CORPORATE Handbook on managing director liability

Anyone who follows the business press closely will notice that the number of court liability proceedings and the amount of damages claimed are not only increasing concerning the management boards and supervisory boards of listed stock corporations but also about the disputed liability proceedings against managing directors of corporations in the legal form of a GmbH or an entrepreneurial company.

In these proceedings, the managing directors are held personally liable. This legal consequence means that, in case of doubt, they have to pay compensation from personal wealth in the event of a conviction if there is no third-party protection. Such situations often lead to personal insolvency and the loss of long and hard-earned family assets.

The issue of liability is, therefore, of great practical relevance for managing directors. The managing director must face the associated challenges and the demanding entrepreneurial duty to act.

Liability responsibilities generally begin with appointing a managing director but can also be relevant if a person acts as a de facto managing director. They continue when the management is divided among several persons or units, for example, in corporate groups. According to the principles of the management’s overall responsibility, management errors in third-party departments can also lead to the managing director’s own liability for the negligence of co-managing directors. Finally, liability does not necessarily end with the resignation from office, which is possible at almost any time if the legal appearance of continued management is maintained.

Basics of managing director liability at a glance

I divided the manual on managing director liability into the following sections. You can select the chapters on managing director liability individually from here.

Part 1 – Internal liability

• Breach of the general duty of care
• Payments to shareholders
• Payments to shareholders in the event of insolvency maturity

Part 1 – External liability

• Liability for taxes
• Liability for social security contributions
• Liability under tort law
• Injury to life or limb
• Violation of protective laws
• Contravention of provisions of special tort law
• Liability for legal transactions or liability similar to legal transactions
• Violations of non-competition clauses
• Acting on behalf of the company before entry into the commercial register
• Failure to submit the list of shareholders
• Liability under prima facie law, culpa in contrahendo