Delaying insolvency proceedings: When does a managing director become liable to prosecution?

If a company, such as a GmbH (limited liability company), is insolvent or over-indebted, the managing director must file for insolvency in a timely manner. Anyone who fails to file for insolvency despite the legal obligation to do so, or fails to do so in a timely manner, can be prosecuted for delaying insolvency proceedings. Intentional failure to file for insolvency can result in a fine or imprisonment of up to three years. Even negligent failure to file for insolvency can be a criminal offense.

Therefore, an economic crisis can also entail significant legal risks for managing directors and other responsible persons in the companies concerned. When outstanding invoices, liquidity problems, missed payments, or enforcement measures arise, the crucial question often becomes: Is there already an obligation to file for insolvency?

As a lawyer, I advise and represent clients in Hamburg and nationwide on issues relating to delaying insolvency proceedings, the obligation to file for insolvency, directors' liability and criminal risks in corporate crises.

What is insolvency fraud?

Delaying insolvency proceedings refers to the late or omitted filing of a required insolvency petition. The relevant provision is Section 15a of the German Insolvency Code (InsO).

The members of the governing body of a legal entity – in the case of a GmbH (limited liability company), generally the managing directors – must file for insolvency without undue delay if the company becomes insolvent or over-indebted. The statutory maximum period is three weeks from the onset of insolvency and six weeks from the onset of over-indebtedness.

Important: These deadlines are not a general "waiting period." The managing director is not permitted to wait three or six weeks in principle. Rather, the insolvency petition must be filed as soon as a delay is no longer acceptable. The statutory maximum deadlines merely mark the outermost time frame.

When is a GmbH (limited liability company) insolvent?

The most important reason for insolvency in practice is insolvency according to § 17 InsO.

A company is considered insolvent when it is no longer able to meet its payment obligations as they fall due. The law also clarifies that insolvency is generally presumed when the debtor has ceased making payments.

For example, the following signs may indicate a critical liquidity situation for managing directors:

• Invoices are repeatedly not paid or are paid late.

• Suppliers insist on prepayment or stop deliveries altogether.

• Salaries can no longer be paid out in full.

• Social security contributions or taxes remain outstanding.

• Direct debits regularly bounce.

• The business account is overdrawn or credit lines are exhausted.

• Creditors initiate enforcement measures.

A single delayed payment does not automatically mean insolvency. The decisive factor is the company's overall liquidity situation.

When does over-indebtedness exist?

In the case of a GmbH (limited liability company), in addition to insolvency, over-indebtedness can also trigger an obligation to file for insolvency according to § 19 InsO (German Insolvency Code).

According to Section 19 of the German Insolvency Code (InsO), over-indebtedness generally exists when a company's assets no longer cover its existing liabilities. However, an important exception applies if, based on the circumstances, the continuation of the business within the next twelve months is highly probable.

A calculated shortfall in funds does not automatically mean that a GmbH (limited liability company) is legally insolvent. The going concern forecast is one of the decisive factors.

Especially during a corporate crisis, one should not focus solely on the balance sheet or equity. A thorough examination of the company's specific assets, financial position, and earnings under insolvency law is necessary.

What is the deadline for filing for insolvency?

The frequently asked question "How long can a managing director wait before filing for insolvency?" can be answered clearly:

In case of insolvency, the statutory maximum period is three weeks, in case of over-indebtedness six weeks.

The legal basis is Section 15a Paragraph 1 of the German Insolvency Code (InsO). However, this provision expressly requires that an application be filed "without culpable delay." Therefore, the deadline must not be treated as an automatically available grace period.

A managing director must not simply let time pass, especially because they are hoping for better sales, a new order, or unsecured financing. The crucial factor is whether concrete and realistic measures to eliminate the insolvency risk exist and are being pursued with the necessary diligence.

When does a managing director become liable to prosecution for delaying insolvency proceedings?

Section 15a paragraph 4 of the German Insolvency Code (InsO) expressly criminalizes the late or omitted filing of an insolvency application.

Anyone who fails to file for insolvency as legally required, or fails to do so in a timely manner, may be punished with imprisonment for up to three years or with a fine. In cases of negligence, Section 15a Paragraph 5 of the German Insolvency Code (InsO) provides for imprisonment for up to one year or a fine.

For the criminal assessment, the following questions are particularly important:

1. Was there even an obligation to file for insolvency?

2. When did the insolvency or over-indebtedness occur?

3. When did the managing director recognize the insolvency?

4. Should he have recognized the insolvency if he had exercised due diligence?

5. When was an insolvency petition actually filed?

6. What measures have been taken in the meantime for restructuring or in preparation for filing for insolvency?

The mere fact that a limited liability company (GmbH) later files for insolvency does not automatically mean that the managing director has committed the offense of delaying insolvency proceedings. The specific circumstances of each individual case are decisive.

What are the penalties for delaying insolvency proceedings?

In cases of intentional delay in filing for insolvency, Section 15a Paragraph 4 of the German Insolvency Code (InsO) provides for a prison sentence of up to three years or a fine. In cases of negligent delay in filing for insolvency, the penalty is imprisonment of up to one year or a fine.

In addition to criminal proceedings, managing directors may face further significant consequences. In particular, they may be held personally liable.

If you, as managing director, are under investigation for suspected insolvency delay, the conditions for criminal liability and the specific point in time at which insolvency occurred should be carefully examined.

Personal liability of the managing director

Upon the onset of insolvency or over-indebtedness, special payment restrictions apply to the managing director. According to Section 15b of the German Insolvency Code (InsO), the members of the management board who are required to file for insolvency are generally no longer permitted to make any payments on behalf of the company. Exceptions include, in particular, payments that are consistent with the due diligence of a prudent and conscientious business manager.

A delayed insolvency application can therefore not only be a criminal problem. It can also trigger personal liability risks for the managing director.

Especially during a corporate crisis, it is therefore important not to consider criminal and liability risks in isolation.

Is the managing director still liable if a tax advisor does the bookkeeping?

Engaging a tax advisor does not, in principle, eliminate the managing director's responsibility for the obligation to file for insolvency.

The managing director must monitor the economic situation of his company and, in the event of signs of a crisis, ensure that the insolvency is professionally assessed.

A tax advisor can provide important support in this process. However, the responsibility for filing for insolvency in a timely manner generally remains with the managing director.

Especially in the event of a worsening liquidity crisis, one should not rely on the annual financial statements or the next business analysis automatically answering the crucial questions.

What must a CEO do during a company crisis?

The managing director should act promptly at the first signs of a possible insolvency.

The following steps are particularly useful:

• Determine current liquidity: What means of payment are available and which liabilities are already due?

• Examine the grounds for insolvency: Is there insolvency or over-indebtedness?

• Create a going concern forecast: Is a sustainable continuation of the company realistic?

• Assessing remediation options: Are there concrete measures that can be implemented in the short term?

• Seek legal advice: If in doubt, consult a lawyer experienced in insolvency law and, if necessary, criminal law at an early stage.

• Document decisions: The underlying figures, forecasts and restructuring measures should be documented in a comprehensible manner.

The earlier an economic crisis is recognized, the greater the scope for action usually is.

What should be considered when insolvency is imminent?

The threat of insolvency must be distinguished from insolvency that has already occurred.

In the case of a limited liability company (GmbH), the threat of insolvency does not generally trigger the same legal obligation to file for insolvency under Section 15a of the German Insolvency Code (InsO) as actual insolvency or over-indebtedness. However, it can be an important warning signal and provide an opportunity to examine restructuring or reorganization measures at an early stage.

For managing directors, it is therefore crucial not to wait until the company can no longer pay outstanding invoices to seek legal advice.

As a lawyer, I advise managing directors and other responsible persons on criminal law issues related to corporate crises in Hamburg and nationwide, in particular regarding:

• the suspicion of delaying insolvency proceedings,

• criminal investigations against managing directors, and

• the liability of managing directors.

FAQ on delaying insolvency proceedings

What is insolvency fraud?

Delaying insolvency proceedings occurs when a managing director fails to file for insolvency, or fails to do so in a timely manner, despite being legally obligated to do so. This obligation to file exists particularly in cases of insolvency or over-indebtedness of the company.

How long does a managing director have to file for insolvency?

In the event of insolvency, the insolvency petition must be filed within three weeks at the latest; in the event of over-indebtedness, within six weeks at the latest. However, these deadlines do not constitute an automatic grace period; the petition must generally be filed without undue delay.

What are the penalties for delaying insolvency proceedings?

In cases of intentional delay in filing for insolvency, Section 15a Paragraph 4 of the German Insolvency Code (InsO) stipulates a fine or imprisonment of up to three years. In cases of negligent conduct, Section 15a Paragraph 5 of the InsO provides for imprisonment of up to one year or a fine.

When is a GmbH (limited liability company) insolvent?

A limited liability company (GmbH) is considered insolvent under Section 17 of the German Insolvency Code (InsO) if it is no longer able to meet its due payment obligations. A mere temporary liquidity shortfall does not necessarily constitute insolvency.

When is a GmbH (limited liability company) considered over-indebted?

According to Section 19 of the German Insolvency Code (InsO), a GmbH (limited liability company) is generally considered over-indebted if its assets no longer cover its existing liabilities and there is no overriding probability that the company can be continued in the next twelve months.

Is the managing director personally liable for delaying insolvency proceedings?

Yes, personal liability of the managing director can be considered under the statutory conditions. In particular, special liability risks for payments may exist after insolvency proceedings have commenced. Section 15b of the German Insolvency Code (InsO) governs the responsibility of the board members required to file for insolvency.

Can a managing director also be held criminally liable for negligence?

Yes. Section 15a paragraph 5 of the German Insolvency Code (InsO) explicitly provides for criminal liability in cases of negligent breach of the obligation to file for insolvency. A crucial factor is whether the managing director could have recognized the insolvency with due diligence.

Does a tax advisor protect against criminal liability for delaying insolvency proceedings?

No. Engaging a tax advisor does not, in principle, eliminate the managing director's own responsibility for complying with the obligation to file for insolvency. Therefore, in the event of a financial crisis, a legal review should also be conducted.

When should I contact a lawyer in Hamburg regarding insolvency proceedings?

Early consultation can be particularly useful if, as a managing director, there are already significant liquidity problems, social security contributions or taxes are outstanding, suppliers can no longer be paid, or there is a suspicion that insolvency or over-indebtedness may have already occurred.

Do you advise managing directors and companies from Hamburg on matters of delaying insolvency proceedings?

Yes. If you, as managing director or person responsible for a company in Hamburg, have questions about the obligation to file for insolvency, possible delays in filing for insolvency, or personal liability and criminal risks, an individual legal review of the specific situation may be advisable.

Are you a managing director and unsure whether you are already obligated to file for insolvency or whether there is a suspicion of delaying insolvency proceedings? Have your financial situation and existing duties as a managing director legally reviewed at an early stage.

By Christian Hermanussen, LL.M.
Lawyer and specialist lawyer for criminal law in Hamburg
Focus: Criminal defense and white-collar crime
Published on August 31, 2026