Particular impact of SARS-CoV-2 (coronavirus) on managing directors' duties of start-up companies
Generally speaking, the question has arisen for all companies for some time whether management boards, managing directors and supervisory boards are under special legal obligations with regard to SARS-CoV-2, i.e. the coronavirus. In the meantime, it is evident that the answer to this question is affirmative without doubt. Since the measures taken against a further spread of the coronavirus obviously have a massive economic impact.
In our article on the relevance of coronavirus for the functional specifications of the management, we describe in detail how the situation has developed and which general duties are particularly relevant for the management for the time being (cf. LINK). The main focus is naturally on risk identification and risk management. For the avoidance of doubt as to the dutiful dealing with the crisis, all entrepreneurial decisions should be based on an adequate information base. In addition, the obligation to ensure compliance with the law takes on a particular significance. In the present context, this obviously means in particular compliance with obligations under employment and occupational safety law, pre-insolvency obligations, administrative cooperation obligations and official directives.
For companies in the start-up phase, the current situation represents an exceptional challenge in two respects. Frequently, their internal organisation is not yet as structured as is the case for well-established companies. Above all, they are particularly affected by the economic and financial impact, in particular with regard to their equity base and financing as well as their cash flow.
Here in particular, the obligation of the management to permanently monitor the economic situation of the company and, if there are signs of any crisis developing, to obtain an overview of the asset situation by preparing an interim balance sheet or asset status, is even more important. In the current situation, this will sometimes result very promptly in the need to resort to the aids from the set of measures recently concluded by the German Federal Government to cushion the impact of coronavirus. Possibly, it is also useful or necessary to make efforts to obtain other financing, such as from the shareholders' side. In addition, it is important to know that the German Federal Ministry of Justice is currently examining to suspend the three-week period for filing an insolvency petition from the onset of insolvency or over-indebtedness for companies affected by the corona crisis until 30 September 2020.
Irrespective of the obligation to file for insolvency, the obligation of the management applies to convene a shareholders' meeting not later than at the point where the annual balance sheet or balance prepared during the course of the financial year shows that half of the share capital is lost, Sec. 49 (3) GmbHG (German Act on Limited Liability Companies). It may also be advisable for a GmbH (limited liability company) to convene a shareholders' meeting earlier when a crisis emerges. Regarding an entrepreneurial company (Unternehmergesellschaft, UG), the special feature applies that the shareholders' meeting must be convened where there is a threat of insolvency, Sec. 5a (4) GmbHG. The reason for this is that for the UG - contrary to the GmbH - no minimum capital is prescribed by law and the share capital is therefore often low. It would therefore make little sense to convene the shareholders' meeting in the event that half of the share capital has been lost.
Dr Daniel Walden