Piercing the corporate veil: when does liability become personal?

GmbH liability: protection of personal assets and its limits

Section 13(2) GmbHG generally limits recourse for company debts to company assets. Personal claims against a director or shareholder require an additional legal basis.

Not every case below constitutes piercing the corporate veil in the strict company-law sense. Directors’ liability, shareholder liability and guarantees must be distinguished, although all may expose personal assets.

1. Breaches of directors’ duties - section 43 GmbHG

Directors must exercise the care of a prudent businessperson. A breach causing loss to the company may create personal damages claims under section 43 GmbHG. After insolvency, the administrator often reviews earlier decisions and payments. This is liability owed to the company.

2. Prohibited payments to shareholders - sections 30 and 31 GmbHG

Assets required to preserve registered capital generally must not be distributed to shareholders. Prohibited payments can trigger repayment claims under sections 30 and 31 GmbHG. The recipient, timing, consideration and financial position matter. Directors and recipient shareholders may be affected on different legal grounds.

3. Personal tax liability - sections 34 and 69 AO

Intentional or grossly negligent breaches of tax duties that cause taxes not to be assessed or paid on time may trigger liability under sections 34 and 69 AO. Company tax arrears alone are insufficient. The breach, fault and causal link to the tax loss require specific assessment.

4. Social-security contributions - section 266a StGB

Unpaid employee contributions may trigger criminal consequences under section 266a StGB and personal civil claims. Payment flows, responsibilities and financial circumstances need review. Criminal defence and personal debt strategy should be coordinated.

5. Personal torts - sections 823 and 826 BGB

A GmbH does not shield someone from liability for their own torts. Depending on the facts, section 823 BGB or intentional damage contrary to public policy under section 826 BGB may apply.

Abusive shareholder interference with company assets may constitute destructive interference. Case law treats this as liability to the company under section 826 BGB. Not every poor decision or instance of undercapitalisation meets the requirements.

6. Fraud and personal damages - section 263 StGB

Deliberately deceiving business partners about material facts can lead to criminal responsibility and personal damages. In a crisis, this may concern knowingly false statements when ordering supplies, obtaining credit or entering contracts. The specific elements of fraud must be met; non-payment alone is insufficient. Civil liability may arise under section 823(2) BGB in conjunction with section 263 StGB.

7. Delayed filing and payments - sections 15a and 15b InsO

An insolvency application must be made without culpable delay after illiquidity or insolvency-law overindebtedness. Section 15a InsO sets maximum periods of three and six weeks respectively, not automatic waiting periods. A breach may have criminal consequences and lead to further personal claims. Payments after insolvency are additionally governed by section 15b InsO and its exceptions.

8. Guarantees: personal liability despite the GmbH

A guarantee under sections 765 et seq. BGB creates your own obligation to the creditor. Banks, landlords, leasing providers and suppliers may require this security. The GmbH’s limited liability generally does not protect against an obligation you personally assumed. Payment and amount depend on the contract and available defences.

Defend personal claims and address remaining debt

When large claims threaten your livelihood, two questions need addressing together: which claims can be defended or reduced, and how can remaining personal debt be managed sustainably?

Piercing the corporate veil does not automatically rule out German discharge. The actual claim and, in particular, section 302 InsO exceptions are decisive. Alongside settlement or German insolvency, we assess EU insolvency where appropriate. Jurisdiction, actual COMI, applicable law and exceptions require prior review; discharge cannot be promised across the board.

In a free initial consultation, we review demand letters, your role, relevant payments and deadlines. Together with the appropriate legal and tax professionals, we plan the next steps.