Term and Basics of Association Liability
Association liability describes the legal consequences and responsibilities that can arise for a registered or unregistered association in the course of its activities and business operations. It primarily concerns the extent to which an association and its bodies as well as members are liable for obligations, damages, or breaches of duty towards third parties or within the association itself. The legal framework for association liability is set out in the German Civil Code (BGB), in particular in Sections 21-79 BGB.
Legal Classification of the Association
Legal Capacity of Associations
An association acquires legal capacity by being entered into the register of associations (Section 21 BGB). A registered association (e.V.) is a legal entity and can therefore itself be the holder of rights and obligations. Unregistered associations are considered merely as non-legal-capacity civil law partnerships (Sections 705 et seq. BGB), whereby the liability scenarios can differ significantly.
Position and Power of Representation of Corporate Bodies
The organs of the association are, in particular, the board and, where provided for, further committees. The association is represented by the board (Section 26 BGB), which concludes legally binding transactions in the name of the association.
Types of Liability in the Context of Association Liability
Internal Association Liability
Liability of the Association Towards Its Members
The association is liable to its members for damages caused by breaches of duty by its organs in management or when conducting events, for example in case of violation of traffic safety obligations. This liability may be modified or limited internally by provisions in the bylaws, but certain core obligations are mandatory.
Liability of Members Towards the Association
Members are primarily liable to the association for payment of dues and for damages they intentionally or negligently cause. Further grounds for liability can be stipulated in the bylaws.
External Liability of the Association
Contractual Liability
The registered association is liable for obligations arising from contracts it has entered into with its association assets (Section 54 Sentence 1 BGB in conjunction with Sections 21 et seq. BGB). This includes, for example, rental, purchase, or employment contracts.
Tortious Liability
The association is also liable for damages arising from unlawful acts according to Section 31 BGB. If an organ of the association, such as the board, causes damage in the course of their duties, the association is directly liable.
Personal Liability of the Board
Corporate bodies such as the board act on behalf of the association. The personal liability of a board member generally exists only in case of culpable breach of duty. According to Section 31a BGB, a board member is liable to a third party or the association only in cases of willful or grossly negligent conduct. For simple negligence, liability may be further limited in the bylaws.
Liability Towards Third Parties
Third parties who suffer damage due to the actions of the board may assert claims against the association, provided the board member acted in the exercise of their capacity as an organ (Section 31 BGB). If powers of representation are exceeded, personal liability of the board in addition to the association may arise (Section 823 BGB, Sections 280, 311 BGB).
Internal Liability Towards the Association
Within the association, the board is only liable for damage to association assets or breaches of duty in cases of gross negligence or intent (Section 31a BGB). This can be further limited by provisions in the bylaws.
Liability of Members for Association Obligations
In a registered association, members are generally not liable with their private assets for the association’s obligations (Section 31 BGB). Creditors can usually only access the association’s assets.
Liability in the Case of Unregistered Associations
In contrast to registered associations, in unregistered associations, acting persons and, if applicable, all members may under certain circumstances be jointly and severally liable with their private assets (Section 54 Sentence 2 BGB by analogy, Sections 705 et seq. BGB).
Special Grounds for Liability
Liability at Events
If an association organizes a meeting, a festival, or a competition, it assumes comprehensive duties for ensuring public safety. If the association fails to fulfill this duty and damage occurs, the association is generally liable with its assets. Grossly negligent behavior can result in personal liability of the responsible individuals.
Tax Liability
Board members are responsible for the association’s tax obligations, such as registration, payment, and proper use of funds for tax-privileged purposes. If these obligations are violated, statutory tax liability rules may apply to board members personally (Fiscal Code, Section 69 AO).
Liability Under Employment Law
If the association employs workers, it is liable as employer for compliance with employment law regulations (e.g., occupational safety, payment of wages). Board members or other authorized representatives may be personally liable if they culpably violate such duties.
Limitation of Liability and Insurance Solutions
Options for Limiting Liability
Associations can reduce their liability risks by clear bylaw provisions, individual exclusions or limitations of liability in contracts. Additionally, proper organization and documentation of decision-making processes as well as informing and training the association’s governing bodies are essential.
Insurance Against Liability Risks
A pecuniary damage liability insurance or a general liability insurance can be obtained to cover risks arising from organ and association liability. Insurance for directors and officers liability (D&O insurance) is another way to cover personal financial losses resulting from a breach of duty.
Legal Consequences in the Event of Breaches of Liability
If the association or its organs are held liable, claims for damages, obligations to pay sums of money, or even criminal consequences may arise. The specific structure of liability depends on the individual case, the nature of the violation, and the assertion of claims.
References
- German Civil Code (BGB), in particular Sections 21-79, Section 31, Section 31a, Section 54
- Fiscal Code (AO), in particular Section 69
- Commentary literature on association law
- Specialist publications on liability in association law
Note: This article provides a comprehensive overview of association liability and highlights the most important aspects for a legal encyclopedia. However, this overview cannot replace detailed legal advice.
Frequently Asked Questions
When is the association, as a legal entity, liable for damage to third parties?
The association is generally liable as a legal entity for damages caused by its organs, in particular the board, in the course of carrying out their association duties (Section 31 BGB). A prerequisite is that the damaging conduct can be attributed to the organized sphere of activity of the association and is connected to association activities. Liability exists even if a board member has acted with gross negligence or intent. In certain cases, tortious liability under Section 823 BGB may also apply, for example if a third party is harmed due to culpable violation of traffic safety obligations. Also noteworthy is liability in the area of employees: If an employee of the association violates the rights of third parties in the course of their duties, the association may be held responsible due to vicarious liability (Section 831 BGB).
In which cases can the board be held personally liable?
Board members of an association are generally personally liable if they culpably breach their duties, that is, act intentionally or negligently. According to Section 31a BGB, liability towards the association and its members is limited to intent and gross negligence if the board acted on a voluntary basis or received remuneration not exceeding 840 euros per year. In relation to third parties, i.e. outsiders, the board is personally liable if the breach of duty is based on their own fault, e.g., failure to comply with legal or bylaw provisions, neglecting mandatory safety measures, or misuse of funds. Personal liability may also arise if the board, on behalf of the association, enters into contracts that the association cannot fulfill (insolvency delay), or if taxes and social security contributions are not properly remitted.
Is the association also liable for the misconduct of individual members?
As a rule, the association is not automatically liable for the misconduct of its members, unless the members act as corporate bodies or with express authorization for the association. Unauthorized actions by a member in the context of private activities do not create liability for the association. It is different, however, if members are carrying out a task assigned to them by the association or acting in an official capacity (e.g., as team leader or at association-organized events) and in doing so, harm third parties. In such a case, the association may be liable as principal for vicarious agents under Section 831 BGB, whereby it can invoke defenses such as due diligence in selection and supervision.
How is liability regulated for voluntary activities?
Voluntary activities are subject to a special privilege regarding liability. According to Section 31a BGB and Section 31b BGB, volunteers are only liable to the association and its members in cases of intent and gross negligence. Liability for slight negligence is expressly excluded so as not to hinder voluntary commitment. For damages to third parties, however, the general rules of tort liability apply if the volunteer acts as a corporate body or representative in dealing with third parties on behalf of the association. Many associations provide their volunteers with separate liability insurance to minimize the remaining risks.
What significance does the association’s bylaws have for liability regulations?
The bylaws of the association may contain specific liability provisions clarifying responsibility among members, towards the association and externally. For example, it can stipulate exemptions from liability for certain groups, regulate limitations of liability or govern internal compensation for damages. However, bylaw provisions must not contravene mandatory statutory regulations (e.g., Section 31, Section 31a, Section 823 BGB). The bylaws may also prescribe that certain activities are only permitted with corresponding insurance coverage. Importantly, provisions in the bylaws only affect internal relationships—to the outside world, statutory liability provisions remain decisive.
How can the association minimize its liability risk?
To minimize liability risk, it is recommended to take organizational and legal precautions: This includes taking out suitable insurance policies (e.g., association, event, pecuniary loss, and D&O insurance for the executive body), training officeholders in liability matters, careful selection and instruction of members and officials, clear assignment of responsibilities, as well as regularly reviewing and adapting the association’s bylaws to current legal requirements. Compliance with statutory provisions, especially with regard to traffic safety obligations and supervision of minor members, should also be carefully documented.
How is the association’s liability for events regulated?
When holding events, the association assumes a variety of statutory and contractual duties to ensure safety. It is obliged to take all reasonable measures to prevent danger and to guarantee participant safety. Violations of these duties can lead to liability claims from third parties, for example, in case of accidents due to insufficient safeguards or defective facilities. In addition, a prior examination is required to determine which public law permits, insurance policies, and official requirements must be observed. In the event of damage, both the organ liability of the association as a legal entity and personal liability of the responsible association organs may arise, particularly if they have acted with gross negligence.
