Liability Before Registration: Who Is Liable in a GmbH or UG in Formation

The company is registered. Nevertheless, a practical question remains for many founders: are private savings now actually protected, and when can shareholders or managing directors still be personally liable?

The answer depends above all on the role in which someone acts and on the legal basis on which a claim arises. What matters is not merely that a claim remains unpaid, but who assumed the underlying obligation and whether their own duties were breached in the process.

At a glance

Full liability protection only applies from registration: only from entry in the commercial register does the limitation of liability of the corporation take full effect, meaning that in principle only the company’s assets are liable (see Section 13(2) GmbHG).
Before registration, there are several levels of liability: (1) external liability of those acting (see Section 11(2) GmbHG), (2) possible shareholder liability in the event of a shortfall or pre-registration losses (overview, for example, in “Liability of the pre-GmbH”), (3) internal liability of the managing director towards the company (see Section 43 GmbHG).
Observe the transparency register: the obligation to report beneficial owners has generally existed since 1 October 2017; since 1 August 2021, the transparency register has been a full register (the notification fiction no longer applies). Anyone already active in the formation phase should keep shareholder data, the flow of contributions and documentation particularly consistent.
In a crisis: anyone who is insolvent must know the deadlines and act (see Section 15a InsO). The application must be filed no later than three weeks after insolvency occurs and no later than six weeks after over-indebtedness occurs.

Who is liable after registration?

The following overview classifies the three roles and their typical personal risks. It does not replace an individual assessment, but helps you to place your own situation.

Role	Basic rule	Typical personal risks
Company	It is liable for its obligations with the company’s assets.	The economic risk lies with the company.
Shareholders	They are not personally liable for company debts merely because of their shareholding.	Outstanding contributions, impermissible repayments, personal security or their own unlawful conduct
Managing directors	They are not automatically liable for every debt of the company.	Their own breaches of duty, in particular towards the company and in special tax, social security and insolvency cases

Liability before registration: a brief look back

Many misunderstandings arise because the formation phases get mixed up. A brief look at the timeline helps to assess your own risk.

Before the notarisation

Before the notarisation, the GmbH or UG does not yet exist as such. If several founders have already joined together by agreement to pursue the formation project jointly and take part in legal dealings together, a pre-formation company with legal capacity may arise, often in the form of a civil-law partnership. Its partners are generally personally and jointly liable for the company’s obligations.

After the notarisation and before registration

After the notarisation and before registration, the so-called pre-GmbH or pre-UG exists. Anyone acting on its behalf is generally personally and jointly liable under Section 11(2) GmbHG. Jointly liable means that creditors can in principle demand the entire claim from any of the persons personally liable. In addition, depending on how the formation proceeds, further claims may arise in connection with raising the capital.

Contracts in this phase should be concluded clearly in the name of the pre-GmbH or pre-UG. Whether a condition precedent, a later start of the contract or another arrangement makes sense depends on the respective contract and the other party. A particular wording does not automatically eliminate personal liability risks.

From registration in the commercial register

With registration, the GmbH or UG comes into existence as such. In principle, its company assets are liable for its obligations.

How typical liability risks can be reduced

Clear responsibilities, complete records and an early look at liquidity problems can reduce typical liability risks. Three areas are particularly relevant.

Define responsibilities and documentation

After registration, it should be clear:

Who decides what, that is, the management or the shareholders’ meeting?
Which transactions require prior approval under the law, the articles of association, rules of procedure or a shareholder resolution?
Where are resolutions, contracts and records kept, so that they can be found and traced?

Consent requirements generally apply internally. If the management breaches them, this can have internal consequences; towards third parties, the transaction usually remains valid nonetheless. Under Section 37(2) GmbHG, restrictions on the power of representation generally have no legal effect towards third parties.

Act in the name of the company

Uncertainty often arises when a contract does not make clear which company is to become the contracting party. Therefore pay attention to:

the full registered company name including “GmbH” or “UG (haftungsbeschränkt)”
a clear designation of the company as the contracting party
the details required by law on business letters and electronic business correspondence
a functional title with the signature as an additional indication, not as the sole decisive liability criterion

Make contributions in full and document payments to shareholders traceably

After registration, shareholders are not liable for company debts merely because of their shareholding. However, outstanding contributions remain owed and can still be demanded by the company, in an insolvency regularly by the insolvency administrator. This does not turn the company’s debts into private debts of the shareholders across the board.

Distributions, remuneration, reimbursement of expenses, loan payments and other benefits to shareholders require a traceable legal basis. In addition, payments must not breach the statutory rules on maintaining the share capital. The assets required to maintain the share capital may generally not be paid out to shareholders. Payments that breach this must be repaid to the company under the conditions of Sections 30 and 31 GmbHG.

If, for example, the company pays a shareholder’s private invoice or money is transferred to a private account without a traceable purpose, repayment and tax questions can arise. Typical cases are:

private expenses paid from the company account without a clear basis
remuneration or bonuses without a valid agreement or without sufficient documentation
distributions or repayments although the capital maintenance requirements are not met
shareholder loans whose terms and payment flows are not traceably documented

Certain benefits or payments can be classified for tax purposes as a hidden profit distribution. The resulting tax consequences should be examined in the individual case with your tax adviser.

A simple rule helps in everyday business: every payment to shareholders should be clearly attributable to a permissible basis, such as a service agreement, an expense statement, a loan agreement or a distribution resolution. For remuneration and transactions with related persons, a tax appropriateness check may additionally be required.

When the management can be personally liable

Managing directors are not personally liable merely because the company cannot pay an invoice. However, if they breach their duties, they may be obliged to compensate the company for the resulting loss. Direct liability towards creditors, tax authorities or other bodies regularly requires a special statutory or their own contractual basis.

Internal liability towards the company: breach of duties of care, organisation or supervision and disregard of valid shareholder instructions
Tax obligations: possible personal liability for intentional or grossly negligent breach of duty
Social security contributions: personal criminal and, where applicable, civil risks for withheld contributions
Insolvency: duty to file in time and restrictions on further payments
Own obligations or own misconduct: for example a personally assumed guarantee or one’s own tort

Under Section 43 GmbHG, managing directors are generally liable towards the company for breaches of duty. For taxes, personal liability may arise under Sections 34 and 69 of the Fiscal Code (AO). Withholding social security contributions is governed by Section 266a of the Criminal Code (StGB).

Depending on the size and risk profile of the company, D&O insurance for the management can be considered. Which claims are actually insured depends on the insurance terms, exclusions and agreed deductibles. It does not prevent liability and does not replace proper processes.

Keep taxes, social security and company crises in view

As legal representatives, managing directors must ensure that the company’s tax obligations are met. However, personal tax liability does not arise with every late or missed payment. It can come into consideration in particular if tax claims are not met, or not met in time, due to an intentional or grossly negligent breach of duty.

Separate rules apply to social security contributions. Withholding contributions owed can have criminal and further personal consequences. Therefore, determine early who keeps the ongoing accounts, who monitors tax deadlines and filings and who approves payments. Especially while building up the company, clear responsibility prevents important duties from getting lost between sales, staff and bookkeeping.

If the company gets into a serious liquidity crisis, a general payment plan is no longer enough. The management must keep solvency and over-indebtedness under constant review and seek expert advice without delay at signs of insolvency. Once insolvency or over-indebtedness has occurred, special rules apply to filing for insolvency and to further payments.

An insolvency application must be filed without culpable delay, no later than three weeks after insolvency occurs and six weeks after over-indebtedness occurs. These periods are maximum periods and not a general waiting time. Once insolvency has occurred, payments may only be made under the conditions of Section 15b InsO.

Personal security and own obligations

The limitation of the company’s liability does not prevent shareholders or managing directors from assuming obligations in their own name or providing assets as security. These include in particular:

guarantee (Bürgschaft)
personal warranty
security from private assets, such as a land charge on a privately held property or the pledge of private assets

A guarantee and a land charge have different effects. With a guarantee, a person assumes their own obligation for the debt of a third party. A land charge initially encumbers the property concerned. Whether personal liability also exists depends on the further agreements. Therefore, check which claims are covered by the security, whether a limit in amount or time is provided and when the security must be released.

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Frequently asked questions about liability

Are shareholders still liable with their private assets after registration?

In principle, shareholders are not personally liable for the obligations of the GmbH or UG. However, outstanding contributions, impermissible repayments, own obligations such as guarantees or own unlawful conduct can lead to personal claims.

What happens if the share capital contribution has not yet been paid in full?

The outstanding amount remains owed and can still be demanded. However, this does not mean that the shareholders are automatically personally liable for all debts of the company.

Is the management automatically liable for debts of the GmbH or UG?

No. Unpaid invoices of the company do not become private debts of the management merely because of their position as a corporate body. However, personal claims can arise if their own duties are breached, for example towards the company or in special tax, social security and insolvency cases.

Can a bank or landlord demand a personal guarantee?

There is no legal obligation to provide a personal guarantee. However, banks, landlords or other contracting partners can make it a condition of a contract. Anyone who provides a guarantee is personally bound to the agreed extent, regardless of the limitation of liability of the GmbH or UG.

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Notarial support through to registration

The phase of the GmbH or UG in formation is legally delicate: obligations are often entered into before the entry in the commercial register has been made. Precisely for this reason, careful preparation of the documents and a clear process pay off, so that responsibilities, representation and liability risks remain traceable.

We support you in taking the steps up to registration in a structured way and in avoiding typical sources of error, so that the procedure remains as smooth as possible and queries or delays are reduced.