If the company’s debts increase, this eats away at the equity. If the members of the board have reason to assume that the equity is less than half of the registered share capital, it must act and immediately draw up a control balance sheet. What it should contain is stated in the companies act, but it is best to contact your accountant for instructions.
If the balance sheet confirms that half or more of the share capital has been used up, the board must call a control meeting as soon as possible and decide there on the company’s future and whether it should go into liquidation. If the decision is made to continue operations, a second control meeting must be held within eight months of the first meeting. A new control balance sheet must be drawn up and if it shows continued used up share capital, the board must apply for liquidation within two weeks.
Should a control balance sheet not be drawn up at all, or any of the above steps not carried out correctly, personal liability may arise for such debts incurred by the company during the time when the board should have acted. Liability is joint and several, but if a member can demonstrate that he has not been negligent, he can escape personal liability.
If there is a risk of personal liability, it may be important to make an extra effort to resolve the debt situation, rather than filing for bankruptcy. If the company then continues to do poorly, a control balance sheet can be drawn up according to the rules, or simply straight away.
Be aware of the company’s tax debts and when these are due for payment. The due date is the starting point for whether you as a member can be held personally liable for the company’s unpaid tax debts. The courts apply this strictly, which in practice means that if the due date is on Monday and the bankruptcy application was submitted on Tuesday, personal liability (representative liability according to the tax procedures act) may exist if the board has acted, or chosen not to act, intentionally or through gross negligence.
In summary, it can be said that a bankruptcy that occurs under such extreme circumstances has created should not be seen as a failure, but as a sad consequence of a torn market. First, every business owner should review what options are available. If the alternatives are not sufficient and the board has acted in accordance with the provisions in place to avoid personal liability, a voluntary bankruptcy proceeding will most likely be the best option for all parties involved.