Insolvency criminal law encompasses, in particular, the offenses of delaying insolvency proceedings and bankruptcy. In corporate crises, the offenses of withholding and misappropriating wages, fraud, and breach of trust also frequently play a role. Insolvencies must be reported by the insolvency court to the public prosecutor's office.
While this often leads to investigations on suspicion of insolvency offenses, there is also a chance of achieving a discontinuation of the investigation by mounting an early defense before the conclusion of the insolvency proceedings.
Criminal defense in cases of delayed insolvency proceedings, bankruptcy, breach of accounting obligations, and preferential treatment of creditors and debtors.
If an investigation is initiated after insolvency proceedings have been opened, the criminal focus is regularly directed against the management – with accusations of delaying insolvency proceedings, bankruptcy or preferential treatment of creditors.
The consequences of criminal proceedings can be severe: fines or imprisonment, a professional ban, and the loss of suitability as a managing director (so-called ineligibility according to Section 6 Paragraph 2 of the German Limited Liability Companies Act (GmbHG)). In addition, there are further professional or commercial consequences and potential civil liability risks.
Insolvency criminal law becomes relevant as soon as a company falls into crisis – i.e., regularly when insolvency is imminent. Criminal assessments are always retrospective and require a precise legal and business analysis.
Insolvency criminal law encompasses several criminal offenses that may become relevant in connection with a corporate crisis:
- Delaying insolvency proceedings (§ 15a InsO),
- Bankruptcy (§ 283 StGB)
- Preferential treatment of creditors (§ 283c StGB) and preferential treatment of debtors (§ 283d StGB)
- Violation of the obligation to keep accounts (§ 283b StGB)
Often, further charges are added: withholding and misappropriating wages (§ 266a StGB), breach of trust (§ 266 StGB) or tax evasion (§ 370 AO)
Our lawyers at Galen Rechtsanwälte defend clients nationwide in insolvency-related criminal law. With our forensic experience in white-collar crime, we comprehensively analyze the facts and the law and develop a defense strategy tailored to your specific situation.
Please contact us to arrange an appointment.
The importance of insolvency criminal law for managing directors and companies
Insolvency criminal law is not an independent law, but a collective term for criminal offenses that are typically committed in connection with a corporate crisis or insolvency proceedings.
In practice, the following should be noted: After insolvency proceedings have been opened, public prosecutors often initiate investigations. They receive information for this, for example, from the insolvency court or through criminal complaints filed by the insolvency administrator or creditors.
The practical relevance of insolvency offenses is considerable. They affect not only large corporations, but also medium-sized businesses, start-ups, and owner-managed companies. The focus is particularly on the governing bodies of legal entities – such as managing directors of limited liability companies (GmbHs) or board members of stock corporations (AGs). In addition, de facto managing directors, shareholders, or authorized signatories can also come under investigation.
In addition to the actual punishment, there are serious side consequences – such as:
- Confiscation of assets (§ 73 ff. StGB, § 111b ff. StPO)
- Inability – i.e., the loss of suitability to assume managing director or board positions (Section 6 Paragraph 2 GmbHG, Section 76 Paragraph 3 AktG)
- professional consequences (e.g. for tax advisors, auditors or lawyers)
- Professional disqualification (§ 70 StGB)
- civil liability claims, e.g. by the insolvency administrator
For many affected individuals, insolvency criminal law is therefore of vital importance.
When does a criminal offense occur under insolvency criminal law?
A corporate crisis becomes relevant under criminal law particularly when insolvency (§ 17 InsO), impending insolvency (§ 18 InsO), or over-indebtedness (§ 19 InsO) exists. In these cases, management is subject to strict legal obligations – the violation of which can trigger criminal consequences.
Delaying insolvency proceedings (§ 15a InsO)
The Delaying insolvency proceedings This is one of the most practically relevant offenses in insolvency criminal law. Managing directors and other authorized representatives of legal entities are obligated to report insolvency or over-indebtedness upon the occurrence of insolvency or over-indebtedness. immediately – that is, without undue delay – to file for insolvency.
The law stipulates maximum time limits: three weeks in case of insolvency, six weeks in case of over-indebtedness (§ 15a para. 1 InsO). These time limits are absolute upper limits and may not be routinely exhausted. If there is no serious and viable prospect of restructuring, the application must be submitted immediately.
For an application to be considered a criminal offense, it must be filed late or not at all. Negligent conduct is also punishable (§ 15a para. 5 InsO). Therefore, anyone who fails to carefully monitor their company's financial situation may be committing a criminal offense.
Typical case scenarios in practice:
- Waiting for further cash inflows without a realistic basis
- Reliance on financing commitments that have not yet been secured
- Continuing business operations despite a persistent liquidity shortfall
The Bankrupt According to Section 283 of the German Criminal Code (StGB), the debtor must first be in a financial crisis, i.e., over-indebtedness or actual or imminent insolvency. A wide range of crisis-related breaches of duty that harm the interests of creditors are covered. Among other things, the following are punishable offenses: concealing assets that would be part of the insolvency estate in the event of insolvency proceedings; engaging in grossly unprofitable loss-making or speculative transactions; and certain violations of commercial accounting, balance sheet or retention obligations.
In practice, the following processes often become the focus of investigations:
- Transfers of assets to relatives or close persons
- Repayment of shareholder loans
- Sale of valuable operating assets below value
In its basic form, intent is required; in certain situations, negligence is sufficient (§ 283 para. 4 and 5 of the German Criminal Code).
Section 283 of the German Criminal Code (StGB) also requires – as do preferential treatment of creditors, preferential treatment of debtors and violation of accounting obligations – the fulfillment of an objective condition of criminal liability: Insolvency proceedings have been opened, the opening has been rejected due to lack of assets or a cessation of payments has occurred (§ 283 para. 6 StGB).
Preferential treatment of creditors (§§ 283c StGB)
The preferential treatment of creditors This occurs when a debtor, aware of their insolvency, grants a creditor security or satisfaction that the creditor cannot claim, or not in that manner, or not at that time. The decisive factor is the so-called incongruent payment. Congruent payments—that is, those to which the creditor had a due and enforceable claim—are generally not covered by Section 283c of the German Criminal Code (StGB). In practice, the distinction between congruent and incongruent payments is often unclear and can provide important avenues for defense.
As with bankruptcy, an objective condition for criminal liability must also be met: The perpetrator must have ceased payments, insolvency proceedings must have been opened against his assets, or the application for the opening of proceedings must have been rejected for lack of assets (§ 283c para. 3 in conjunction with § 283 para. 6 of the German Criminal Code).
Preferential treatment of debtors (§ 283d StGB)
The perpetrator is not the debtor, but a third party who, aware of the impending insolvency, after payments have ceased, or during ongoing insolvency or insolvency proceedings, conceals assets of the debtor—which would belong to the insolvency estate in the event of insolvency—from the creditors. The action must either be carried out with the debtor's consent or for their benefit.
Even the preferential treatment of debtors The objective condition for criminal liability requires that insolvency proceedings have been opened, that the opening has been rejected due to lack of assets, or that a cessation of payments has occurred (§ 283d para. 4 StGB).
Violation of the obligation to keep accounts (§ 283b StGB)
Section 283b of the German Criminal Code (StGB) is linked to commercial and tax law. Accounting obligations For example, anyone who fails to keep proper accounts or who does not prepare financial statements in a timely manner, contrary to commercial law requirements, is liable to prosecution. This offense serves as a catch-all provision for cases under Section 283 Paragraph 1 Numbers 5 to 7 of the German Criminal Code (StGB), in which the other prerequisites for bankruptcy are not met, for instance, because no crisis existed at the time of the act or because the existence of a crisis was not recognized through negligence.
Section 283b of the German Criminal Code (StGB) also requires, as an objective condition for criminal liability, the occurrence of a crisis: cessation of payments, opening of insolvency proceedings or rejection of the opening due to lack of assets (Section 283b para. 3 in conjunction with Section 283 para. 6 StGB).
How are insolvency crimes detected?
Frequent triggers for investigations in insolvency criminal law are notifications from the insolvency court to the public prosecutor's office, information from the insolvency administrator, criminal complaints from creditors, or information from (former) employees.
The public prosecutor's office then examines whether there is initial suspicion of a crime. Typical investigative measures include:
- Searches of business and private premises (§§ 102 ff. StPO),
- Examinations of witnesses
- Securing business documents and digital data
- Expert report on the business management assessment of the crisis situation
A key element is often a retrospective insolvency report that determines the precise point in time of (impending) insolvency or over-indebtedness. This report has a significant impact on the criminal assessment and is therefore also an important point of attack for the defense.
Because: The assessment of liquidity forecasts and going concern assumptions necessarily contains evaluative elements that must be critically reviewed.
What penalties are threatened under insolvency criminal law?
The penalties vary depending on the offense.
Delaying insolvency proceedings (§ 15a InsO): Imprisonment for up to three years or a fine; in case of negligent commission: imprisonment for up to one year or a fine
Bankrupt (Section 283 of the German Criminal Code): Imprisonment for up to five years or a fine; in cases of negligent commission: imprisonment for up to two years or a fine; in particularly serious cases (Section 283a of the German Criminal Code): imprisonment from six months to ten years
Violation of bookkeeping obligations (Section 283b of the German Criminal Code): Imprisonment for up to two years or a fine; in case of negligent commission: imprisonment for up to one year or a fine
preferential treatment of creditors (Section 283c of the German Criminal Code): Imprisonment for up to two years or a fine, preferential treatment of debtors (Section 283d of the German Criminal Code): Imprisonment for up to five years or a fine; in particularly serious cases, imprisonment for six months to ten years.
In addition to the actual penalty, there are potential collateral consequences such as confiscation measures, a professional disqualification pursuant to Section 70 of the German Criminal Code (StGB), or disqualification from holding a position under Section 6 Paragraph 2 of the German Limited Liability Companies Act (GmbHG) or Section 76 Paragraph 3 of the German Stock Corporation Act (AktG). Companies may face fines under the Administrative Offenses Act. Furthermore, there are regularly civil liability risks.
How Galen Lawyers can support you in cases involving allegations of insolvency offenses
Criminal proceedings in insolvency law require a strategically focused defense. We begin by thoroughly reviewing the case file and analyzing the legal situation under insolvency law and the prosecution's investigative approaches.
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.
We offer personal and individual consultations. Please feel free to contact us to schedule an appointment.
FAQs – Frequently Asked Questions about Insolvency Criminal Law
As soon as insolvency (§ 17 InsO) or over-indebtedness (§ 19 InsO) exists, the authorized representatives of legal entities – and certain equivalent persons – are obligated to file for insolvency without delay (§ 15a InsO). A concrete assessment regularly requires a business analysis.
Yes. Section 15a Paragraph 5 of the German Insolvency Code (InsO) also criminalizes negligent conduct. Anyone who fails to carefully monitor their company's financial situation and consequently fails to file an application, files it late, or files it incorrectly, may be liable to prosecution.
Incongruent satisfaction occurs when a creditor receives a payment or security to which they were not entitled in that form or at that time. Such preferential treatment can, for example, constitute the offense of preferential treatment of creditors (Section 283c of the German Criminal Code).
Not every disposition of assets is automatically a criminal offense. The decisive factor is whether the elements of a criminal offense are met, for example, Section 283 of the German Criminal Code (bankruptcy) or Section 283d of the German Criminal Code (preferential treatment of debtors). An individual assessment is always required.
Insolvency reports serve to retrospectively determine the point in time when insolvency occurred. They often have a significant impact on criminal investigations. However, the assumptions and calculation methods used in these reports must be critically reviewed.
A professional disqualification under Section 70 of the German Criminal Code (StGB) does not occur automatically, but can be ordered by a court upon conviction. Disqualification under Section 6 Paragraph 2 of the German Limited Liability Companies Act (GmbHG) occurs by operation of law, but only upon a legally binding conviction for certain offenses, which include, in particular, insolvency and financial crimes. The precise requirements must be examined on a case-by-case basis.
Submitting an application after the fact does not eliminate the criminal liability that has already occurred, but it can be taken into account when determining the sentence. Decisive factors include, among others, the length of the delay and the resulting damage.
In the case of companies, in addition to formally appointed bodies (managing directors, board members), de facto managing directors – i.e., persons who actually conduct business without being formally appointed – can also be held criminally liable. Furthermore, under certain circumstances, shareholders, authorized signatories, or senior employees can also become the focus of investigations for insolvency-related offenses.
The statute of limitations depends on the respective penalty range of the offense (§ 78 of the German Criminal Code). In cases of intentional delay of insolvency proceedings (§ 15a para. 4 of the German Insolvency Code) or bankruptcy (§ 283 of the German Criminal Code), it is generally five years; in cases of negligent delay of insolvency proceedings (§ 15a para. 5 of the German Insolvency Code), it is three years. The exact commencement of the limitation period is specific to the offense and depends on the particular circumstances.
As soon as you become aware of an investigation, for example through a summons as a suspect or as a result of a search, you should seek legal advice immediately. You should not make any statements to investigating authorities before consulting a lawyer. Furthermore, early legal representation regularly opens up significant strategic options.