Mon, Jun. 04, 2007

Constructive GmbH Bankruptcy

CK - Washington.   It takes a law professor to summarize a complex supreme court decision in a few lines: A German GmbH-style corporation files for bankruptcy in May but is illiquid in January. From January through May, the manager, Geschäftsführer, has the GmbH pay bills of 30K Euros and collect payments on its invoices of 20K Euros, all via an overdrawn bank account.

Is the manager liable to the bankruptcy estate? If so, would that be for 30K, 20K, or 10K, Ulrich Noack asks. The Supreme Court in Karlsruhe decided on 20K under the rules of constructive bankruptcy which governed the entity when its illiquid status begans through the bankruptcy filing.

The Geschäftsführer should have caused the debtors pay into another account. Their payments into the overdrawn account affected adversely the constructive estate in bankruptcy, docket no. II ZR 310/05, March 26, 2007, 10 pages, German.


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