Corporate funeral

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A company funeral refers to certain measures for the liquidation (dissolution) of companies with insolvency characteristics. The companies mostly operate as corporations ( legal entities ), in particular as limited liability companies (GmbH) or stock corporations (AG).

This procedure is usually carried out by commercial undertakers on behalf of the entrepreneur concerned. First, the company is sold to the liquidator for a symbolic purchase price and a new managing director or board member is appointed. The purpose is to shift the obligation to file for insolvency to the new management of the company (managing director / chairman of the board). In most cases, the company's registered office is relocated at the same time in order to bring subsequent insolvency proceedings to the jurisdiction of another bankruptcy court , possibly to another federal state . This is to ensure that the former managing director / board member is not confronted with the consequences of insolvency proceedings in his region.

The implementation of the insolvency proceedings is usually associated with considerable professional and private consequences for the managing director or board member concerned. The filing for insolvency, the submission of the financial information and the entry in the public debtor directory have the consequence for the managing director and board of directors concerned that this is negatively stored in the credit reporting agencies. As a result, the affected managing director / board member is afflicted with a flaw that can make him unworthy of credit and thus make an independent new start considerably more difficult. In addition, there are publications in the regional newspapers under the heading Insolvency Announcements.

This type of company liquidation is often used by companies that may be subject to warranty claims in the future, e.g. claims from the 5-year warranty obligation at property developers.

Legal corporate funeral

If the "commercial company funeral" (liquidation sale) only serves the purpose of conducting the insolvency proceedings with a new managing director / board member (and under certain conditions) at a different place of jurisdiction and complying with the statutory provisions (in particular the obligation to file for insolvency), this is the procedure legally “not objectionable” (Higher Regional Court Karlsruhe of May 30, 2005, Az. 15 AR 8/05).

Illegal corporate funeral

In the case of such practices that are objectionable under criminal law, the new managing director / board member is usually only a "straw man" and is not able to properly conduct the company's business. It is not uncommon for him to be based abroad and therefore not at all capable of practically handling insolvency proceedings. The obligations to file for insolvency are not complied with (consequence: delay in insolvency). The relocation of the registered office takes place only in appearance (mailbox address / non-existent location). This is supposed to lead to the void and wear down the society's creditors. Everything that is still of value is sold, creditors are not satisfied. This income is withheld and not taxed.

The business documents, which could be used to prove, among other things, that the previous managing director was guilty of various bankruptcy crimes, will be destroyed. Frauds and irregularities of the former managing director are also to be covered up, for example bankruptcy due to failure to prepare a balance sheet or breach of accounting obligations as well as delaying insolvency (failure to apply for insolvency).

The practices of criminal corporate undertakers create significant problems for creditors in this society. If they apply for bankruptcy proceedings, they will do so at the old address known to them. However, due to the relocation of the registered office , the insolvency court is no longer competent. In some cases there are months of disputes over jurisdiction that delay the initiation of bankruptcy proceedings.

Since the entire construction is only aimed at thwarting evidence and disadvantaging the creditors, it is also judged to be immoral . From this it also follows that the criminal responsibility of the former managing director can go beyond the time of his formal management. This criminal approach also justifies claims for damages against the "former managing director", the civil law direct liability in private assets.

Often a company funeral is based on mediation by a commercially active "company undertaker". These then take on the task of preparing the necessary legal declarations, engaging a suitable sham managing director and utilizing the remaining assets for the benefit of the previous shareholder and to cover their own "fees" in illegal cooperation with the (old) shareholder .

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