When waiting for investors becomes a trap – liability and risks for companies

1. Financing risks – when investors fail to materialise

Innovative companies often require large sums of money for research, development and market entry. Capital-intensive business models such as Lilium’s are under enormous pressure:

• High capital commitment: Development costs are incurred long before market maturity.
• Uncertain financing commitments: Investors often make non-binding commitments that they can later withdraw.
• Dependence on external capital: Without regular financing rounds, there is a risk of stagnation or even insolvency.

Lilium faced financing problems on several occasions. Investor confidence waned and the company had to look for new sources of capital – a situation familiar to many start-ups.

2. Liability risks for management and shareholders

When financing problems arise, managing directors and shareholders come under particular scrutiny. Key liability risks include:

a) Delayed filing for insolvency (Section 15a InsO)

If a company becomes insolvent or overindebted, it must file for insolvency within three weeks. If this is delayed, the following risks arise:

• Personal liability of the management for payments after insolvency
• Criminal consequences (imprisonment or fines)

b) Capital maintenance requirement (Section 30 GmbHG)

Shareholders may not distribute profits if this would cause the share capital to fall below the statutory minimum amount. Violations can lead to personal repayment obligations.

c) Liability for incorrect communication

If companies mislead investors, employees or the public about their financial situation, they face:

• Claims for damages from investors and contractual partners
• Liability under Section 826 of the German Civil Code (BGB) for intentional immoral damage

Lilium found itself in critical situations on several occasions in which financing commitments were uncertain – a classic example of the risks involved when financing strategies prove to be overly optimistic.

3. Strategies for minimising risk

Companies should protect themselves against financing risks at an early stage. Important measures include:

• Careful financial planning – calculate financing rounds with sufficient buffers.
• Diversification of capital sources – avoid dependence on individual investors.
• Early crisis detection – regular liquidity checks and worst-case scenarios.
• Timely communication – Open and honest communication with shareholders and investors.
• Compliance with legal obligations – Strictly observe insolvency law requirements to avoid liability.
• Diversification of capital sources – avoid dependence on individual investors.