Directors and Officers Liability
Personal liability of CEOs, directors, officers and board members
The liability risks for CEOs, directors, officers and board members are constantly increasing under German Corporate Law. It is not only the number of cases, but also the amounts of the individual claims that are higher than ever before. This development has its origin in various management failures of the recent years that led to massive corporate scandals. Due to these incidents the liability legislation in Germany tightended and the German courts began handling the cases stricter (in particular in regard to the degree of fault, the burden of proof and the statutory limitation periods). This led to a significant increase of liability cases under German Corporate Law in the past years. Furthermore, shareholders and stakeholders of a business develop a more and more demanding attitude towards CEOs, directors, officers and board members (of the management board, supervisory board, advisory board, board of trustees, executive committee etc.) and do not hesitate to take legal action and hold managers personally liable whenever they suspect a slight misconduct – this is at least the situation in Germany.
Under what conditions can the CEO, director or board member be held liable?
Under German Liability and Corporate Law every CEO, director, officer or member of the supervisory board has to perform his or her duties with the diligence of a reasonable and conscientious business man: This means that any conduct (action or omission) has to be measured on this liability scale. A personal liability of a CEO, director, officer or board member occurs when a breach of duty leads to a financial loss for the business. In case of doubt, the burden of proof is on the CEO, director or board member to provide evidence that his conduct was legally and economically appropriate. The statutory limitation period for liability cases under German Corporate Law are 5 years or, if the business is publically listed, 10 years.
Typical cases of personal liability of CEOs, directors and board members
• The CEO or director takes key decisions without an objectively reasonable basis of factual information
• Shareholder loans or intercompany loans are not handled properly and in accordance with German Corporate Law
• The opportunities and risks of a certain business decision are misjudged in a completely irresponsible manner
• Management action is clearly not in accordance with the articles of association or with shareholder resolutions
• The supervisory board supervises the management carelessly and overlooks a measure with considerable potential for loss to the German company
• A disadventagous management decision is taken despite of a considerable conflict of interests, foreign influence or self-interest of the decision maker
• Taxes or social security contributions are not properly paid to the German tax and social security authorities
• In a crisis the management fails to inform the shareholders in time or to the extend appropriate according to German Corporate Law
• Despite insolvency or over-indebtedness the CEO or director fails to file for insolvency in due time as required under German Corporate Law
Corporate Lawyer in Germany
Our German corporate lawyers will reliably enforce your liability claims or defend yourself against such legal action. At the overlaps of German Corporate Law and German Labor Law Attorney Dr. Christian Hendrik Zeller represents your interests persistently. Attorney Dr. Zeller provides courtroom representation for you and your business before all German Higher Courts and the Appeal Courts.
Please contact us 24/7 by phone (+49 (0) 69-58 80 972-40), by email (email@example.com ) or via our contact form. You will find even more contact options in the 24/7 access to our German law firm (on the left): Feel invited to book a short free consultancy with one of our German Corporate Lawyers, request a call-back within 24 hours or start a live chat with someone from our law firm. We look forward to hearing from you. Google
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