Category Archives: Politics Law Society

Politics Law Society

EGC: A word mark consisting of two letters can be registered as an EU trade mark

EGC: A word mark consisting of two letters can be registered as an EU trade mark

EGC: A word mark consisting of two letters can be registered as an EU trade mark

It is possible even for a word mark consisting solely of two letters to be registered as an EU trade mark. This was confirmed by the EGC in rulings from 24 April 2018 (Az.: T-207/17 and T-208/17).

We at the commercial law firm GRP Rainer Rechtsanwälte note that commercial symbols need to be sufficiently distinct from the products and services of other providers in order for them to be capable of being registered as a trade mark and to benefit from the protection that comes with trade mark registration. The General Court of the European Union (EGC) has now ruled that it is possible for a word mark to have the required distinctive character even if it consists of only two letters.

A US company had successfully applied to register a word mark made up of two letters in conjunction with a figurative mark with the European Union Intellectual Property Office (EUIPO) as an EU trade mark for various goods and services, including printers and cartridges. A Polish company requested that this mark be declared invalid, arguing that it was descriptive and lacked distinctive character. The petition was rejected by the EUIPO and the claim dismissed by the EGC.

The line of reasoning employed by the Polish company bringing the claim, i.e. that it is especially common in the field of technology for short combinations of letters to be used as descriptions for products and services, failed to convince. The EGC held that a mark is not considered to only have descriptive character simply because it consists of two letters. It found that the contested combination of letters is not often used and nor is it perceived as a designation that lacks distinctive character. The mark was also said to serve as an indication of the origin of the products to the relevant audience. Moreover, the plaintiff had failed to demonstrate that at the time of the mark“s registration another business made use of similar or identical marks to market their products. The Court therefore concluded that the registered EU trade mark need not be declared invalid.

Trade marks are of considerable value to businesses because they give rise to a high degree of brand recognition among consumers. Consequently, trade mark protection is also important. However, before a commercial mark can be registered as a trade mark, it needs to be assessed whether the necessary requirements for registration have been met and whether or not rights associated with existing trade marks would be infringed. Lawyers who are experienced in the field of intellectual property law can advise on matters relating to trade mark registration and protection.

https://www.grprainer.com/en/legal-advice/ip-law/trademark-law.html

GRP Rainer www.grprainer.com/en/ is an international full service law firm. The lawyers counsel on corporate and commercial law, business law, tax law, IT law and IP law and distribution law. The law firm advises international companies, corporations, mid-sized businesses and private clients worldwide. GRP Rainer can be found in Berlin Bonn Cologne Duesseldorf Frankfurt Hamburg Munich Stuttgart, Germany and London, UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

Unfair exploitation of a product“s reputation by imitating its well-known design

Unfair exploitation of a product“s reputation by imitating its well-known design

Unfair exploitation of a product"s reputation by imitating its well-known design

A product“s good reputation can be deemed to have been unfairly exploited even if the presentation of the product has been imitated but the word mark has not been infringed. That was the verdict of the Oberlandesgericht (OLG) Frankfurt, the Higher Regional Court of Frankfurt.

We at the commercial law firm GRP Rainer Rechtsanwälte note that if goods or services are offered that are an imitation of a competitor“s products, this constitutes a violation of the Gesetz gegen den unlauteren Wettbewerb (UWG), Germany“s Unfair Competition Act. According to a ruling of the Oberlandesgericht Frankfurt from 28 February 2018, imitating the features of a well-known product may constitute unfair exploitation of the latter even if the word mark on the counterfeit product is distinct from the one featured on the imitated product (Az.: 6 W 14/18).

In the case in question, a company from Malaysia had presented an adhesive at a specialist trade fair, the presentation and colour scheme of which bore a strong resemblance to a well-known product made by a German manufacturer. The only thing distinguishing the products was the different inscriptions on the tubes. The OLG Frankfurt ruled that the German company was entitled to sue for an injunction.

The Court held that the German manufacturer“s product had competitive originality. It went on to explain that this kind of originality presupposes that the product“s specific form or certain characteristics are capable of informing consumers about its commercial origin or special features. The Court noted that it is the overall impression created by the design that matters. These requirements were found to have been met in the case of the adhesive, whose overall impression was said to be influenced mainly by the shape of the tube, the colour scheme and the screw cap. The OLG ruled that these features are familiar to consumers, stating that the characteristic combination of colours and shape give rise to a high degree of brand recognition independent of the word mark. It expanded on this point by noting that it is possible to identify the product even if the writing is not yet legible.

The OLG concluded that the Asian company“s product was an imitation because it featured the imitated product“s defining characteristics such as the shape of the tube and colour scheme in a very similar form. All in all, the Asian company was deemed to be unfairly exploiting the good reputation enjoyed by its German competitor“s product. To this end, the Court held that it is sufficient for consumers to project the original product“s good reputation onto the imitation.

Lawyers who are experienced in the field of competition law can advise on matters pertaining to trademark law as well as in relation to violations of the UWG.

https://www.grprainer.com/en/legal-advice/competition-law.html

GRP Rainer www.grprainer.com/en/ is an international full service law firm. The lawyers counsel on corporate and commercial law, business law, tax law, IT law and IP law and distribution law. The law firm advises international companies, corporations, mid-sized businesses and private clients worldwide. GRP Rainer can be found in Berlin Bonn Cologne Duesseldorf Frankfurt Hamburg Munich Stuttgart, Germany and London, UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

OLG München – Extraordinary termination of a commercial agency agreement

OLG München – Extraordinary termination of a commercial agency agreement

OLG München - Extraordinary termination of a commercial agency agreement

It is possible for a commercial agency agreement to be extraordinarily terminated for good cause if the relationship of trust between the parties has broken down. That was the verdict of the Oberlandesgericht (OLG) München, the Higher Regional Court of Munich.

A commercial agency agreement can be terminated by any party to the agreement if there is good cause for doing so. We at the commercial law firm GRP Rainer Rechtsanwälte note that sec. 89a of the Handelsgesetzbuch (HGB), Germany“s Commercial Code, provides that this right cannot be excluded or limited. However, the legislature left open the definition of what exactly constitutes good cause. According to a ruling of the OLG München from 8 February 2018, there is deemed to be good cause justifying termination of a commercial agency agreement if the relationship of trust between the parties has irretrievably broken down and it is no longer reasonable to expect further cooperation in consideration of all factors relevant to the circumstances of the specific case (Az.: 23 U 1932/17).

In the instant case, the plaintiff had entered into a commercial agency agreement with the defendant, according to which it was amicably settled that activities relating to the role of the commercial agent would be carried out by the plaintiff“s husband. When the latter downloaded extensive data records onto his private computer without permission, the company issued extraordinary notice of termination. The plaintiff took action against this, demanding, among other things, payment of commission, bonuses and a commercial agency settlement.

The OLG München held that the extraordinary notice of termination had been justified, ruling that downloading and saving the data records had not been necessary for the purposes of carrying out activities relating to the role of the commercial agent and that the plaintiff could be held responsible for her husband“s conduct in this regard. The OLG München took the view that downloading the data without permission was so serious that the relationship of trust between the parties had irretrievably broken down and it was no longer reasonable to expect the contractual relationship to continue until the end of the ordinary notice period for termination. The Court stated that the fact that the plaintiff had worked with the company for more than 20 years changed nothing. It went on to say that it had not even been necessary to issue a prior formal warning, as the relationship of trust had been severely shaken by the impropriety, such that the former could not be restored with a successful warning.

Legal disputes between commercial agents and commercial enterprises are common. Lawyers who are experienced in the field commercial law can advise on matters ranging from drafting to terminating a commercial agency agreement.

https://www.grprainer.com/en/legal-advice/commercial-law/commercial-agency-law.html

GRP Rainer www.grprainer.com/en/ is an international full service law firm. The lawyers counsel on corporate and commercial law, business law, tax law, IT law and IP law and distribution law. The law firm advises international companies, corporations, mid-sized businesses and private clients worldwide. GRP Rainer can be found in Berlin Bonn Cologne Duesseldorf Frankfurt Hamburg Munich Stuttgart, Germany and London, UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

Bundeskartellamt imposes fines running into millions for illegal arrangements

Bundeskartellamt imposes fines running into millions for illegal arrangements

Bundeskartellamt imposes fines running into millions for illegal arrangements

The Bundeskartallemt, Germany“s Federal Cartel Office, has imposed fines totaling approx. 23 million euros in response to the collective calculation of uniform price recommendations.

According to a case report of the Bundeskartellamt from 16 March 2018, Germany“s Federal Cartel Office imposed fines amounting to about 23 million euros in total on ten businesses and an individual involved in the plumbing and heating services sector in a decision from 21 February 2018 (Az.: B5 – 139/12).

In justifying its decision to impose the fines, the Bundeskartallemt cited that the competing plumbing supplies wholesalers had collectively calculated the respective recommendations for gross list prices as detailed in their sales catalogues using internal data such as operating costs, mobility and minimum discounts. In the course of this, the highest purchase price that a plumbing supplies wholesaler was able to obtain from the manufacturer served as the basis.

The businesses, members of the costing committee for a North-Rhine Westphalia plumbing services association called „Mittelstandskreis Sanitär Nordrhein-Westfalen“, or „MKS NRW“ for short, recommended using these gross list prices amongst each other as well as to other members. This frequently led to these prices being either included in the catalogues or only slightly adjusted. The Bundeskartellamt found that the common calculation basis gave rise to an anti-competitive alignment of the initial price level and thus resulted in less competition.

The exceptional derogation for recommendations made by small and medium-sized enterprises was definitively abolished when the 7th amendment to Germany“s Act Against Restraints of Competition, the Gesetz gegen Wettbewerbsbeschränkungen (GWB), entered into force. The members of the MKS NRW would therefore have been obliged to re-assess and cease their anti-competitive conduct. Instead, they continued to collectively calculate the gross list prices until the search in March of 2013. Due to the fact that those involved cooperated with the Bundeskartellamt in uncovering the cartel, they benefited from a leniency programme, which resulted in the fines being reduced.

For those adversely affected by the cartel, the Bundeskartellamt“s decision means that they can demand compensation from the cartelists. We at the commercial law firm GRP Rainer Rechtsanwälte note that it is no longer necessary to furnish evidence substantiating the violation.

We also note that violations of antitrust law or competition law are met with severe penalties, and the violations need not be obvious as in the case of illegal price-fixing arrangements. Lawyers who are experienced in the fields of antitrust law and competition law can advise businesses on enforcing or fending off claims arising from violations of antitrust law or competition law.

https://www.grprainer.com/en/legal-advice/antitrust-law.html

GRP Rainer www.grprainer.com/en/ is an international full service law firm. The lawyers counsel on corporate and commercial law, business law, tax law, IT law and IP law and distribution law. The law firm advises international companies, corporations, mid-sized businesses and private clients worldwide. GRP Rainer can be found in Berlin Bonn Cologne Duesseldorf Frankfurt Hamburg Munich Stuttgart, Germany and London, UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

BVerfG – Proportionality in relation to allegations of delayed filing for insolvency

BVerfG – Proportionality in relation to allegations of delayed filing for insolvency

BVerfG - Proportionality in relation to allegations of delayed filing for insolvency

Allegations of delayed filing for insolvency are easily made, yet the investigations need to maintain a sense of proportion. A home search can just as easily overshoot the mark.

A managing director“s obligations include, among other things, filing for insolvency in due time. The application for insolvency must be submitted without undue delay, but no later than three weeks after the onset of insolvency or over-indebtedness. We at the commercial law firm GRP Rainer Rechtsanwälte note that by failing to meet this obligation, the managing director renders him- or herself liable to prosecution.

Allegations of delayed filing for insolvency are easily made. However, the public prosecutor“s office needs to maintain a sense of proportion during investigations. Searching the managing director“s private living quarters may be unconstitutional if the initial suspicion is not based on concrete facts but rather vague indications and mere supposition, as the Bundesverfassungsgericht (BVerfG), Germany“s Federal Constitutional Court, made clear in a ruling from 10 January 2018 (Az.: 2 BvR 2993/14).

In the case in question, two companies had maintained close business relations for years. When one of them, a GmbH, fell into arrears with its payments and these payments failed to materialize even after several formal reminders, the creditor lodged a criminal complaint. The competent public prosecutor“s office subsequently opened an investigation on suspicion of failure to file for insolvency in due time. During the course of the investigation, a search of the managing director“s business premises and living quarters was ordered and carried out. The managing director lodged a complaint against the search order and at the same time demanded that the seized documents be handed over, arguing that there were no indications that the company was insolvent. He further argued that it was evident from the correspondence that the asserted claims were being disputed and for this reason had not been paid. The managing director also claimed that the search order was disproportionate given the numerous other investigative measures that could have been taken that would not have violated constitutional rights to the same extent.

The seizure of the documents was later reversed and the investigation suspended. The managing director nonetheless brought a constitutional complaint due to violation of his constitutional rights. The BVerfG upheld the complaint in relation to the house search, stating that for a house search to be conducted the initial suspicion needs to be based on concrete evidence and the search must be proportionate. It went on to say that, in any event, a search is disproportionate if alternative investigative methods that would not have violated constitutional rights to the same extent are avoided without plausible cause. The Court held that in this case it should have been possible to inspect the list of debtors and the annual financial statements of the GmbH, or to request information from the account screening file.

If allegations of delayed filing for insolvency are made or insolvency is imminent, lawyers who are experienced in the field of company law can serve as professional advisers.

https://www.grprainer.com/en/legal-advice/company-law/restructuring-insolvency.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

ECJ – Commercial agents can claim compensation for termination during probationary period

ECJ – Commercial agents can claim compensation for termination during probationary period

ECJ - Commercial agents can claim compensation for termination during probationary period

Even if a commercial agency agreement is terminated during the probationary period, the commercial agent may still be entitled to claim compensation or damages. That was the verdict of the ECJ.

After a commercial agency agreement is terminated, the commercial agent is normally entitled to claim compensation. We at the commercial law firm GRP Rainer Rechtsanwälte note that this may not be the case if, for instance, the commercial agent was the one who terminated the agreement or the termination is attributable to wrongful acts committed by the commercial agent. Having said that, termination of the commercial agency agreement during the probationary period is not grounds for the right to claim compensation lapsing. That was the verdict of the Court of Justice of the European Union in a ruling from 19 April 2018 (Az.: C-645/16).

In the instant case, the company and the commercial agent had settled on a twelve-month probationary period in the agreement. Both parties were entitled to terminate the agreement within this timeframe allowing for a certain notice period. Because the commercial agent fell well short of the contractually agreed target, the company issued notice of termination within the probationary period. The commercial agent subsequently asserted a claim for payment of compensation for the loss associated with the termination of the agreement. The point of contention was then whether such a claim can be made even if the contractual relationship is terminated during the probationary period.

Commercial agents“ rights to claim compensation are laid out in an EU directive. The Court of Justice held that the rights provided for in the directive to claim compensation and damages are not meant to serve as a sanction against terminating an agreement but rather as a means for compensating the commercial agent both for services he or she performed which the company continues to benefit from as well as for any costs and expenses he or she incurs. The Court of Justice went on to state that if the conditions set out in the directive are fulfilled, the right to compensation cannot be denied solely on the basis that the agreement was terminated during the probationary period; the right to claim compensation is equally applicable during the probationary period.

The case before the ECJ concerned a legal dispute in France. However, the ruling also has implications for German commercial agency law. The relevant German provisions are closely aligned with the EU directive. As such, it is not possible to circumvent commercial agents“ rights to claim compensation by terminating the agreement during the probationary period.

Lawyers who are experienced in the field of commercial law can serve as professional advisers to businesses and commercial agents, advising on matters ranging from drafting agreements to enforcing claims or fending off those brought by contractual partners.

https://www.grprainer.com/en/legal-advice/commercial-law/commercial-agency-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

OLG München – Commercial agent“s right to be issued with excerpt from the accounts

OLG München – Commercial agent“s right to be issued with excerpt from the accounts

OLG München - Commercial agent"s right to be issued with excerpt from the accounts

The limitation period for a commercial agent“s right to be issued with an excerpt from the accounts normally begins at the close of the year in which he or she received a final commission settlement.

When calculating the commission due, a commercial agent can demand an excerpt from the accounts concerning all transactions in relation to which he or she is entitled to commission. We at the commercial law firm GRP Rainer Rechtsanwälte note that based on this excerpt, the commercial agent is then able to review each and every transaction subject to commission in order to check whether the settlement is correct and complete.

In a judgment from 21 December 2017, the Oberlandesgericht (OLG) München, the Higher Regional Court of Munich, reaffirmed that the limitation period for this right normally begins at the close of the year in which the business issued the commercial agent with a final commission settlement (Az.: 23 U 1488/17). The Court then noted that a three-year limitation period is to be expected. This was said to be equally applicable in principle to insurance agents. The OLG went on to state that even if the brokered contracts are subject to an indemnity period in case of cancellation, this does not preclude the acceptance of a final commission settlement, as the insurance agent knows which amounts have been withheld as reserves in case of cancellation when receiving the settlement.

The Court ruled that the excerpt from the books must include a complete, orderly and clear presentation of all the information relevant to the commission as well as any information required by the commercial agent for the purposes of assessing his or her commission claims. Whether information pertaining to transactions is relevant to the commission in a given case depends on the commission scheme in place between the business and the commercial agent. The OLG München further stated that this can be ascertained mainly from the commission agreement in addition to mandatory statutory provisions, including sec. 87a paras. 2-4 of the Handelsgesetzbuch (HGB), Germany“s Commercial Code.

Legal disputes between commercial agents and businesses concerning claims for commission or compensation as well as non-compete obligations are common. To avoid these kinds of disputes, the main points ought to have already been settled in the commercial agency agreement in a clear and detailed manner. Lawyers who are experienced in the field of commercial law can serve as professional advisers to businesses and commercial agents, advising on matters ranging from drafting agreements to enforcing claims or fending off those brought contractual partners.

https://www.grprainer.com/en/legal-advice/commercial-law/commercial-agency-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

Removing the costs associated with forming a GmbH from its articles of association

Removing the costs associated with forming a GmbH from its articles of association

Removing the costs associated with forming a GmbH from its articles of association

According to a ruling of the Oberlandesgericht (OLG) Celle, the Higher Regional Court of Celle, the provisions in a GmbH“s articles of association concerning who bears the costs associated with forming the company must not be removed before a period of ten years has passed since the company was initially registered.

In addition to the company“s share capital, there are other costs which need to be taken into account when forming a GmbH. These include, for instance, costs arising from notarization and registration in the commercial register. Naturally, it is often in the shareholders“ interest for these costs to be borne by the company, especially since this gives rise to tax benefits. We at the commercial law firm GRP Rainer Rechtsanwälte note that if the intention is for the GmbH to bear the costs associated with forming the company, it then becomes strictly necessary to include a provision to this effect in the articles of association.

If the company has been in existence for several years, it is common for the shareholders to conclude that the provisions dealing with the formation costs are superfluous. However, these cannot be readily removed. In a ruling from 2 February 2018, the OLG Celle held that the provisions in a GmbH“s articles of association regarding who is to bear the costs associated with forming the company must not be removed before a period of ten years has passed since the company was first registered (Az.: 9 W 15/18).

The OLG Celle justified its decision with reference to the need to ensure that information interests in legal relations are upheld for a minimum period. The prevailing statutory limitation periods under GmbH law serve as a guide here. The Court went on to state that the waiting period for retaining the provisions in the articles of association dealing with the costs associated with forming the company must therefore amount to a minimum of ten years starting from when the company was first registered.

It is nonetheless generally beneficial for shareholders to transfer the costs associated with forming the company, as these are tax deductible as business expenses. However, there needs to be a provision to this effect in the articles of association. This is because these costs do not constitute business expenses but rather a hidden distribution of profits to the shareholders if they are borne by the GmbH despite the latter not being obligated to assume this responsibility.

A lot of factors need to be considered when forming a company, including aspects of tax law. Lawyers who are experienced in the field of company law can offer advice.

https://www.grprainer.com/en/legal-advice/company-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

GRP Rainer Rechtsanwälte – Report on mandatory social security contributions for managing directors

GRP Rainer Rechtsanwälte – Report on mandatory social security contributions for managing directors

GRP Rainer Rechtsanwälte - Report on mandatory social security contributions for managing directors

Mandatory social security contributions for managing directors is a controversial topic that continues to rear its head and ought not to be underestimated, as businesses can potentially be faced with large back payments.

Our experience at the commercial law firm GRP Rainer Rechtsanwälte shows that businesses often underestimate the obligation to pay social security contributions in relation to managing directors. This is particularly true in the case of shareholder-managing directors, who are also not automatically presumed to be self-employed. We at GRP Rainer Rechtsanwälte note that, in fact, the Bundessozialgericht (BSG), Germany“s federal court for matters pertaining to social security, has set high standards for recognizing a managing director as self-employed.

In two rulings from 14 March 2018, the Bundessozialgericht held that managing directors of a GmbH are generally deemed to be employees of the company and therefore subject to mandatory social security contributions (Az.: B 12 KR 13/17 R and B 12 R 5/16 R). The BSG ruled that shareholder-managing directors are only deemed not to be employees if they have the legal authority to determine the fate of the company by influencing the general meeting the shareholders. This is normally the case if the managing director holds more than 50 per cent of the shares in the authorized capital as the majority shareholder. If the managing director owns exactly 50 per cent of the shares in the authorized capital or less than that, an employee relationship can then only be ruled out if the articles of association include explicit provisions conferring a full blocking minority on him or her, and he or she is able to obstruct the general meeting of the shareholders from issuing instructions.

The Court went on to state that when it comes to the issue of mandatory social security obligations, it is also not a matter of whether a managing director has extensive powers and freedom in their relations with third parties. Instead, the crucial factor is the scope of their ability to influence resolutions of the general meeting of the shareholders by legal means.

Managing directors in an employment relationship are, as a matter of principle, subject to mandatory social security contributions. Clear indications of an employment relationship include, e.g. the managing director being subject to the instructions given by their employer in relation to working hours, the place of work as well as the type of work. This is usually the case with manager directors who are hired from outside of the company, but shareholder-managing directors can also be subject to mandatory social security contributions. For this reason, it is necessary to carry out a detailed assessment of the managing director“s status in order to avoid large back payments. Lawyers who are experienced in the field of company law can offer advice.

https://www.grprainer.com/en/legal-advice/company-law.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en

Politics Law Society

GRP Rainer Rechtsanwälte – Liability of managing directors for delay in filing for insolvency

GRP Rainer Rechtsanwälte – Liability of managing directors for delay in filing for insolvency

GRP Rainer Rechtsanwälte - Liability of managing directors for delay in filing for insolvency

If a company is faced with imminent insolvency or over-indebtedness, the managing director must file for insolvency. Failure to do so in due time may result in him or her being held personally liable.

It is often difficult for managing directors and other governing bodies to accept that the company is facing insolvency. Understandably, every possible measure is taken to avoid insolvency in a lot of these cases. Notwithstanding this, managing directors should not under any circumstances ignore signs of imminent insolvency, as one of their duties is to file for insolvency in due time. We at the commercial law firm GRP Rainer Rechtsanwälte note that the managing director might otherwise be held personally liable for the delay in filing for insolvency. Our experience shows that many managing directors are unaware of when an insolvency petition needs to be filed and which payments can still made.

In principle, an insolvency petition must be submitted without undue delay, but no later than three weeks after the company becomes insolvent or over-indebted. A company is considered to be over-indebted if the company“s assets no longer cover its existing liabilities. In the case of insolvency, the company is no longer able to meet its payment obligations. A company is deemed to be insolvent if the vast majority of liabilities can no longer be settled, even if individual payments are still being made.

In that case, managing directors must above all take care to ensure that no payments are made that diminish the insolvency estate. Otherwise, they may be liable to pay damages. According to a ruling of the Bundesgerichtshof (BGH), Germany“s Federal Supreme Court, from 4 July 2017, payments made under these circumstances are only permissible if the compensation or return contribution offsets the reduction in the insolvency estate (Az.: II ZR 319/15). To this end, the compensation or return contribution to be added to the insolvency estate needs to be suitable for use by the creditors. The BGH noted that wages or services are generally not suitable for these purposes. The Court went on to state that if the managing director nevertheless arranges for payment of wages, he or she may be liable to make restitution.

A looming threat of insolvency may entail a high risk of personal liability for the managing director. That is why legal advice ought to be sought if there are signs that the company is on the verge of insolvency or over-indebtedness. Lawyers who are experienced in the field of company law can serve as expert advisers.

https://www.grprainer.com/en/legal-advice/company-law/restructuring-insolvency.html

GRP Rainer LLP www.grprainer.com/en/ is an international firm of lawyers and tax advisors who are specialists in commercial law. The firm counsels commercial and industrial companies and corporations, as well as associations, small- and mid-sized businesses, self-employed freelancers and private individuals worldwide from offices Cologne, Berlin, Bonn, Dusseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London UK.

Contact
GRP Rainer LLP
Michael Rainer
Augustinerstraße 10
50667 Cologne
Phone: +49 221-27 22 75-0
Fax: +49 221-27 22 75-24
E-Mail: info@grprainer.com
Url: http://www.grprainer.com/en