3.5  Shareholders’ Liability	103

3.4.4  Statute of Limitations

Most claims asserted by the GmbH against the managing director are subject to a five-year limitation period.94 It is irrelevant whether the breach in question was negligent or willful. The limitation period applies to claims based on a breach of duty arising under corporate law, as well as claims based on a breach of duty arising from the managing director’s employment agreement.95

The five-year limitation period (specified in Sec. 43 GmbHG) begins as of the time the damage resulting from the breach of duty occurs, regardless of the company’s knowledge. In contrast, the three-year limitation period (specified in Sec. 195 BGB) begins only as of the time the company gains knowledge of the damage and the party that has caused the damage.96

3.4.5  Summary—Managerial Duties and Liability Risks

DutiesandresponsibilitiesofthemanagingdirectorofaGmbHinparticularinclude:

•Monitoring raising and preserving the minimum share capital;

•Filing all necessary applications for the GmbH with the competent Commercial Register;

•Calling of shareholders’meetings;

•Monitoring the financial situation of the GmbH and, in the case of insolvency, filing for insolvency proceedings without undue delay;

•Fiduciary duties, in particular, confidentiality, non-competition, making use of ‘corporate opportunities’in the interest of the GmbH.

Liability risks arise especially from:

•Claims of the GmbH;

•Claims of the GmbH’s creditors;

•Claims for delayed insolvency proceedings;

•Claims for payments following the GmbH’s insolvency;

•Claims of tax authorities/social insurance agencies.

3.5  Shareholders’ Liability

The GmbH, as well as the AG are both corporate entities which are legally separate from their shareholders. Following registration with the competent Commercial Register, in principle only the respective company’s assets may be used to satisfy

94  See Secs. 9b para 2, 43 para 4 GmbHG.

95  If a breach of duty also constitutes a tort, the tort claim is subject to the limitation provisions of Secs. 195, 199 BGB, even if the underlying tort involves a breach of duty arising under corporate law.

96  See Sec. 199 para 1 BGB.

104	3  Limited Liability Company (GmbH)

the claims of the company’s creditors. Thus, the risk of shareholders being held personally liable is principally limited to their capital contribution; any other personal liability is excluded.

There are, however, some important exceptions from this general rule, which may roughly be divided into two categories: First, there are statutory provisions which explicitly stipulate a personal liability of a shareholder violating her/his duties and obligations under the law. Second, there are specific cases of ‘piercing the corporate veil’developed by the German courts.

3.5.1  Statutory Provisions Stipulating Personal Liability

Statutory law may explicitly provide for a personal liability of a shareholder vis- à-vis the company or its creditors in cases in which a limitation of liability is unjustified since the shareholder has violated specific statutory obligations. The most important examples include:

•Tort liability for providing false or incomplete information at the time of formation of the company or at any time thereafter.97

•Compensation of damages which arise from the shareholder’s willfully or grossly negligently impairing the company through contributions or start-up costs.98

•Reimbursement of payments received in violation of the capital maintenance rules of Sec. 30 GmbHG.99

•Contingent liability of all other shareholders in case a payment made to another shareholder in violation of the capital maintenance rules of Sec. 30 GmbHG cannot be retrieved from the recipient but is necessary to satisfy the company’s creditors.100

•If the company no longer has a managing director, the obligation to file for insolvency immediately upon the company’s becoming illiquid or over-indebted automatically passes on to the shareholders by operation of the law. In this case, the shareholders are liable for damages suffered by third parties resulting from a belated filing.101

97  See Sec. 9a para 1 GmbHG; such false information may in particular relate to the value of a contribution in kind.

98  See Sec. 9a para 2 GmbHG; examples are contributions in kind which are of no use to the company or stipulating excessively overrated start-up costs in the articles of association.

99  See Sec. 31 para 1 GmbHG. 100  See Sec. 31 para 3 GmbHG.

101  See Secs. 64 GmbHG, 823 para 2 GmbHG, 15a InsO.