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A decision by the Federal Court of Justice (FCJ) dated 16 May 2000 (DB 2000, 1703) has considerably increased the criminal and civil sanctions to which general managers of limited liability companies (GmbHs) are exposed.
Under § 266a (1) StGB (German Penal Code), employers who "deprive" the authorised collection agency of employee contributions to the social insurance system are subject to imprisonment of up to five years or fine. Under § 823 (2) BGB (German Civil Code), persons who violate a law intended for the protection of others have civil liability for the amount of the resulting damage. § 266a (1) StGB is a so-called "protective law" within the meaning of § 823 (2) BGB, the purpose of which is to safeguard the funds owed to the social insurance system.
The employer function is exercised by the general managers of a GmbH, who are its legal representatives. They accordingly have potential liability under § 266a (1) StGB and § 823 (2) BGB.
2. Facts Of The Case And Central Issue
The case involved a floundering limited partnership with a corporate general partner (GmbH & Co. KG). In January 1994, the limited partnership paid wages to its employees, but failed to remit social insurance contributions to the proper collecting agency by the 15th of the following month as required by the German Social Code. In February 1994, social insurance contributions were again not remitted, but for this month no wages were paid, although the LP's employees continued to work. By March 1994, the LP was out of funds, and a bankruptcy proceeding was commenced in late April 1994.
The agency authorised to collect social insurance contributions (the local public health insurance organisation - AOK) sued the general manager of the GmbH that was the LP's general partner seeking to recover the employee social insurance contributions for the months of January and February 1994 plus interest. The lower courts held the general manager liable for the January contributions, but not the February contributions on the grounds that the collection agency could not be "deprived" of social insurance contributions where no wages were paid.
3. Holding Of Federal Court Of Justice
The Federal Court of Justice reversed the Higher Regional Court, holding that social insurance contributions are payable to the collection agency for periods during which employees continue to work whether or not wages are paid to them for this work. Where employee social insurance contributions are not remitted for periods during which employees continue to work, the collection agency is "deprived" of these contributions within the meaning of the criminal statute as long as the employer has the necessary funds at his disposal. The Higher Regional Court had determined that the LP had the funds necessary for timely payment of the social insurance contributions for January and February.
The Federal Court of Justice remanded to the Higher Regional Court for determination whether the failure of the general manager to remit the employee social insurance contributions for the month of February was intentional. Civil liability is here predicated on violation of a criminal statute, which cannot be violated without intent.
4. Other Case Law On Point
The situation presented by the instant case recurs with some regularity. Under § 266a StGB, conditional intent (dolus eventualis) is sufficient to satisfy the mental element of the crime, hence to trigger civil liability. The Federal Court of Justice has held that the obligation to remit employee contributions to the social insurance system under § 266a StGB takes priority over all other business debts, both old and new (judgement of 21 January 1997 - VI ZR 338/95, BB 1997, 591). Where a desperate financial situation creates doubt whether the employee social insurance contributions can be timely paid, the general manager is required to take special steps to ensure such payment where at all possible. Hence, the crime of § 266a StGB is committed, and liability under § 823 (2) BGB arises, where the company lacks the funds to pay the employee social insurance contributions because available funds have been expended for other pressing business needs. One should, however, note that § 266a (5) StGB permits the court to refrain from imposing punishment where the employer immediately informs the collection agency in writing of his inability to pay amounts due and explains why payment is impossible despite his best efforts. In its decision of 21 January 1997, the Federal Court of Justice implied (loc. cit. p. 592/2) that the narrow exception of § 266a (5) StGB was virtually the only defence a general manager might raise.
That the collection agency can be "deprived" of employee social insurance contributions within the meaning of § 266a StGB even where no wages are paid was the majority view even prior to the May 2000 decision reported on above (see e.g. the judgement of 21 January 1997, loc. cit. p. 592/1-2). The Higher Regional Court of Düsseldorf held in a 1997 judgement (GmbHR 1997, 900) that a good faith belief on the part of a general manager that he could not commit the crime of § 266a StGB as long as no wages were paid was an irrelevant mistake of law (Verbotsirrtum) on his part and precluded neither commission of the crime nor personal liability under § 823 (2) BGB (ignorantia juris non excusat).
5. Concluding Remarks
The personal liability existing under § 823 BGB in conjunction with § 266a StGB exists only with respect to employee contributions to the social insurance system. No similar liability exists with respect to the matching employer contributions. Nevertheless, general managers should take note of both the criminal and civil implications of the decision here reported on.
Editorial cut-off date: 11 June 2001
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