Prohibition of commercial activities

If a business operator is deemed unreliable with regard to a business being operated, the competent authority is required to prohibit the business entirely or in part if this is necessary for the protection of the general public or of the persons employed at the establishment.

In particular, persistent payment arrears with the tax office or health insurance funds can lead to the competent authority initiating proceedings to prohibit the business owner from operating their trade.

The trade may be prohibited

• to the business owner,
• its authorized representatives and
• Persons entrusted with the management of the business operation.

Depending on which activities the unreliability relates to, individual other trades or all trades may be affected by the prohibition.

Revocation of the business license:
If the commercial activity being exercised requires a license (examples: security company, transport company, insurance mediation) and the business operator is unreliable, the commercial license is to be revoked. In addition, a prohibition of business operations may be considered.

Insolvency
If a company is insolvent, the authority may not initiate or continue a business prohibition or license revocation procedure with regard to the business that was operated at the time the insolvency petition was filed (so-called blocking effect), unless the business prohibition or license revocation is based on facts that lie outside the insolvency proceedings. The blocking effect applies during

• of the insolvency proceedings,
• the opening of insolvency proceedings (insofar as security measures have been ordered),
• the implementation of an insolvency plan.

Reasons for prohibition (examples):

• Violation and/or disregard of tax and social security obligations
• lack of economic drive and lack of professional responsibility
• Inability to ensure proper business operations; lack of economic performance (lack of financial resources)
• disorderly financial situation
• Submission of the statutory declaration of assets / Arrest warrant to compel the statutory declaration of assets
• criminal or administrative offense proceedings

• The competent authority shall notify the person concerned in writing that proceedings to prohibit the operation of their business have been initiated against them.
• Before the prohibition, a hearing of the chambers may take place. If there is imminent danger, the hearing may be omitted. In any case, the chambers will be informed.
• The determined facts are communicated to the data subject in detail. There is an opportunity to comment on the facts (in writing or for the record at the authority).
• If the facts prove to be established, the authority shall issue an order prohibiting the exercise of the trade.
• The person concerned receives a written notice regarding the disposition. This expressly points out the possibility of filing an action for annulment ("instructions on the right to appeal").

Order of immediate enforcement:
If the competent authority orders immediate enforcement, the suspensive effect of an action for annulment is eliminated. The commercial activities in question must be ceased immediately and the business deregistered. Upon application by the affected party, the competent administrative court may restore the suspensive effect of the action for annulment.

Suspension of enforcement:
The data subject may apply to the competent authority for the enforcement to be suspended.

Deputy continuation:
The competent authority may, upon application, authorize the business to be continued by a deputy who ensures the proper management of the commercial enterprise.

Apply for reinstatement:
If the facts that led to the prohibition of the trade have ceased to exist, the competent authority may, upon application by the person concerned, permit the prohibited trade to be exercised again at a later date.

Legal consequences of a prohibition to exercise a trade:
The trade prohibition applies throughout the federal territory. As of the date legal force takes effect ("certificate of legal force" for the prohibition order), the business must be shut down and properly deregistered. Due to other laws (for example, the Limited Liability Companies Act), further reporting obligations may exist.

Intentional or negligent violations of a prohibition order can be punished with a fine of up to 5,000.00 euros.

Anyone who persistently, intentionally, or negligently violates a prohibition order faces imprisonment or a fine.

A legally binding prohibition is entered into the Central Trade Register at the Federal Office of Justice.

• Statement on the facts:
  within the period specified by the competent authority
• Action for annulment against the prohibition order:
  within one month of their notification (in writing or for the record before the competent administrative court)
• Application for reinstatement of trade practice:
  at the earliest after one year (in special cases also earlier)

The costs are to be borne by the business operator. Fees may apply

• Procedural costs (usually based on time spent, but at least 66.00 euros),
• Administrative costs associated with required deregistrations.