By the creation of the necessary minimum capital the entrepeneuer buys himself a row of priveleges. The biggest such privelege is the limited liability. In the worst case scenario the partners' investment is lost but their private assets remain untouched. As it is said in Germany it goes also for the GmbH “No rule without exception”. According to this principle in some cases the GmbH's partner(s) and / or managing director may need to assume liability on their own assets. This is valid naturally first whenever and insofar as the partner(s) and / or managing directors voluntarily assume the debts of the company.

In practise it is often the case that banks will require such guarantees on order for the company to secure finance. If a partner or managing director signs such a liability decleration (surety or additional assumption of debts), then his private assets will be available to the creditors. Caution is thus required when signing such a declaration.

Piercing the corporate veil

Also without the voluntary assumption of liability will the partner(s) or managing director of a company in certain circumstances attract personal liability. This was stated by the Federal Supreme Court's (BGH) decision of the 16.07.2007 (Az. 11 ZR 03/04). In this decision the BGH determined, in line with previous case law, that the personal liability of the partners will occur if they engage in so called “existence destroying interferences” in the company leading to liquidation. A condition for this is the withdrawal of assets from the company without consideration.

However, in deviation to previous case law the BGH determines now that such interferences may be interpreted as immoral damage to the society and are as such able to constitute claims towards shareholders that are not subordinate but equal to other claims in company law. Notarial recording of the incorporation of a GmbH and the comprehensive consultation ensured within this framework ensures that the information provided by all of the concerned parties remains secure. It serves therefore to protect all involved parties and ensures to protect entrepeneurs from unpleasant suprises and liability.