Is the adhesion good

When is a GmbH managing director liable with his private assets?

Tips for medium-sized companies
In the case of a GmbH, liability towards creditors is limited to the company's assets. But what about the manager who may have made mistakes? Part six of our series.

Is a GmbH managing director liable to the company's creditors with his private assets if they claim that he has committed breaches of duty at their expense? And what about the GmbH itself? Under what conditions can it demand compensation from the managing director?

You will find an overview of all parts of the "Tips for medium-sized GmbH" series in this overview.

Obligations and scope of protection of the managing director

The managing director is obliged to carefully manage the company for the good of the company even at the company's founding stage. In doing so, he must provide himself and the shareholders with appropriate, reliable facts and information, check the creditworthiness of contractual partners in advance and demand securities such as guarantees and assignments for important transactions.

If he observes all laws, the articles of association and all instructions of the shareholders' meeting and if he acts with the care of a prudent businessman from his point of view for the benefit of the company, he is protected from his own liability according to the regulation of the so-called Business Judgment Rule. Even if his decision later turns out to be economically flawed.

Principle of liability of the GmbH

If the GmbH managing director acts legally and disclosed for the GmbH and creditors or third parties suffer damage in the process, only the GmbH is liable in the external relationship. This corresponds to the meaning and purpose of the GmbH as a corporation with the aim of protecting the private assets of the shareholders behind it and the managing directors acting for the GmbH.

Liability of the managing director to the company

The GmbH law regulates that the company's managing director is obliged to pay damages internally if he has not observed the due diligence of a prudent businessman when performing his managing director duties.

The managing director is liable for this with his entire private assets if the following additional requirements are met:

  • Damage or other financial disadvantage must have occurred for the GmbH.
  • The managing director must be at fault, either in the form of negligence or intent. There is negligence if the care required in traffic has been neglected or if the managing director has trusted that no damage will occur. There is intent when the managing director has accepted the occurrence of the damage with approval or even wanted it directly.
  • There must be a causality between the breach of duty by the manager and the occurrence of the damage, i.e. the breach of duty must have caused the damage.

Compensation must be paid by the GmbH managing director in the event of conflicts of interest and competition with the company with which the managing director has obtained advantages for himself or for companies closely related to him or with whom he is closely connected financially, in family or in any other way, to the detriment of the GmbH. Examples would be private trips at the expense of the GmbH, the employment of employees for private purposes, the hiring of unqualified family members, the awarding of lucrative contracts to befriended entrepreneurs against secret revenue sharing and comparable legal violations.

Criminal offenses such as bribery in order to acquire orders for the company, the acceptance of bribes from major customers of the GmbH, fraud, embezzlement, insolvency offenses, toleration or aiding in the existence of the shareholders' interventions in the company's assets in violation of the capital maintenance regulations and much more are also prohibited .

Personal liability to tax authorities and social security agencies

The GmbH managing director is personally liable with his private assets for payments not made or made late by the GmbH to the tax authorities and the social security agencies as well as for other statutory payment obligations of the GmbH that cannot be collected otherwise. This is due to his position as an organ and his culpable breach of duty.

Acting with the consent of the shareholders or on the basis of an instruction

If the managing director has obtained the approval of the shareholders' meeting and / or the supervisory board for transactions that require approval, or if the managing director acts on the basis of a formally and materially legally effective instruction, the company cannot normally take recourse against him. Exception: The managing director did not ensure that the shareholders were able to approve or issue instructions on the basis of comprehensive, applicable information.

Personal liability of the GmbH managing director towards third parties

According to general principles, the GmbH managing director is personally liable to third parties whenever he conducts business and does not make it sufficiently clear that he does not want to act for himself personally, but for the company. The same applies if he makes particular demands on personal trust, if he as a private person assumes a guarantee for the fulfillment of the contract by the GmbH, if he has a personal mostly economic interest in the conclusion of a contract or if he commits a criminal offense such as theft, Fraud, breach of trust, or bankruptcy offenses.

If the managing director does not constantly check the company's finances and does not report bankruptcy in good time in the event of impending insolvency and / or over-indebtedness of the GmbH, he may be liable to pay damages to the creditors who have been damaged if all legal requirements are met. The fact that this, for example, in the justified assumption that everything was economically in order with the GmbH, that contractual advance payments had been made and that later suffered high damage due to the entry of insolvency, would have been avoidable if the GmbH managing director had acted according to his duties and when the contract was initiated would have clarified the company's bankruptcy.

It is also important that the managing director is aware that he already has so-called personal agent liability in the formation stage, until the future company is entered in the commercial register.

Checklist: Protection of the managing director from personal liability

  • Get advice at the time of employment as to the extent to which a limitation of liability in terms of amount and a shortening of the legally stipulated five-year liability period for damages in relation to the GmbH can be agreed in the employment contract as managing director.
  • Conclusion of directors & officers insurance for those areas of directors' liability that are insurable. Fidelity insurance and financial loss liability insurance are also possible.
  • Always act for the benefit of the GmbH on a sound basis of information, compliance with the law, the articles of association, the obligation to obtain consent from the shareholders 'meeting and the instructions of the shareholders' meeting.
  • Check and observe the instructions of the shareholders' meeting for compliance with the law and the articles of association or work towards changing them.
  • Ensure that all legal regulations for raising and maintaining the share capital of the GmbH are observed.
  • Make sure that the GmbH is not over-indebted or insolvent, otherwise file an application for insolvency immediately to prevent creditors being disadvantaged.
  • Obtain regular discharge from the shareholders' meeting
  • In the event of uncertainty, obtain a well-founded basis for decision-making from consultants such as lawyers, tax consultants, accountants or other specialists.

You can find out whether you as a GmbH managing director can be terminated and recalled at any time, you will find in the next article in our series "GmbH manual for medium-sized companies".

Dr. Babette Gabhard is a lawyer and specialist lawyer for commercial and corporate law and for banking and capital market law. (Photo: B. Gäbhard)