Managing directors in particular are now called upon to make far-reaching decisions that will continue to have an effect after the crisis.
Provisions of mandatory law must of course be implemented.
In addition, the managing director must comply with the law, the articles of association, shareholder resolutions and individual instructions of the general meeting.
In the case of far-reaching discretionary decisions for which there are no instructions from the aforementioned provisions, we recommend obtaining instructions from the general meeting, which can also be done by circulation.
Furthermore, we recommend that the individual steps be documented in order to be able to prove, if necessary, that to the best of our knowledge and belief, we acted as a diligent manager would act in such a situation.
It will happen at numerous companies that the company made profits in the past financial year which could in principle be distributed, but which will result in substantial losses this year due to the Corona crisis.
In this case, the so-called payout block applies, according to which managing directors are not allowed to pay out a profit that is distributable in itself to the shareholders in order to offset the losses that are now starting to accumulate. If the managing directors become aware in the period between the end of the financial year and the shareholders' resolution on the annual financial statements that the assets of the company have been significantly and probably not just temporarily reduced as a result of losses incurred or reductions in value, the profit resulting from the balance sheet must be excluded from distribution in an amount corresponding to the reduction in assets suffered and transferred to the account of the current financial year. No distribution to the shareholders may be made in this amount.
In our opinion, this applies even if the event causing the loss becomes known only after the shareholders' resolution on the distribution of profits, but before the actual payment of the profit distribution. A managing director who nevertheless pays out can be liable to injured creditors and can be held directly liable.
The payout block serves to protect creditors so that due claims can be serviced. According to the assessment of the legislator, creditors have priority over shareholders.
We will be pleased to advise you so that you can avoid liability. Please contact us at email@example.com or by telephone on 01 725 77.