Skip to content

You are here:

Liability of executive bodies - Limits via the allocation of responsibilities

The liability of the executive bodies of corporations is a matter that routinely keeps the courts busy. Where there are several managing directors the principle of overall responsibility will apply, i.e. the managing directors will be jointly responsible and jointly liable. In a recent judgement, the Federal Court of Justice (Bundesgerichtshof, BGH) gave its view on the issue of the extent to which internal responsibility arrangements can restrict the liability of managing directors internally as well as externally and, in doing so, confirmed its previous ruling and developed it further.

Issue - Unauthorised bank transactions in the event of insolvency 

The court’s decision related to its ruling of 9.11.2023, case reference: III ZR 105/22, on a case where a corporation had wanted to realise real estate projects and had raised funds from investors for this purpose. This had involved bank transactions within the meaning of the Banking Act (Kreditwesengesetz, KWG) that may only be carried out with the appropriate permit from the German Supervisory Authority (BaFin). However, the company did not possess such a permit. After the company became insolvent, an investor subsequently sued one of the managing directors personally for damages. This managing director asserted that as the architect he had only been responsible for the technical area and had had no knowledge of the capital raising.

Ruling - While liability was restricted by the responsibility arrangements, ...

First of all, the BGH confirmed that the managing director of a company which effects unauthorised bank transactions may be liable to prosecution under the KWG and that, under civil law, personal liability for a tortious act could also be derived from this. However, for that it would be necessary to determine fault, which cannot be derived solely from the executive position (as the lower court believed).

Admittedly, the executive position as a managing director provides for a wide-ranging duty of care. However, this does not preclude the delegation of tasks and, thus, the transfer of responsibility. So, for example, while internal responsibility arrangements at the management level will not result in the abolition of responsibility under criminal and liability laws, such arrangements may however restrict it. Dividing up the business activities in such a way would mean that the managing director who is not affected would have limited responsibility internally and externally because that managing director would generally be able to rely on the competent managing director to carry out the duties that have been assigned to them.

... nevertheless, the supervisory obligations remained

However, on account of the overall responsibility, the managing director who is not in charge has supervisory obligations and breaching these could constitute grounds for liability on the part of that managing director. They are obliged to intervene when there are indications that the competent managing director is not fulfilling their duties properly. In the case in question, no findings concerning this were identified and this was why the matter was referred back to the lower court.


While the allocation of responsibilities/departments is not a mandatory requirement under the law, nevertheless, it would be advisable to record the existing allocation in writing and to clearly and unambiguously define the respective duties there. Such arrangements can be made by adopting a resolution at a shareholders’ meeting. It is however also possible for the management to give itself the appropriate rules of procedure. Furthermore, each managing director should keep themselves informed about the performance of the duties of the co-managing directors and document the exercise of these duties in a suitable manner in order to be able to produce exonerating evidence in the event of a dispute.

Back to top of page