Over-indebtedness in insolvency is defined in § 19 para. 2 inso described. "Over-indebtedness exists if the debtor's assets no longer cover the existing liabilities, unless the continuation of the business is predominantly probable according to the circumstances".

Who is affected by overindebtedness?

All limited liability corporations such as the gmbh, AG, UG (haftungsbeschrankt) and comparable foreign companies such as the ltd.

All companies in which no personally liable partner is a natural person, such as a gmbh & co. KG , gmbh & co. OHG .

Cooperatives, foundations and associations can also be over-indebted.

The insolvency reason over-indebtedness is only applicable to companies that are liable with limited equity capital. This is exhausted in the event of overindebtedness. Equity investors have already lost their capital contribution in over-indebtedness. As a result, the going concern risk is transferred to the creditors.

Contrary to common usage, over-indebted natural persons and partnerships cannot file for insolvency due to over-indebtedness.

How to check whether over-indebtedness exists?

The examination is carried out in two stages: first, a prognosis of continued existence must be made. If this is positive, there are no grounds for opening insolvency proceedings.

As a result of the financial market crisis, section 19 of the german insolvency code (inso) was amended in 2008 by the act implementing a package of measures to stabilize the financial market (financial market stabilization act – fmstg). Until then, an over-indebtedness balance sheet had to be prepared even in the case of a positive going concern forecast, but with going concern values, not break-up values. As a result of the amendment, the main focus is now on the consideration of solvency.

Even with negative capital in the over-indebtedness balance sheet, the company is not over-indebted if it is likely to remain solvent in the forecast period.

1. Forecast of continued existence

The prerequisite for a positive going concern forecast is

  • The will to continue as a going concern and
  • A feasible business plan for the current and the following business year, in which
  • A liquidity forecast showing that the company will not become insolvent in the period under review.

If such a forecast is not available when the overindebtedness occurs, there is a duty to file for insolvency, unless the forecast can be submitted subsequently at short notice. The continuation forecast must be documented in writing, including a budgeted income statement and financial planning.

The forecast horizon usually includes the current and the following fiscal year. A positive forecast presupposes that solvency is predominantly probable in the period under consideration.

If the forecast is negative, the occurrence of insolvency is more likely than its avoidance. In this case, a petition for insolvency can always be filed due to imminent insolvency, provided that the over-indebtedness balance sheet does not show a capital shortfall.

2. Over-indebtedness balance sheet

An over-indebtedness balance sheet is used to determine whether over-indebtedness exists. If the liabilities exceed the existing assets in the case of a negative going concern forecast, there is a duty to file for insolvency in the case of corporations.

You may not use the values of the commercial or tax balance sheet (book values) to determine the value of the assets and liabilities; liquidation values must be used.

Assets: the going concern values or liquidation values of each asset must be determined, hidden reserves can be disclosed. All saleable assets can be valued, even if they do not appear in the commercial balance sheet. This includes self-created intangible assets, licenses and other rights that can be sold individually. In case of doubt, expert opinions can help. Provided loan securities are to be set off.

Liabilities: equity and equity-replacing items with subordination are not to be listed. Provisions usually are.

Insolvenzberatung schubert: please note that this presentation only reflects the legal situation in a very abbreviated form. You should always seek legal advice in a crisis, use also my free initial consultation.

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What are the consequences of overindebtedness?

If the over-indebtedness is not determined or is determined too late, this can have consequences under criminal law and liability. With the occurrence of over-indebtedness there is a duty to file for insolvency.

Over-indebtedness as a characteristic of a criminal offense

If over-indebtedness exists and no insolvency petition is filed, the offence of delaying insolvency pursuant to § 15 a inso is fulfilled. In addition, the provisions of the criminal code on bankruptcy apply.

And also the omitted loss announcement opposite the partners is punishable, if you neglected it to indicate to partners or shareholders the loss at height of the halftige capital stock or share capital after § 84 gmbhg or § 401 aktg.

Overindebtedness and personal material liability

Once over-indebtedness is established, you must stop all payments, otherwise you will be liable for damages to the company. Accordingly, the gmbh act § 64 reads: "the managing directors are obliged to compensate the company for payments made after the company has become insolvent or after its over-indebtedness has been established."

Managing directors or board members are liable to the shareholders according to § 823 abs. 2 BGB liable to pay damages if you do not notify the partners or shareholders of the loss in the amount of half of the share capital or nominal capital in accordance with section 84 gmbhg or section 401 aktg.