Delaying insolvency proceedings – a criminal risk in corporate crises
Corporate crises are a part of economic reality. For managing directors, however, they can quickly become a personal danger: those who file for insolvency too late, incorrectly, or not at all risk serious legal consequences – often without initially realizing it.
Especially during a crisis, operational decisions are made under pressure: payments to suppliers, wages, taxes, social security contributions, deferral and installment payment agreements, or the continuation of business operations. What appears from a business perspective to be a restructuring attempt can be considered a breach of duty under criminal law. Early, discreet, and strategic advice is therefore crucial to protecting your rights and limiting the risks to your personal and professional livelihood.
Failure to file for insolvency is a central focus of insolvency criminal law. Typically, managing directors of limited liability companies (GmbHs), board members of stock corporations (AGs), or other members of the governing bodies of legal entities are affected. Even de facto managing directors – i.e., persons who actually perform management functions without being effectively appointed – can be held criminally liable.
Criminal investigations do not always originate from a traditional criminal complaint. As soon as an insolvency application is filed or rejected for lack of assets, insolvency courts and public prosecutors examine whether there are indications of criminal offenses in the area of insolvency crimes.
Overview of delayed insolvency proceedings – their significance in insolvency and economic criminal law
The issue of delaying insolvency proceedings is regulated in Section 15a of the German Insolvency Code (InsO). This provision protects the proper functioning of insolvency proceedings and the equal treatment of creditors. It aims to prevent individual creditors from being given preferential treatment, assets from being siphoned off, or the insolvency estate from being diminished through delayed action in cases of insolvency or over-indebtedness.
For white-collar crime, delaying insolvency proceedings is particularly relevant because it often doesn't occur in isolation. In insolvency situations, other criminal offenses also come into focus:
- Bankruptcy (§ 283 StGB)
- Violation of the obligation to keep accounts (§ 283b StGB)
- Preferential treatment of creditors (§ 283c StGB)
- Withholding and misappropriating wages (§ 266a StGB)
- In complex cases, additional offenses such as breach of trust (§ 266 StGB) or fraud (§ 263 StGB) may be considered, for example in the case of credit-financed continuations or inaccurate information provided to contractual partners.
The sectors affected are those where liquidity fluctuations, project-based business, and pre-financing are typical, particularly construction and finishing trades, logistics, hospitality, retail, care and healthcare services, IT and consulting companies, and startups with high burn rates. Furthermore, situations involving corporate groups, cash pooling, and complex financing structures are also affected, where determining insolvency is known to be particularly contentious.
When does delaying insolvency proceedings occur? – Obligation to file for insolvency under Section 15a of the German Insolvency Code (InsO) and insolvency eligibility.
Criminal liability is primarily based on Section 15a of the German Insolvency Code (InsO). According to this section, the members of the representative body of a legal entity must... and certain equivalent persons in charge In the event of insolvency (§ 17 InsO) or over-indebtedness (§ 19 InsO), an application for insolvency must be filed without undue delay.
The statutory maximum periods are three weeks in the case of insolvency and six weeks in the case of over-indebtedness. These periods are not waiting periods: they may only be fully utilized if a serious and viable solution to the insolvency can realistically be expected within this time.
The central question, therefore, is whether there was any ground for insolvency at all.
Insolvency (§ 17 InsO) exists, in simplified terms, when the debtor can no longer meet their due payment obligations. In practice, this is reconstructed based on liquidity status, payment arrears, and enforcement pressure. A short-term cash flow problem is insufficient; what is decisive is a non-temporary shortfall in funds.
Over-indebtedness (§ 19 InsO) primarily affects corporations. It exists when the assets no longer cover the existing liabilities – unless the continuation of the business is highly probable under the circumstances. The going concern forecast is not solely a matter of subjective will: it requires a documented, coherent and feasible financial plan.
Subjectively, criminal liability under Section 15a of the German Insolvency Code (InsO) requires either intent or negligence, depending on the specific circumstances. Intent means that the responsible person knows of the insolvency or at least considers it possible and nevertheless fails to file for insolvency in breach of their duty or delays doing so. Negligence applies if the financial situation is not monitored with due diligence, even though there was reason to do so. In practice, the distinction between negligence and intent is a crucial point of attack for the defense.
Typical case scenarios:
- Liquidity gradually gets lost from view, for example because management and accounting do not have a daily overview of outstanding liabilities and available funds.
- Attempts at restructuring are being made without a reliable documentation of the path forward – for example, without viable financing, without a sound liquidity plan, or without realistic assumptions.
- Payment prioritization occurs during a crisis, for example in favor of individual creditors, wage payments, or intra-group settlements.
- Complex structures (holding companies, subsidiaries, cash pooling) make it difficult to accurately determine insolvency at the level of the individual legal entity.
How is insolvency fraud detected? Insolvency court, administrator, and public prosecutor's office.
Delaying insolvency proceedings is often not triggered by a traditional criminal complaint, but rather by the systemic logic of the insolvency process itself. Insolvency courts, insolvency administrators, and creditors regularly provide starting points for investigations.
Typical triggers:
- Filing for insolvency or rejection due to lack of assets.
- Reports from (provisional) insolvency administrators and trustees, for example regarding late filing, reduction of assets or conspicuous payments.
- Notifications from social security institutions, tax offices or health insurance funds if contributions and taxes are not paid for an extended period of time.
- Whistleblowers, former employees, business partners or competitors
The public prosecutor's office conducts the investigations, often supported by specialized economic crimes units. Typical measures include searches pursuant to Sections 102 and 103 of the Code of Criminal Procedure, seizure of accounting documents, email accounts, servers, and mobile devices, as well as the questioning of employees from finance, controlling, and management. In many cases, the analysis of digital data plays a key role.
What penalties are imposed for delaying insolvency proceedings?
The penalty is governed by Section 15a, paragraphs 4 and 5 of the German Insolvency Code (InsO). Intentional breach of duty is punishable by a fine or imprisonment of up to three years. Negligent breach of duty results in a lesser penalty; a fine or imprisonment of up to one year is possible.
In practice, the side effects often outweigh the actual sanction. These include:
- Entries in the Federal Central Register
- Corporate law consequences: A conviction for intentionally delaying insolvency proceedings leads, according to Section 6 Paragraph 2 Sentence 2 No. 3a of the German Limited Liability Companies Act (GmbHG), by operation of law to the loss of the right to hold office as managing director – regardless of the sentence. This disqualification applies for a period of five years from the date the judgment becomes legally binding.
- Lasting reputational damage and de facto impediment to future appointments to public office
Furthermore, there are risks of liability under civil and insolvency law: According to Section 15b of the German Insolvency Code (InsO), managing directors are personally liable for payments made after the company became insolvent, unless these payments were consistent with the due diligence of a prudent and conscientious business manager. In addition, there are potential claims by insolvency administrators, shareholders, or creditors, as well as risks of clawback.
Often, delaying insolvency proceedings is combined with other charges. Depending on the specific circumstances, bankruptcy offenses (Sections 283 et seq. of the German Criminal Code), violation of accounting obligations (Section 283b of the German Criminal Code), preferential treatment of creditors (Section 283c of the German Criminal Code), or Section 266a of the German Criminal Code may be relevant. This significantly increases both criminal and economic risks.
Criminal defense in cases of delayed insolvency proceedings – your advice and defense by Galen Lawyers
The lawyers at Galen Rechtsanwälte advise and defend clients nationwide in proceedings related to white-collar crime and insolvency law. We have extensive forensic experience in complex economic litigation and in supporting companies and their governing bodies in crisis situations.
Our priority is an early, structured, and discreet approach. We clarify the initial situation, request access to the files, and analyze the public prosecutor's investigative approaches.
Key points of the defense are often:
- The examination to determine whether insolvency or over-indebtedness actually existed and from what point in time.
- The reconstruction of the liquidity situation and the maturity structure, including deferrals, installment agreements and the question of whether claims were actually due and enforceable.
- The evaluation of restructuring and continuation attempts: Was there a reliable continuation forecast, was financing secured, were assumptions documented?.
- The classification of the subjective accusation: Are there reliable indications of intent, or do circumstances point to negligence or an unavoidable error?.
- The integration of parallel procedures and risks, in particular liability issues under Section 15b of the German Insolvency Code (InsO), possible confiscation or attachment measures, and professional consequences.
If you first learn of an accusation, immediately exercise your right to remain silent and do not make any statements regarding the matter. Seek legal counsel immediately to protect your rights. Ill-considered statements—even to authorities or in private settings—can significantly complicate your subsequent defense. Early review of the case file forms the basis of any strategic defense. Professional advice from the outset helps avoid mistakes and strengthens your position.
We also accompany you during searches and interrogations, advise you on your decision to testify, and on dealing with investigating authorities. Our goal is a legally sound defense that considers evidentiary issues, procedural rights, and economic consequences equally.
Have you received a summons or a notice of hearing, or is your company in crisis? Feel free to contact us to schedule an appointment.
Delaying insolvency proceedings refers to the unlawful delay, omission, or incorrect filing of an insolvency petition despite the company being insolvent. The legal basis is Section 15a of the German Insolvency Code (InsO), which regulates the obligation to file for insolvency for certain business entities. The decisive factor is whether the company was insolvent (Section 17 InsO) or over-indebted (Section 19 InsO). Key criteria are not catchphrases, but rather the objective economic situation and the duties of the respective company body.
Those subject to the filing requirement include, in particular, managing directors of limited liability companies (GmbHs), members of the management board of stock corporations (AGs), and other corporate representatives of legal entities. Even in the case of companies without legal personality, individuals may be subject to the filing requirement if statutory provisions apply.
Internal task assignments do not, in principle, absolve one from legal responsibility. Particularly relevant: Even de facto managing directors who actually exercise management functions without being formally appointed can be held criminally liable.
The maximum period is linked to the objective occurrence of insolvency – not to your subjective knowledge of it. It therefore begins at the point in time when insolvency or over-indebtedness has actually occurred.
- In case of insolvency: Application no later than three weeks
- In case of over-indebtedness: application no later than six weeks
Neither of these deadlines are automatically exhaustive waiting periods: "Without culpable delay" means that the application must generally be submitted immediately. The maximum deadline only applies if a realistic attempt to eliminate the insolvency is seriously pursued within this timeframe.
Insolvency is regularly assessed based on a liquidity statement that compares outstanding liabilities with available funds. Investigative procedures involve evaluating accounting records, bank statements, dunning procedures, enforcement measures, and cash flows.
Other indicators can include: returned direct debits, loan terminations, or persistently outstanding wages and contributions. It is often disputed whether there was a mere payment delay or a sustained funding shortfall.
Over-indebtedness particularly affects corporations and does not depend solely on a balance sheet deficit. The decisive factor is whether a going concern forecast is highly probable.
For this to be the case, financing, earnings prospects, and stabilization measures must be comprehensible and documented. Without a viable forecast, over-indebtedness can exist even if the business is still operational. In criminal defense, the plausibility of the forecast is often a key point of examination.
Intentional violation of the obligation to file for insolvency is punishable under Section 15a Paragraph 4 of the German Insolvency Code (InsO) by a fine or imprisonment of up to three years. In cases of negligence, the penalty is less severe under Section 15 Paragraph 5 of the InsO: imprisonment of up to one year or a fine.
Yes. In parallel, liability claims under Section 15b of the German Insolvency Code (InsO) may arise, particularly regarding payments made after the onset of insolvency. Furthermore, claims for avoidance and restitution, as well as civil claims for damages, are possible. Corporate law consequences and practical restrictions on future corporate positions may also occur. Therefore, the defense should always consider both criminal and economic consequences together.
In times of crisis, the question regularly arises as to which payments were still permissible or even required, and which improperly reduced the available assets. Investigative authorities frequently examine payment prioritizations, distributions to shareholders, intra-group transfers, or selective creditor satisfaction. Thorough documentation of the decision-making criteria can be crucial in these situations.
In such situations, you should exercise your right to remain silent and Seek legal assistance immediately.
Often, yes. In practice, in addition to Section 15a of the German Insolvency Code (InsO), the following are regularly examined: bankruptcy offenses (Section 283 of the German Criminal Code (StGB)), violation of the obligation to keep accounts (Section 283b StGB) or preferential treatment of creditors (Section 283c StGB), withholding of wages (Section 266a StGB), breach of trust (Section 266 StGB) or fraud (Section 263 StGB).
As soon as there are signs of a crisis or you receive indications of an investigation, early consultation is advisable. This is particularly true in cases of impending insolvency, disputes over the going concern forecast, or increasing creditor action. In criminal proceedings, early access to files and a strategic approach are regularly crucial. The sooner the facts are established and the decision-making processes documented, the better accusations can be assessed and defended.