Dusseldorf Many companies are fighting for their economic existence in the corona crisis. In many cases, the question is whether the company is still solvent. Managers have to decide whether to go before the bankruptcy judge. Legislators have relaxed the rules, but the criminal risks remain enormous. Under certain circumstances, managing directors can continue to be vulnerable to bankruptcy.
It is not the only challenge that bosses face in the crisis. Criminal law consequences also threaten unclean applications to banks that grant loans. There are also some pitfalls when dealing with social security funds, tax offices and the Federal Employment Agency. Companies that are now applying for short-time work, for example, have to take great care to provide correct information to the employment agencies.
Entrepreneurs who do not treat employee personal data confidentially, for example regarding illnesses, must also face sanctions. In addition, employers must ensure that their employees are given the best possible protection against Covid-19 using breathing masks or clothing.
The upheavals on the stock exchanges have already prompted financial supervision and public prosecutors. They are about tracking down insider dealers. Heiko Ahlbrecht is a partner in the law firm Wessing & Partner in Düsseldorf, which specializes in white collar crime. In the interview, he shows the potential legal risks of the corona crisis.
Read the full interview here:
Mr. Ahlbrecht, the state supports entrepreneurs in the corona crisis. For example, the obligation to file for bankruptcy was suspended. Are there no more criminal risks for managing directors?
Yes, they still exist. The legislator only wants to avoid that a company has to file for bankruptcy because it is still waiting for support. Anyone who has submitted an application for public aid or is in the process of financing or restructuring negotiations will be postponed. In these cases, managing directors are no longer obliged to submit the application for bankruptcy to the responsible district court within three weeks. In these cases, criminal liability for the delay of bankruptcy is excluded until the end of the suspension period.
When will the relief apply?
The fulfillment of the requirements for the suspension of the period is presumed if the insolvency was not yet on December 31, 2019. Nevertheless, companies should document for safety that the corona pandemic is the cause of the corporate crisis and that there is a prospect of restructuring.
Who pays attention has nothing to fear?
No, that would be too easy. In addition to the delay in insolvency, there are other insolvency offenses in the criminal code, such as bankruptcy, the violation of accounting requirements, creditors ‘privileges and debtors’ privileges. How the Covid 19 bankruptcy suspension law will affect it is completely open. In this respect, one cannot say that there are no longer any criminal risks for the managing director.
In which cases is an application still necessary?
If the bankruptcy is not based on the effects of the Covid 19 pandemic, entrepreneurs still have to go to the bankruptcy court. The same applies if there is no prospect of the elimination of an existing insolvency. The new regulation is therefore extremely dangerous because the risk of delaying insolvency continues to exist.
“The risk of criminal liability for tax evasion has decreased significantly”
What threatens managers who don’t stick to it?
Above all, the fact of delaying insolvency is relevant. Anyone who does not file for bankruptcy, in time or incorrectly can be punished with imprisonment of up to one year or a fine, even in the case of mere negligence. If acted deliberately, the prison sentence can even be up to three years. In addition, bankruptcy offenses are often implemented, which can further increase the sentence.
How do prosecutors find out about it?
Every German bankruptcy court is obliged to report to the public prosecutor’s office and to notify every bankruptcy opening and rejection. The investigative authorities then examine the case ex officio. If there is an initial suspicion, formal investigations are initiated. The insolvency administrator then becomes the best witness of the public prosecutor’s office.
What happens if companies do not pay social security contributions because of the crisis?
This can also cause problems. The umbrella organization of statutory health insurance companies recommended that all insurers pay the hourly social security contributions. However, this option is initially limited to March and April and is only an option when all other aid measures have been exhausted. In all other cases, criminal liability for withholding and misappropriating wages remains possible. A justification for a so-called conflict of duties that would imply impunity is conceivable – but how courts will interpret the law is open.
How compliant are the tax authorities?
The risk of criminal liability for tax evasion has decreased significantly. The Federal Ministry of Finance has made it clear in a letter that companies that can be shown to be directly and not insignificantly affected by the effects of the corona crisis can have taxes paid without interest. To do this, however, they must submit an application. This applies equally to sales tax, income tax and corporate income tax.
Another instrument is the easier granting of loans, for which the state largely guarantees. What do borrowers have to look out for?
The state guarantees a large part, but no interest rate reductions are planned. The interest rate depends on the creditworthiness of the borrower and the term. As a result, the interest rate fluctuates between one and up to more than seven percent. The creditworthiness is the crux of the matter under criminal law. If you are misled about this, a fraudulent offense is considered, as is generally the case with incorrect or incomplete information to a lender. This is credit fraud. The application can also be punishable.
Around half a million companies have already registered short-time work. Are criminal risks lurking here?
Yes, the employment agencies even explicitly draw attention to the risks associated with short-time work benefits themselves. If there is a fraudulent overpayment, criminal charges will be filed. The agencies use this to warn employers of incorrect or incomplete information. Subsidy fraud is also conceivable.
“Processing of health data is only possible restrictively”
Do the authorities even find out?
The risk of detection should not be underestimated. Some federal states have special examination groups at the employment agencies, which critically examine the applications and inform the main customs office or the public prosecutor directly if there are suspicions. It is therefore important to ensure complete and error-free timesheets and to carefully check the requirements for applying for short-time work benefits.
Small businesses and the self-employed receive emergency aid. This is very unbureaucratic, the authorities pay out very quickly. Isn’t there a risk of free-riders?
The less the authorities check, the more likely there will be abuse. However, each applicant must assure that their details are correct. Otherwise, he will be punished.
What other criminal problems do you observe?
Because of the health risks, employers must ensure that their employees are adequately protected. For some activities, it is certainly advisable to provide breathing masks or gloves. Companies should also observe the hygiene recommendations of the Robert Koch Institute. If you do not do this, you may have to be accused of having committed negligent bodily harm if an employee becomes ill.
Employers sometimes collect health data on their employees. Is this problematic from a criminal law perspective?
Quite. Processing of health data is only possible restrictively. Such data processing already exists if, for example, it is saved that an employee shows corona symptoms or if fever of the employees is to be measured. In the event of violations of data protection law, there are serious fines. If you want to be sure, you should get information from the Federal Commissioner for Data Protection.
Corona is also causing turbulence on the stock exchanges. How do investigators look at it?
The stock exchange supervisory authorities and the public prosecutor’s office have received the first criminal complaints and information about criminal insider trading in the context of share buybacks. Insider trading means that the insider – including employees of listed companies – uses the company’s internal data for its own stock exchange transactions.
Mr. Ahlbrecht, thank you for the interview.
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