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8. September 2019 | Advice for GmbH managing directors: Avoid liability in case of insolvency

31. July 2020 | Liable despite professional liability insurance? Liability – Risk and Legal Situation

10. November 2020 | GmbH Managing Director Liability: Duty of Care – Damage – Liability Risks

16. June 2022 | Liability of the partnership partners: OHG – GbR – KG (this contribution)

Partners may be personally liable to their business partners. Liability is regulated for the individual legal forms of partnerships. We explain how the shareholders of a KG, OHG or GbR are liable.

When you set up a partnership, you must be aware that as a partner you are personally liable with your own assets. In addition, the partnership is also liable to itself. Accordingly, it is important to know how liability is generally regulated and how the personal liability of the partner is in relation to the liability of the company itself. A distinction must be made between the individual legal forms of partnerships and between the time at which the partnership partner joined the company.

First, we clarify how shareholders of an open commercial company (OHG) are liable. First of all, the company itself is liable for its liabilities under § 124 HGB. This requires the existence of an OHG for the time being. This requires a social contract and an effective obligation of the OHG. As a partnership, OHG is not a legal entity like a capital company. Nevertheless, § 124 (1) HGB stipulates that it can also acquire property and assume liabilities. OHG is therefore a partnership with legal capacity.

Nevertheless, it should be noted that OHG must be effectively represented when establishing the binding obligation. It will do so, for example, by an authorized representative or according to § 125 (1) HGB by the partnership partners. Since Section 124 (1) of the German Civil Code also provides that OHG may be sued, it may be sued despite the lack of legal capacity of OHG, so that the action may also be brought expressly against OHG.

2.2.1 Liability of existing partnerships

The liability of the shareholders of an OHG, on the other hand, concerns § 128 HGB. Accordingly, an OHG would have to exist that is exposed to a liability. In addition, the partnership partner must have already been a partnership partner of OHG at the time the liability was established. If these conditions are met, the partnership partners are ancillary liable for the liability of OHG as a joint and several debtor.

It should be noted that the partnership partners alone are jointly and severally liable among themselves. In relation to the OHG, on the other hand, the shareholders are liable side by side. In the absence of a legal defence of the preliminary action, there is no subsidiarity between the liability of shareholders and the company itself. The creditor therefore has the right to choose the debtor.

Due to the independent and ancillary debt of the shareholders, the action can also be brought against them. Consequently, the creditor may also bring the action immediately against OHG and its shareholders together. Then it is a simple dispute association within the meaning of §§ 59, 60 ZPO. This means that several parties act as plaintiffs or defendants, respectively, who are in legal union with regard to the subject matter of the dispute or are entitled or obliged from the same factual or legal circumstances. In particular, the simple litigation association has cost advantages but also means that the OHG and its shareholders cannot invite each other as witnesses. The latter is also beneficial for the creditor.

Whether the shareholders of OHG are entitled to reimbursement of their expenses is regulated by § 110 HGB. Accordingly, the shareholder has a right to reimbursement of expenses against OHG in respect of such expenses as he could consider necessary. Although the shareholder was obliged to repay the liability in accordance with § 128 HGB, there is actually no expense, since this requires a voluntary payment. However, in order to assess voluntariness, only the internal relationship between the company and the shareholder is considered. As soon as no obligation is written down in the articles of association, the payment is voluntary. Then the shareholder is also entitled to compensation against the company.

In addition, according to § 426 (1) BGB, the paying partnership partner may be entitled to compensation against the other shareholders of OHG. However, this entitlement exists only if OHG does not have the necessary funds at its disposal and the shareholders are therefore unable to comply with OHG. This restriction results from the fiduciary duty of the shareholders among themselves. If the entitlement comes into consideration accordingly, it shall also be limited to the share which the paying partner is not required to bear.

The liability of the limited partner of a limited partnership is regulated in § 171 HGB. This requires that the shareholder was a limited partner at the time the liability of the limited partnership was established. However, the limited partner is liable only insofar as he has not yet made his contribution. The deposit relates to the agreed amount of liability.

On the other hand, §§ 161 II, 128 HGB concerns the liability of the general partner. However, he is fully liable for the liabilities of the KG with his personal assets.

The liability of the limited partner before registration concerns § 176 HGB. This rule applies if a liability of the company has been established between the entry of the limited partner and the registration in the commercial register. Accordingly, the limited partner is liable for all liabilities that were established in this period without limitation. However, this means that this period between the entry and registration of the limited partner in the commercial register is very dangerous for him. However, it is difficult for him to demand that the limited partnership does not create any liabilities during this time.

However, you can easily avoid this problem. It is possible to agree that the entry of the limited partner only takes effect if he is also entered in the commercial register. Then the entry of the partnership partner is conditional on a suspensive basis within the meaning of § 158 paragraph BGB, so that the limited partner only becomes a shareholder with his registration. In this way, unlimited liability according to § 176 HGB can be avoided. Only the limited liability on the contribution not yet made pursuant to § 173 HGB for liabilities established before the occurrence comes into consideration.

The liability of the company civil law (GbR) in itself requires that it constitutes a legal entity capable of liability. It is sometimes argued that the GbR is not liable, since the company assets are only special assets of the shareholders and there is no statutory order of the legal capacity of the GbR. However, the same applies to the other legal forms. In this view, GbR would not be the debtor, but only the shareholders. Therefore, the shareholders should be liable with their private assets and their share of the company assets.

The prevailing opinion acknowledges the GbR, however, its legal capacity, so that it is justified and obligated as such. This suggests that there can be no special assets without a corresponding legal entity. In addition, because of the principle of the identity of partnerships, the GbR must also have the ability to be the bearer of rights and obligations, because the GbR automatically becomes an OHG as soon as it requires a commercial establishment in terms of type and scope. Moreover, the more recent statutory provisions, such as § 11 II InsO, tend to suggest that the legislature now also assumes the legal capacity of the GbR. Accordingly, GbR is also liable for its liabilities.

4.2.1. Dogmatic justification of the liability of partnership partners in dispute

It is also controversial how it is achieved that the partnership partners are liable in addition to the GbR. Previously, it was argued that both the company and the shareholders are contractually obliged by the declaration of intent. Accordingly, the one declaration of intent given would have to apply in the name of the GbR, in the name of the co-shareholders and in their own name. Then there would be a three-part declaration of intent, so that both the GbR and the other co-shareholders become contractual partners. However, this division is artificial, since in particular none of the shareholders is concerned about whom he actually obliges everything by the declaration of intent.

The overwhelming view therefore assumes that the GbR alone becomes a contractual partner. The shareholders, on the other hand, are liable by law in an ancillary manner analogous to § 128 HGB.

4.2.2 Liability for liabilities before the partnership member joins

4.2.2.1. General liability for liabilities before occurrence

It is controversial whether shareholders of a GbR are liable for liabilities created before the shareholder joined. It was sometimes claimed that the GbR operates in various forms, including as a non-acquisition company. Therefore, a liability of the participating shareholders for liabilities of the company is unreasonable. On the other hand, there is the argument that the personal liability of the partnership corresponds to the nature of the partnership. It does not have any tied liability capital. Therefore, the protection of creditors requires the liability of the shareholders also for corresponding liabilities. In addition, the company assets are open to the shareholders at any time. This access possibility also has newly entering shareholders, who even benefit from the existence of a functioning company, their already acquired assets, the market position and customer relationships. According to the principle of personal identity, it seems consistent to apply § 130 HGB analogously to the GbR.

4.2.2.2 Liability in the event of GbR being created by the entry of a new shareholder

A different case exists if GbR is only created by the entry of the new shareholder, since only one sole proprietorship was previously operated. Then an analogous application of § 130 HGB is excluded. However, liability according to § 28 (1) sentence 1 in conjunction with § 128 sentence 1 HGB could be considered,

§ 28 (1) sentence 1 HGB establishes the liability of the company for liabilities of the former business owner in the event that a sole trader establishes a commercial company into which he then also contributes his commercial business as a contribution. Thus § 18 (1) sentence 1 HGB justifies the liability of the company. As just shown, however, the shareholders are also liable personally pursuant to § 128 sentence 1 HGB for the company liabilities and thus also for the company liabilities from § 28 paragraph 1 sentence 1 HGB. Thus, there is also liability of the entering shareholder for the liabilities before his entry, if this creates a GbR at all.

4.2.2.3. Liability for originally freelance work

But how does the situation look if the original activity was such a freelance nature? Then there was no trade and thus no individual merchant, cf. § 2 BRAO. § 28 (1) sentence 1 HGB would then not be directly applicable. However, § 28 (1) sentence 1 HGB could possibly apply analogously.

The fact that the newly entering shareholder has the same access to the company assets as the original sole owner of the business. Accordingly, the protection of creditors and the advantages which one has as a member of a functioning company could justify applying § 28 (1) sentence 2 of the HGB analogously to this case as well.

However, the BGH sees this differently. He argues that freelancers in particular work because of a special relationship of trust with the creditor. Be it, for example, a single lawyer and his client. This provides the client with personal, self-responsible services, which are specifically linked to the person of the lawyer. This trust should be based in particular on the fact that the client has just commissioned a single lawyer instead of a law firm.

This argument can also be supported by a systematic argument. Shareholders of an OHG may exclude the liability according to § 28 (1) sentence 1 HGB by a corresponding entry in the commercial register. However, this possibility is not open to freelancers because of the lack of merchant property. If § 28 (1) sentence 1 HGB were to apply to a freelancer, non-merchants would be treated worse than merchants. The latter argument should probably be more decisive than the first and centrally argue against an analogous application of § 28 (1) sentence 2 HGB.

According to § 713 BGB in conjunction with § 670 BGB, the partnership partner of a GbR has a claim for reimbursement of expenses for the necessary expenses in company matters. Expenditure is only a voluntary sacrifice of assets. But also in the case of the GbR, as in the case of the OHG, the internal relationship between the company and the shareholder is used to assess the voluntary nature. The decisive factor is therefore whether, according to the articles of association, there is an obligation on the shareholder to repay liabilities of the company.

It seems questionable whether a GbR with limited liability would not also be conceivable. This would be possible if the articles of association stipulate that the representative power of a shareholder is limited only to liability with the company assets and does not include liability with the private assets. This depends on how the liability of the partner of a GbR is justified. If one considers that the contracting partner also makes the declaration of intent on behalf of the other partners, a corresponding limitation of personal liability would be conceivable. (For this theory see also above)

If, on the other hand, § 128 HGB is applied analogously, a restriction of the power of representation has no meaning for liability, since liability is already established by law.

The BGH fundamentally contradicts this possibility. Accordingly, a limitation of liability can only be achieved if this is agreed with the contractual partner. However, the occurrence with the addition GbR-mbH should not be sufficient for this, since a layman does not understand it. Rather, it corresponds to the understanding that someone who acts as an individual or in a community is also personally liable. Something else can only apply to any agreement or legal provision.

It is controversial whether partnership partners are also liable for fulfillment according to § 128 HGB. According to one view, only the value interest, i.e. money, is always attached. However, liability for performance interferes too much with the privacy of the shareholders. However, the protection of creditors speaks against it. The members of a partnership are not required to make a contribution or to receive the assets. Accordingly, they are personally liable. However, this personal liability on the interest is without consequences if the shareholder has no more money. Accordingly, only the liability to the interest and fulfillment of the creditor protection. Therefore, shareholders are also liable for fulfillment