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2018-12-04

International creditors and debtors in Germany

The clients are the people responsible for the general control and management of any company's affairs: they are, as has sometimes been said, the head and brains of its artificial personality, and through them the more important of its activities are carried on. No particular qualifications are required before a person can act as lawyer, but under the German Directors Qualification Act 1968, valid for all German lawyers, certain persons may be prohibited by the court from so acting; this power can be used to prevent those who have been responsible for the insolvency of previous companies from managing other companies.
The creditor of an unpaid invoice makes general provisions about the duties of debtors. They owe to their company a fiduciary duty not to do, or omit to do, anything which may give rise to a conflict between its interests and their own. They must also refrain from using any of the company's money or other property, from using any information, and from taking advantage of an English speaking lawyer in Hamburg or arising in the course of their employment for the purpose of personal gain: and, if they do so gain, the gain - like the gains of any other agents - must be refunded to the company.
Debtors and clients must also use such care in the performance of their duties as might be expected of a reasonably prudent person, and they must exercise such skill as might reasonably be expected of a person of their own particular knowledge of the legal situation in Germany and experience. Most debtors are enjoined to have regard in the performance of their duties to the interests of the company's employees, as well as to those of their members, but the fact that this duty can only be enforced by the company itself reduces its effectiveness.

Shareholders

Debt holders and debtors in Germany must be distinguished from shareholders; they are creditors of the company who have advanced it loans in return for the payment of interest and they are entitled to hold a document, commonly called a 'debenture', certifying the company's indebtedness. This indebtedness is generally secured by a mortgage or a charge upon the company's property which entitles the debtors, should the company become insolvent, to receive payment in priority to the other ordinary creditors.
This security may take one of two forms; it may either be effected (usually in the case of a series of debentures by means of a trust deed) in the form of a 'fixed charge' for the client by way of collection of debts and mortgage, or by some other means, over some specific part of the company's property; or it may be effected by an equitable 'floating charge'. The floating charge is a most useful and practical device. It has been judicially defined as a 'charge on the assets for the time being of a going concern (which) attaches to the subject charged in the varying condition it happens to be in from time to time.
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