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Criminal law and insolvency

Criminal law as applicable to insolvency punishes acts that lead to a crisis in an enterprise or that contribute to the deepening of a crisis if the enterprise is already insolvent or over-indebted. Such acts include bankruptcy (section 283 Criminal Code), breaches of accounting requirements (section 283b Criminal Code) and fraudulent preference accorded to creditors or debtors (sections 283c and 283d Criminal Code).

Often a delay or failure in filing for insolvency pursuant to section 15a Insolvency Code will be cause for criminal investigation, which may go hand-in-hand with typical accompanying crimes that occur during a crisis, e.g. failure to make full payment of social security contributions (section 266a Criminal Code).

Earlier actions may also come into focus

The starting point for criminal investigations under insolvency law may also include the concealment of assets, various ways of shifting profits or the prevention of enforcement. Previous business actions or decisions may also be re-examined in criminal proceedings arising under insolvency law.

Legally binding convictions for intentional insolvency offences present an enormous risk for company managers as, regardless of the sentence imposed, they will be (pursuant to section 6 Limited Liability Company Law) barred from senior management roles for a period of five years. This correspondingly applies to insolvency offences committed abroad. Compliance with the Limited Liability Company Law, which requires notification to be made to the commercial register and provides penalties for violation, is also necessary.