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.

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