Definition and legal classification of the manager
The term manager refers, in companies or organizations, to a person who performs management functions and bears responsibility for business processes, personnel management, and the achievement of defined objectives. Managers operate at various levels of hierarchy – from middle management to the executive board. The legal status, responsibilities, and duties of a manager depend on the organizational structure, specifically the legal form of the company as well as the employment contract or by formal appointment to a body.
Legal distinction of the manager
Manager as an executive is not a legal term; it becomes legally relevant through the assumption of concrete official roles (e.g., managing director of a GmbH, member of the board of an AG) or through management or executive contracts with entrepreneurial responsibility. In particular, the following legal positions must be distinguished:
- Official appointment: Managers as members of a corporate body, such as managing directors, board members, or chairpersons, are part of the statutory representative body of the legal entity.
- Executive employee: The definition in labor law distinguishes executive employees from other workers in terms of authority to issue instructions, decision-making freedom, and representation rights. Therefore, a manager can be both an employee and a member of a governing body.
Official appointment and legal status
Position as a body member
GmbH managing director
The managing director of a limited liability company (GmbH) is, according to § 6 para. 1 GmbHG, the legally authorized representative organ of the company. Appointment takes place by shareholder resolution, and the legal status arises from the employment contract as well as statutory provisions. Managing directors are not employees, but organ representatives, and are subject to specific corporate obligations—in particular, the duty of care under § 43 GmbHG.
Board member of a stock corporation
The board is the management body of a stock corporation (§§ 76 et seq. AktG) and is appointed and dismissed by the supervisory board. Board members are subject to the regulations of the Stock Corporation Act and are responsible for the autonomous management of the company. Liability, duties, and areas of responsibility are defined in detail, especially in § 93 AktG (duty of care and responsibility of board members).
Other official positions
Other legal forms such as cooperatives or associations also have corresponding official positions (board, executive board), whose legal foundations are governed by the relevant special laws and statutes.
Liability and responsibility of managers
Managers in official positions are particularly exposed to liability. Basically, there is internal liability towards the company and—to a limited extent— external liability towards third parties.
internal liability
The so-called “business judgment rule” (§ 93 para. 1 sentence 2 AktG) protects managers in official positions if decisions are made on the basis of adequate information for the benefit of the company. Fault-based misconduct and violations of statutory duties give rise to claims for damages against the company; for example, in the case of insolvency delay (§ 64 GmbHG, § 92 InsO), tax evasion, or other legal violations.
external liability
Personal liability towards third parties may arise, for example, in the event of culpable breaches of protective laws (§ 823 para. 2 BGB). In addition, criminal consequences (e.g., embezzlement, fraud, delay in filing for insolvency) are possible.
Managers as executive employees
In contrast to an official position, a manager can also be an executive employee within the meaning of labor law (§ 5 para. 3 Works Constitution Act, BetrVG). In addition to responsibility for essential areas of operation, special protection against dismissal as well as restricted participation rights are granted under labor law. The distinction from a body member is of crucial legal importance.
Particularities under labor law
Executive employees are subject to their individual employment contracts and benefit both from the protective mechanisms of labor law and special regulations, such as those regarding the Working Hours Act (ArbZG), co-determination in the enterprise, and rules regarding dismissal and severance pay.
Remuneration and compliance
Remuneration systems for managers
The remuneration of managers is among the most important compliance topics. It typically consists of a fixed salary, variable bonuses, long-term incentive programs, and fringe benefits. Since the entry into force of the Act on the Appropriateness of Management Board Remuneration (VorstAG), special requirements apply for the transparency and appropriateness of management board compensation, especially in listed companies (§§ 87, 87a AktG).
Compliance and monitoring requirements
Managers are obliged within the scope of their activities to ensure compliance with laws and internal policies through appropriate compliance processes. Violations of legal requirements or duties of care can result in corporate, labor, and criminal law consequences (keyword: compliance responsibility of the management).
Body relationship, appointment, and removal
The appointment, term of office, and procedures for the removal of a manager in an official position are governed by the articles of association, statutes, and the applicable statutory provisions:
- GmbH managing director: Appointment and removal by shareholder resolution; removal at any time unless otherwise provided in the articles of association (§ 38 GmbHG).
- AG board member: Appointment by the supervisory board, removal only for good cause (§§ 84, 85 AktG).
- Executive employees: Dismissal and termination are governed by labor law, sometimes with extended notice periods or special rules.
Co-determination and corporate participation
The Works Constitution Act and Co-determination Acts regulate the rights of employee representatives, which affect the activities of executives and managers. Members of the executive management are regularly excluded from election to the works council but can belong to the supervisory board.
Duties of confidentiality and loyalty
Managers are subject to extensive duties of confidentiality and loyalty towards their company or employer. These obligations are stipulated in the service or employment contract as well as in specific corporate law provisions (§ 93 para. 1 sentence 3 AktG, § 43 GmbHG).
Conclusion
The term “manager” is multifaceted and legally dependent on the specific design of the function and the corporate law framework. Whether as a body member or executive employee, managers face significant duties, responsibilities, and potential liabilities. Compliance with corporate, labor, and criminal law requirements is an essential aspect of a manager’s role and constitutes a key element of modern business law.
Frequently asked questions
What legal duties do managers have in German companies?
Managers are subject in their position to a multitude of legal duties, primarily arising from the Stock Corporation Act (AktG), the Limited Liability Companies Act (GmbHG), and other relevant legislation such as the Commercial Code (HGB), as well as special provisions such as labor or tax law. Central obligations include, in particular, the duty of care and the duty of loyalty (§ 93 AktG, § 43 GmbHG). The duty of care requires that managers act with the care of a prudent and conscientious business manager in their decisions. Breaches can result in claims for damages against the manager. The duty of loyalty requires acting in the best interests of the company and avoiding conflicts of interest. Managers must also comply with corporate reporting and disclosure obligations (e.g., balance sheet, management report, ad hoc disclosures) and ensure compliance with compliance requirements. They also share responsibility for compliance with labor, data protection, and tax regulations, as well as due diligence in connection with business transactions.
What liability risks do managers face in the event of breaches of duty?
Managers can be subject to both internal and external liability. In the case of breaches of duty within the company (internal liability), liability is governed primarily by § 93 AktG and § 43 GmbHG. In such cases, they are personally and fully liable for any resulting damages. External liability concerns claims by third parties, for example due to delay in filing for insolvency (§ 15a InsO), violations of environmental or tax law duties. The so-called business judgment rule (§ 93 para. 1 sentence 2 AktG) is particularly relevant, protecting managerial discretion against subsequent poor decisions, provided the manager could reasonably assume to act in the company’s interest based on sufficient information. However, intentional or grossly negligent breaches are generally not protected. Key liability pitfalls also exist with breaches of documentation or organizational duties.
To what extent must managers answer for criminal acts within the company?
Managers also bear criminal responsibility in their executive role. Relevant offenses include embezzlement (§ 266 StGB), fraud (§ 263 StGB), insolvency offenses (§§ 283 et seq. StGB), anti-competitive behavior, or violations of data protection law (§ 42 BDSG). Personal criminal liability arises in particular if the manager acts personally or is considered a so-called de facto managing director. Delegation of tasks only exempts the manager if careful selection, supervision, and instruction of the assigned persons can be proven. A central challenge is avoiding so-called organizational fault, which can arise from inadequate supervision or insufficient compliance. The case law requires clear and transparent allocation and control of tasks within the management and its area of responsibility.
What are the specificities for managers regarding labor law?
In terms of labor law, managers, particularly board members and managing directors, are only partially considered employees. They often serve as representatives of the corporate body, and are therefore subject to different legal rules. In most cases, they are not covered by special job protection or works constitution law. However, employment contracts can regulate individual legal claims, such as special payments, severance payments, or non-compete clauses. In the context of termination agreements and contract arrangements, particular care is required to, for example, preserve claims to severance pay, bonuses, or retirement benefits. Protective provisions, such as the General Act on Equal Treatment (AGG), generally also apply to managers.
Are there special notification and reporting obligations for managers?
Yes, managers, as members of corporate bodies, are subject to extensive notification, disclosure, and reporting obligations. In addition to commercial law disclosure obligations under §§ 325 et seq. HGB, such as filing annual financial statements and management reports, there are stock corporation reporting duties (§ 15 WpHG) for insider information, voting rights notifications (§ 33 WpHG), and notification of holdings. Violations of these obligations can result in significant administrative or fine proceedings. Within the framework of corporate governance, there are also extensive transparency and reporting requirements, for example regarding management board remuneration or declaration of conflicts of interest (see § 111a AktG).
What is the legal significance of compliance systems for managers?
Compliance systems are of considerable legal importance for managers. The absence or inadequate design of an internal company compliance system can be considered organizational fault and result in personal liability for managers. Managers are required to take appropriate measures to prevent legal violations within the company. This includes establishing, monitoring, and, if necessary, adjusting compliance processes. In the event of violations of statutory regulations (e.g., corruption, antitrust law, money laundering), effective establishment and maintenance of a compliance system can have a liability-reducing effect. The case law of the Federal Court of Justice (BGH) attaches central importance to the organization’s compliance when assigning breaches of duty.
