On 26 September 2017, the Federal Fiscal Court (BFH) ruled that, despite the opening of insolvency proceedings and the appointment of a provisional insolvency administrator, the managing director of a GmbH may be personally liable to the tax authorities for the GmbH’s import sales tax liability. This is because the duty of the managing director to make provision for the funds continues to exist, the violation of which, in the event of a dispute, triggers the managing director’s liability. Managing directors and board members should be aware of their personal liability risk.
Claim against the managing director after the GmbH’s insolvency
In the present case, the plaintiff and another person were managing directors of a limited liability company that had several import shipments for which import duties were incurred cleared for free circulation in 2011. These were due on 16 March 2011 due to a payment deferral granted. On 01.03.2011 the GmbH already applied for the opening of insolvency proceedings, whereupon the local court (AG) ordered a provisional insolvency administrator on 03.03.2011, on whose approval the managing director was from now on dependent.
Since the import duties due on 16 March 2011 could not be debited for lack of cover, the Main Customs Office (HZA) made a personal claim against the managing director, as it assumed that he had grossly negligently breached his duty to ensure that the account of the GmbH was sufficiently covered to settle tax debts that had fallen due.
The courts confirm executive liability
The Finance Court and the Federal Fiscal Court endorsed the result of the HZA. The Tax Code stipulates that managing directors are personally liable if claims due to intentional or grossly negligent breach of duty are not fulfilled or not fulfilled in time. In the event of a dispute, the managing director was responsible for ensuring that the due tax liability could be paid in time by sufficient funds in the account of the B.V.. It had also been grossly negligent on the part of the managing director to think that he could not fulfil this obligation, since the approval of the provisional insolvency administrator would be required for this.
Cover your liability risk
This judgement of the BFH is of particular practical relevance, since the tax obligations of the managing director of a GmbH are specified. Managing directors and board members cannot always rely on the limited liability of a legal entity and should inform themselves about the personal liability risk and take appropriate precautionary measures.
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