Glossary · Capital

Piercing the corporate veil (Durchgriffshaftung)

Also: Durchgriffshaftung, veil piercing

In short

Piercing the corporate veil means that shareholders of a GmbH or UG exceptionally have to answer personally for the company's debts, even though in principle only the company's assets are liable. It is the rare exception to limited liability.

Piercing the corporate veil (Durchgriffshaftung) explained

Under Sec. 13 (2) GmbHG, only the company's assets are liable to the creditors of a registered GmbH. The courts break through this in a few groups of cases, for example when private and company assets are so intermingled that they can no longer be separated, or in the case of an intervention that destroys the company's existence, where shareholders withdraw assets the GmbH needs to pay its debts. This must be distinguished from liability on your own account: as managing director for breaches of duty or a late insolvency filing, or because you signed a guarantee. Separate accounts and clear contracts with the company reduce the risk.

Legal basiscase law; starting point Sec. 13 (2) GmbHG

More in our guideWhat is a GmbH? Meaning and key features explained simplyGmbH stands for Gesellschaft mit beschränkter Haftung, a German limited liability company. It is a corporation and a legal entity in its own right, formed by one or more persons with at least €25,000 in share capital, of which at least €12,500 must be paid in before registration (Sec. 5 and 7 GmbHG). Once the GmbH is entered in the commercial register, only the company's assets are in principle liable for its debts (Sec. 13 (2) GmbHG).Read the guide

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Related terms

GmbH (limited liability company)The GmbH is a corporation and legal entity formed by one or more persons with at least €25,000 share capital. As soon as it is entered in the commercial register, in principle only the company's assets are liable for its debts.Managing director (Geschäftsführer)The managing director runs the GmbH or UG and represents it in and out of court. They must be a natural person with full legal capacity and are appointed by the shareholders.UG (haftungsbeschränkt)The UG (haftungsbeschränkt) is not a separate legal form, but a GmbH with less than €25,000 share capital, mathematically from €1, which must be paid in full in cash before the application. In return, it must put a quarter of its annual net profit into a reserve every year.Capital contribution (Stammeinlage)The capital contribution is the contribution a shareholder makes on their share in a GmbH or UG. Its amount is based on the nominal amount of the share.Capital increase (Kapitalerhöhung)In a capital increase, the share capital of a GmbH or UG is increased, either through new contributions or from the company's reserves. A notarised resolution with a three-quarters majority and entry in the commercial register are required.Contribution in kind (Sacheinlage)A contribution in kind is a contribution to the share capital in the form of assets, rights or a business instead of money. It is permitted for a GmbH with a formation report on the contribution in kind, and excluded for a UG.

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