In a landmark decision, Düsseldorf Higher Regional Court clarified that general managers cannot rely on their D&O insurance cover in the event of claims for repayment by an insolvency administrator under Section 64 German Act on Limited Liability Companies (Case I-4 U 93/16).
The court case dealt with the everyday case that a general manager had made payments, although the company was already ready for insolvency. Section 64 Act on Limited Liability Companies stipulates that a general manager is personally responsible for payments that the company has made despite insolvency or over-indebtedness.
In the case at issue, the general manager requested exemption from her D&O insurance for the insolvency administrator’s claims. The insurance company refused, which has now been confirmed in two instances. Reviewing the jurisdiction of the Federal Court of Justice and other Higher Regional Courts, it is to be expected that the decision will be affirmed.
This means for general managers and board members of corporations that in the event of a corporate crisis, they will need to keep a close eye on the obligation to file for insolvency. As a precautionary measure, the own D&O insurance policy should be supplemented correspondingly.