Term and Definition of Managing
The term “Managing” describes, in a legal context, all activities and measures aimed at the purposeful direction, control, and oversight of organizations, companies, projects, or assets. Managing encompasses both strategic and operational leadership tasks, which regularly arise from a corporate office or with the authority to issue instructions. German and European law contain numerous regulations defining the rights and obligations of persons tasked with managing.
Legal Classification and Distinction
Corporate Office and Representative Position
In corporate law, managing is considered a central responsibility of governing bodies, such as the management board of a stock corporation (§ 76 AktG), the managing director of a limited liability company (§ 35 GmbHG), or the executive board/association board (§ 26 BGB). In this context, managing is understood as an inherent corporate and leadership duty, associated with special obligations and responsibilities.
In contrast, there are managing activities that are performed based on contractual assignment as management or executive services outside of a corporate role (for example, management contracts). Here, it is important to note that the legal responsibilities and liability risks are structured differently.
Aspects of Liability Law
Internal Liability
Persons entrusted with managing are subject to specific duties and liability regulations. Within the internal relationship, corporate officers and other managers are particularly liable for the proper conduct of business. The exercise of care by a prudent and diligent business leader (see § 43 GmbHG, § 93 AktG) is decisive. In the event of breaches of duty, claims for damages may be asserted against the company or organization.
External Liability
For certain breaches of duty of care in managing, external liability to third parties may arise, for example, in the case of violations of insolvency filing obligations (§ 15a InsO) or in cases of liability to creditors and shareholders. Individuals involved in managing may also be held personally liable for tortious actions (§ 823 BGB et seq.).
Compliance Obligations in Managing
The concept of managing involves comprehensive compliance requirements. To avoid personal liability risks, managers must implement internal control systems and ensure compliance with applicable laws and internal company policies (see § 91 para. 2 AktG). Failure to take appropriate measures can lead to significant civil and criminal liability.
Managing in Various Legal Areas
Company Law
In company law, managing is closely linked to management, corporate office, and representative authority. Relevant provisions can be found in the company statutes (AktG, GmbHG, HGB, BGB). Typical regulatory content includes appointment procedures, powers of representation, removal from office, allocation of responsibilities, as well as compensation structure and liability.
Insolvency Law
In insolvency law, managing duties — such as the timely filing of an insolvency petition (§ 15a InsO) — play a central role. A violation may result in criminal sanctions and piercing of the corporate veil. Moreover, managing is obligated to act immediately in the event of impending insolvency or over-indebtedness and must refrain from any actions that would harm creditors.
Labor Law
In labor law, managing concerns the distinction between employee and employer functions for executives. Senior employees perform managing functions and are subject to special labor law provisions (§ 5 BetrVG, § 14 KSchG).
Tax Law
In tax law, managing entails increased responsibility for the proper fulfillment of tax obligations (§ 34 AO). Misconduct can lead to personal liability risks (§ 69 AO).
Criminal Liability
Managing also forms the basis for criminal liability, particularly in cases of embezzlement (§ 266 StGB), fraud (§ 263 StGB), delay in filing for insolvency, or tax evasion. Criminal liability attaches to one’s position as a key decision-maker within the company or organization.
Duties and Responsibilities of Managing Functions
Duty of Care
A central duty in managing is the exercise of care expected of a prudent and diligent business leader. Of key importance is the so-called “Business Judgment Rule,” codified in stock corporation law (§ 93 para. 1 sentence 2 AktG): decisions must not be evaluated ex post, but rather on the basis of reasonable considerations informed at the time of the decision.
Confidentiality and Duty of Loyalty
Other fundamental legal duties include maintaining confidentiality regarding operational and business secrets and safeguarding the company’s assets with the required loyalty (§ 93 AktG, § 43 GmbHG).
Documentation and Reporting Obligations
Proper managing requires proper documentation of all material decisions and measures, as well as comprehensive information and reporting duties to supervisory bodies (supervisory board, shareholders).
Managing as a Contractual Relationship
Managing can also be the subject of an obligation-based contractual relationship. Management contracts govern the transfer of management and control tasks to natural or legal persons. The structure is primarily based on commercial and civil law requirements. Key contents include scope of services, obligations, compensation, liability, and termination provisions.
International Managing
In international law, additional requirements apply, for example, in accordance with European directives (e.g., on corporate governance) and country-specific regulations. Managing functions in an international corporate context also require compliance with rules on cross-border liability, tax law, and compliance in cross-border business.
References and Further Regulations
- Stock Corporation Act (AktG)
- Act on Limited Liability Companies (GmbHG)
- Commercial Code (HGB)
- Civil Code (BGB)
- Insolvency Code (InsO)
- Fiscal Code (AO)
- European Union Corporate Governance Guidelines
Note: This presentation provides a comprehensive overview of the legal foundations, obligations, and risks of managing. The actual legal requirements may differ in individual cases and depend on the specific legal, organizational, or company law position.
Frequently Asked Questions
What are the legal duties of a Managing Director towards the company?
A Managing Director (Geschäftsführer or board member) is legally required to exercise the care of a prudent and diligent business manager in accordance with § 43 GmbHG or § 93 AktG. He or she must safeguard the interests of the company, comply with all statutory regulations, and in particular fulfill accounting obligations. This includes the timely preparation of annual financial statements, payment of taxes and social security contributions, as well as the immediate filing for insolvency in the case of insolvency or over-indebtedness of the company. Violations can lead to personal liability. Managing Directors have duties of loyalty and confidentiality and may not enter into transactions at the expense of the company. They must disclose conflicts and avoid any potential conflicts of interest.
What liability risks exist for a Managing Director?
A Managing Director is personally liable with his or her private assets if statutory or contractual duties are breached. Typical liability risks arise, for example, in the case of delayed insolvency filings (delayed filing for insolvency), violations of tax obligations, misconduct in management, or insufficient supervision of employees and business partners. Liability can exist towards the company (internal liability) as well as towards third parties (external liability). In addition, there are criminal risks, for example in the case of tax evasion, embezzlement, or violations of occupational safety regulations. D&O insurance (directors’ and officers’ insurance) can reduce personal liability risk, but cannot eliminate it entirely.
What co-determination rights must Managing Directors observe?
Depending on the size and legal form of the company, Managing Directors must observe the statutory co-determination rights of employees. In Germany, the Works Constitution Act (BetrVG) and the Co-Determination Act (MitbestG) apply in particular, which require employee representatives such as works councils or supervisory boards to be involved or informed in certain decisions. This applies for instance to personnel decisions, restructurings, dismissals, or social plans. Violations of co-determination rights can lead to labor court proceedings, fines, or challenges to decisions, especially if participation rights have been infringed.
To what extent are Managing Directors obligated to notify insolvency?
Managing Directors are required to file for the opening of insolvency proceedings with the competent local court without undue delay, but at the latest within three weeks, upon the occurrence of insolvency or over-indebtedness of the company. Late filing can have criminal consequences (delayed filing for insolvency according to § 15a InsO) and typically leads to personal liability for payments made after the company becomes insolvent. The notification obligation applies regardless of actual knowledge; grossly negligent ignorance does not protect against liability.
What information and reporting obligations exist towards shareholders or the supervisory board?
Managing Directors are required to inform shareholders or the supervisory board fully, accurately, and in a timely manner about all significant matters concerning the company. This includes, in particular, issues relating to the financial situation, key management measures, planned investments, or extraordinary risks. The exact duties result from the law, the articles of association, or the rules of procedure. Inadequate information can lead to removal from office, claims for damages, and personal liability risks. In publicly listed companies, there are additional duties under the Securities Trading Act (WpHG) and the Market Abuse Regulation (MAR), such as those relating to ad hoc disclosure.
What employment law provisions must be observed in managing?
Managing Directors must observe all employment protection laws that apply to the company’s employees. These include, in particular, the Protection Against Dismissal Act (KSchG), Maternity Protection Act (MuSchG), General Equal Treatment Act (AGG), Working Hours Act (ArbZG), Minimum Wage Act (MiLoG), and occupational safety regulations. They are responsible for the correct implementation and enforcement of these regulations within the company. Violations of employment law norms can result in fines as well as personal liability risks. At the same time, the Managing Director is usually not considered an employee under employment law, but rather a company officer.
What company law limits apply to the representative authority of a Managing Director?
The representative authority of a Managing Director is determined by company law, the articles of association, and, if applicable, existing rules of procedure. In dealings with third parties, unlimited representative power usually applies in accordance with § 35 GmbHG or § 78 AktG, meaning that restrictions in the internal relationship are generally ineffective vis-à-vis third parties. However, restrictions, consent requirements, or instructions may be established in the internal relationship, the violation of which can lead to claims for damages by the company. For certain transactions (e.g., sale of real estate, major investments), approval by the shareholders’ meeting or the supervisory board may be required.
