Liability for payments after company has become insolvent

Insolvency & Restructuring

If a managing director of a company makes payments after a substantive insolvency, they may be liable for damages under Section 25(3)(2) of the Statute on Limited Liability Companies. This does not apply to payments that comply with the duty to exercise due care and diligence of a prudent and conscientious manager even after the occurrence of substantive insolvency. Such liability will arise if there is a reduction in the company's assets which are distributable as part of the insolvent's estate because the managing director filed for insolvency late and payments were made in the meantime. The company is the party entitled to such damages.

ILO-Newsletter, dd. 22 June 2018
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Dr. Alexander Isola

M.C.J. (NYU) Partner