A company’s legal infringements can also come back to haunt its managing director. That being said, the latter’s liability towards third parties is strictly limited.
Legal infringements are particularly common in the fields of trademark and competition law. Our experience at the commercial law firm GRP Rainer Rechtsanwälte shows that in these cases claims are often brought against the managing director of the company acting unlawfully as well. Having said that, the managing director’s personal liability towards third parties in event of competition violations is now strictly limited.
As early as 2014, the Bundesgerichtshof (BGH), Germany’s Federal Supreme Court, considerably curtailed managing directors’ liability (Az.: I ZR 242/12). The BGH distanced itself from the prevailing case law at the time, according to which managing directors’ liability came into consideration if the managing director knew of employees’ competition violations and did nothing to prevent them. The Karlsruhe judges held that the managing director’s status as a governing body and their general responsibility for the company do not by themselves give rise to an obligation on the part of the managing director to prevent competition violations in relation to external third parties. Mere knowledge of a competition violation and failure to prevent it are not enough to trigger liability on the part of the managing director.
Managing directors’ liability might nevertheless come into question if the managing director personally committed the unlawful act or ordered that it be carried out or, pursuant to the principles of tort law, a duty to intervene arises by virtue of his or her position, with the result that the managing director’s conduct can ultimately be blamed for the competition violation.
Furthermore, the managing director has a duty towards the company to ensure that legal infringements such as competition violations do not occur. If the managing director fails in this respect to fulfil their duty to manage the business in a prudent manner, he or she may still be liable towards the company. However, according to the case law of the BGH, this duty does not extend to external third parties, as general liability would impose an almost incalculable risk on the managing director.
Legal disputes are common when it comes to issues pertaining to managing directors’ liability. Lawyers who are experienced in the field of company law can provide managing directors and other executive organs as well as companies with comprehensive advice.