Liability of the Managing Director of a "GmbH" in Germany
A “GmbH” is a private limited liability company under German law. The managing director (German: “Geschäftsführer”) of a GmbH is exposed to personal liability in a wide variety of ways. Managing directors can be held liable to the company for failing to exercise the standard of care owed to the company and under certain circumstances can be sued by the business partners of the company for acts of misconduct towards them. There is also the possibility of being held accountable under criminal law or under the law of administrative offences.
The following is intended as an overview - and not a complete review - of the liability of managing directors in these areas.
I. Liability towards the company (internal liability)
- 1. Basic principles
- 2. Overview of the main duties of a managing director
- 3. Liability of the managing director when following shareholders’ instructions
- 4. Limitation of liability when responsibilities are divided among several managing directors?
- 5. Waiver by the company
- 6. Liability of managing directors during the GmbH’s incorporating stage
- 7. Digression 1: Liability for violations of the prohibition of competition
- 8. Digression 2: Liability towards the company for breaches of insolvency law duties
II. Liability towards third parties (external liability)
The managing director is an organ of the GmbH and therefore acts on behalf of the company. For this reason, the GmbH is liable to third parties for any loss caused by misconduct on the part of its managing directors. Although in principle managing directors are not themselves liable to these third parties, there are exceptions to this rule.
- 1. Liability for ostensible legal situations and for breaches of trust
- 2. Liability in relation to taxes and social security contributions
- 3. Liability in tort
- 4. Liability towards third parties for breaches of duties under insolvency law
- 5. Corporate group liability (managing directors with several controlling shareholdings)
- 6. Liability towards third parties in the incorporating stage (liability of the person acting as a managing director)
- 7. Further Information
- Germany Trade & Invest (Link: http://www.gtai.de/GTAI/Navigation/EN/trade.html)
- Limited Liability Companies Act (GmbHG) (Link: http://www.gesetze-im-internet.de/englisch_gmbhg/englisch_gmbhg.pdf)
- German Bar Association (Link: https://dav-international.eu/en/)
- Deutsche Außenhandelskammern (AHK) (Link: http://www.ahk.de/)