Intermediary and sales liability: experten.de warning list on the lack of disclosure of annual reports*.

*by Johannes Fiala, Attorney at Law (Munich), M.B.A. (Univ.Wales), M.M. (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Banker Karl-Heinz Weber, Dipl.-Kfm., Certified Public Accountant and Tax Advisor, Member of LWSB e.V., Chamber of Tax Advisors Munich, WPK Düsseldorf,IdW Düsseldorf
To whom do I entrust my money? In the search for an answer, brokers are according to the BGH judgement of 13.12.2000 (Az. III ZR 62/99) ?? obligated to examine the investment concept, concerning which they are to give information, (at least) for plausibility ?? One of the simplest ways of checking the seriousness and lawfulness of the initiator is to ask whether the relevant annual reports have been filed with the commercial register in accordance with the so-called KapCoRiLiG or the Publizitätsgesetz.
It should be noted that this already applies to the simple investment intermediary. It is therefore not usually necessary for an investment adviser to be involved.
Purpose of disclosure: Anyone who has claims against a company will want to inspect the annual accounts at the commercial register in order to gain an insight into the financial situation. The first company law directive (68/151/EEC) of 9 March 1968 already stipulated that the Member States must ensure that all companies disclose their balance sheets and profit and loss accounts. If this is not done, the member states are to impose appropriate measures, according to Art. 6 of this directive. The first implementation of the directive took no less than 17 years! Because of the small sanction of an “administrative fine” for non-compliance, the Commission had brought an action against the Federal Republic of Germany before the European Court of Justice (Case C-191/95). The aim of the legal dispute: the introduction of more effective sanctions in the event of non-compliance with the disclosure obligation.
The Higher Regional Court of Düsseldorf referred the question to the European Court of Justice as to whether the German statutory regulation should not be interpreted in conformity with Community law to the effect that anyone can demand disclosure (Case C – 97/96).Regulation since 2000: Under the Capital Companies and Co-Directive Act (KapCoRiLiG), the accounting principles of Sections 264 ff. HGB, which were previously only applicable to corporations, must now also be applied to commercial partnerships without natural persons as general partners (usually GmbH & Co. KG).
There are basically two ways to completely avoid the disclosure obligation.
These are: ? The assumption of unlimited liability by a natural person in a commercial partnership (so-called full liability solution), ? the preparation of exempting consolidated financial statements in accordance with §§ 264 para. 3, 264b HGB, 5 para. 6 PublG.
Administrative fine in case of violation of the disclosure obligation Violations of the disclosure obligation of corporations and corporations & co are punished in an administrative fine procedure upon application by anyone, whereby the range of the administrative fine to be imposed is between 2,500 and 25,000 euros. The administrative fine procedure applies for the first time to financial statements for the 1999 financial year, insofar as corporations are concerned; for corporations & Co, on the other hand, this regulation only comes into effect for financial statements for the 2000 financial year.
Deadlines: As a rule, disclosure or filing with the commercial register must be made within 12 months of the end of the financial year, § 325 HGB. According to commercial law, the annual financial statements must be prepared six months in advance, § 238 ff. HGB.
Further risks: Already in case of non-compliance with the deadline for the preparation of the annual financial statements and slight delay in filing for insolvency, a prior conviction is imminent, cf. sections 283 et seq. of the German Criminal Code (StGB). A company director who does not submit the annual financial statements to the commercial register or does not do so in due time is giving an indication with regard to the question of his own personal reliability.
Does the VSH protection no longer apply? An investment intermediary who does not carry out the simplest considerations and checks, for example a formal check, will quickly find himself in a situation of personal responsibility. If the intermediary is indifferent to this, his VSH insurer will more or less promptly raise the argument of a deliberate breach of duty: This would allow the VSH insurer to argue that such conduct by the intermediary is not covered. The knowledge of formal, easily recognisable gaps on the occasion of a plausibility check can, so to speak, be the “blessing and curse” of gained transparency for the intermediary.
Tip for the broker: Ask your VSH insurer whether ignoring such transparent information is harmless for the VSH protection?
Status: 24.10.2005

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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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