment contract, which does not automatically end upon resignation unless otherwise stipulated therein, implies an obligation to take over a managerial role, a resignation without good cause may result in personal liability of the resigning managing director. The resignation must be declared in writing to the shareholders’ meeting or the supervisory board and shall apply immediately. Alternatively, the resignation may be declared with effect from the deletion in the commercial register. In contrast, sole managing partners cannot resign in a corporate crisis without appointing a successor.

During a corporate crisis, managing directors should refrain from payments by the GmbH or AG to its shareholders (e.g. upfront dividends or loans). Because of the payment ban, managing directors are also personally liable for payments to shareholders which consequently result in illiquidity and/or over-indebtedness. This also applies to indirect payments made through third parties such as group companies or strawmen. The duty to observe the payment ban cannot be delegated to a single managing director.

Even after insolvency filing, the managing directors remain in office. In any case, they continue to operate in self-administration proceedings and implement their decisions in consultation with the supervisor. They also remain in their function outside self-administration proceedings and have powers in the so-called “insolvency-free area”. They must undertake formally necessary activities, such as registrations with the commercial register or disclosure of financial statements. Even former managing directors are obliged to be available to the insolvency receiver for questions within two years from their departure.

In Germany, the obligation to file for insolvency in accordance with Section 15a InsO is suspended at least until 30 September 2020. However, this does not apply if:

– the illiquidity and/or over-indebtedness does not stem from the spread of the SARS-CoV-2 virus (COVID-19 pandemic), or

– if there are no chances of eliminating an existing illiquidity.

If the distressed company was not insolvent on 31 December 2019, it is assumed that the insolvency is due to the effects of the COVID-19 pandemic and that there are chances of eliminating an existing insolvency.

Insofar as the insolvency filing duty is suspended due to Covid-19, payments comply with the care of prudent managing director pursuant to Section 64 s.2 GmbHG or Section 92 (2) s.2 AktG if the payments are made “in the proper course of business”, in particular to maintain or resume business operations or to implement a restructuring plan.

In the current Corona crisis, executives of pandemic-damaged German companies should prepare a restructuring plan and document the conjunction between the Corona crisis and insolvency, if and when and to what extent state aid has been applied for, or with whom which financing or restructuring solutions have been negotiated, and to what extent state aid is appropriate for corporate restructuring. In addition, it should be documented why payments have been made in the proper course of business in light of insolvency or serve to maintain or resume operations of the distressed company.