Board duties in an impending liquidity crisis

The company’s board of directors plays an integral part in a liquidity crisis. In accordance with the Limited Liability Companies Act, the board must act with due care and promote the interests of the company. A board member who is in violation of the duty of care can be held personally liable for the damages caused to the company, the shareholders or third parties, such as the creditors.

The board must be aware of the company’s financial position: The board should actively monitor the state of the company’s equity. If a listed company’s equity is gone, the board has an obligation to file the loss of the equity with the Trade Register without delay. The board must also monitor the company’s cash reserves with pronounced care and ensure the fair and equal treatment of the creditors.

The board must record its decisions with due care: When faced with a crisis, the board meets more often and carefully records all its decisions and the reasons therefor so that these decisions can be verified in a retroactive assessment.

The board plays an integral part in managing the crisis and keeping the company afloat: In order to overcome the crisis as well as possible, it is recommended to ask for help well in advance and to map out the different options with financiers and legal advisors, among others.