Operating

Concept and Legal Significance of Operating

Definition of the Term “Operating”

The term “Operating” is derived from English and literally means operating, handling, or carrying out an activity or process. In a legal context, “Operating” has a multifaceted meaning, as it is used across various fields in connection with operation, administration, contract structuring, ownership relations, and liability issues. The term is particularly relevant in commercial law, tenancy law, leasing law, and administrative law, where the exact legal structure can vary significantly depending on the area.

Operating as a Contractual Object

Operating in Leasing Law

In leasing law, “Operating” refers to the type of operating lease, a form of contract that differs from other forms of leasing such as finance leasing. The operating lease is characterized by the following features:

• Short-Term Nature: These contracts generally have a shorter term than the usual useful life of the leased item.
• Temporary Use: The lessee only acquires the right to use, but not ownership or significant rights of disposal over the leased asset.
• Risk and Cost Allocation: The economic risk generally remains with the lessor, particularly regarding loss of value and maintenance obligations.
• Accounting Treatment: According to commercial and tax regulations, the leased object usually remains on the balance sheet of the lessor.

Legal Classification and Distinction

In operating leasing, it is legally essential to distinguish it from rental agreements and finance leasing. Although operating leasing shares similarities with a rental agreement under §§ 535 et seq. BGB, it notably differs in the rules for the transfer of opportunities and risks, as well as options for early termination of the contract.

Operating in Company Law and Corporate Management

Operation of a Business (Operating)

In the context of corporate and trade law, operating refers to the independent management, organization, and control of a company or a business unit. This encompasses:

• Power of Attorney: Decision-making authority within the company’s organization in accordance with §§ 54 HGB or based on internal company regulations.
• Duties and Obligations: Operational duties arise from statutory regulations (e.g., § 15 BO GewO), contractual agreements, or regulatory requirements.
• Liability Issues: The management of a business (“Operating”) may give rise to both civil liability risks (e.g., from tort, contract, or strict liability) and administrative responsibilities (such as under environmental law, trade law, or tax law).

Authorization Requirements

For certain activities within the scope of operating, regulatory approval is required, such as for the operation of hazardous facilities, the provision of financial services, or commercial passenger transport. The legal framework derives from specific statutory provisions (for example, the Federal Immission Control Act, Banking Act).

Operating and Administrative Law

Operation of Public Facilities

In administrative law, operating refers to the operation of municipal or state facilities, such as when management is awarded to private companies (Public Private Partnership, PPP). The legal basis derives from procurement law, municipal law, and the specific special law governing the facility concerned (e.g., road law, waste law).

Rights and Duties of the Operator

The rights and duties within the scope of operating are regularly governed by contractual provisions and statutory requirements. These include:

• Operator Responsibility: The contractual and statutory duty for proper management as well as monitoring compliance with public law regulations.
• Liability Regimes: Obligations to pay damages to third parties or public authorities in case of improper management or breaches of statutory duties.

Operating in Other Areas of Law

Operating in Competition Law

The structure of a company’s operating model (“Operating Model”) may have implications under competition law, for example in the organization of distribution networks or the outsourcing of company functions. The regulations on anti-competitive practices (GWB, antitrust law) and fair competition law (§§ 1 et seq. UWG) must be taken into account.

Operating in Data Protection Law

If a company operates its own or third-party data centers (“Operating Data Centers”), special requirements under data protection law (GDPR, BDSG) apply. In particular, there are obligations regarding data security, processing on behalf of others, and transparency.

Contract Drafting and Liability in Operating

Legal Foundations of Contracts

Legally, operating services are governed based on various types of contracts:

• Service Contract (§§ 611 et seq. BGB): For continuous activities not tied to particular success.
• Contract for Work (§§ 631 et seq. BGB): When a specific result is owed.
• Rental Agreement (§§ 535 et seq. BGB): Where an item is provided for use, without encompassing the operation itself.

Proper contract structuring is essential for allocating liability, transferring rights, and limiting risks.

Liability Provisions

In connection with operating services, general liability rules (compensation according to § 280 BGB) as well as specific liability bases (e.g., product liability, operator liability) may apply. Particularly for operator liability, contractual limitations of liability and insurance solutions are frequently important.

Summary

The term “Operating” legally refers to all forms of operating, administering, or using property, rights, or businesses and covers a variety of legal aspects. The legal classification depends on the specific field of activity, the underlying contracts, and statutory requirements. Key regulations are found in leasing law, corporate law, administrative law, as well as other specific statutory areas. Particularly relevant are issues of liability, authorization requirements, and contractual risk allocation.

See also

• Leasing Agreement
• Operational Management
• Corporate Management
• Construction Law – Operator Obligations
• Procurement Law – PPP Models

Frequently Asked Questions

Who is legally responsible for the operation (“Operating”) of a company?

The legal responsibility for the operating of a company fundamentally lies with the legal representatives, typically the managing directors (in the case of a GmbH) or the management board (in the case of an AG). According to the law, these bodies are required to manage the company properly and represent it externally. This includes in particular compliance with all relevant legal provisions such as the German Commercial Code (HGB), GmbH Act, Stock Corporation Act, tax law, labor law, and industry-specific regulations. Proper management further includes diligent organization of business processes, the appointment and supervision of senior employees, ensuring proper accounting, and fulfilling tax obligations. The legal responsibility cannot be fully transferred to third parties, even if individual tasks are delegated. In the event of breaches of duty, managing directors or board members can be held liable for recourse both internally to the company and externally to third parties.

What legal requirements exist for the outsourcing of operational activities?

The outsourcing of operational activities, for example as part of outsourcing or engaging external service providers, is in principle permitted. However, important legal requirements apply: The principal usually remains responsible for compliance with legal obligations. For sensitive areas, such as payroll, data protection, or IT services, specific legal requirements (including the General Data Protection Regulation, § 11 BDSG, §§ 666 et seq. BGB, §§ 44 et seq. GmbHG) must be observed. Appropriate contractual arrangements must be made to ensure compliance and clarify liability with respect to the service provider. In critical infrastructures or the financial services sector, there are also industry-specific requirements for outsourcing contracts and reporting obligations (e.g., MaRisk, BAIT, KWG for banks). Supervisory authorities can, in exceptional cases, prohibit certain outsourcing if proper management would thereby be endangered.

What liability risks exist for operational errors?

In the event of errors in business operations, managing organs (managing directors, management board) are generally subject to increased civil liability risks. The company may hold them liable for damages, for instance, in the event of breaches of management duties, lack of due care (Business Judgement Rule), insufficient supervision of processes, or disregarded compliance rules. Externally, the company is liable to third parties (external liability), but under certain circumstances, personal liability of the organs is also possible, especially in case of violations of protective laws (§ 823 para. 2 BGB), tax evasion, concealment of insolvency, or offenses against environmental and labor protection laws. In case of serious breaches of duty, insurance coverage (D&O insurance) can also be restricted or canceled.

What statutory documentation requirements apply in operating?

Within the framework of operating, numerous statutory documentation and record-keeping obligations must be observed. The German Commercial Code (HGB), Fiscal Code (AO), and respective special laws are decisive here. These include in particular proper accounting (§§ 238-241a HGB), keeping and retention of business books, records, contracts, commercial letters, and electronic documents (usually six to ten years). For personal data, the requirements of the GDPR regarding traceability and obligations for documentation in data protection management also apply. Depending on the industry, further requirements arise, for example from the Product Safety Act, Occupational Health and Safety Act, or Medical Devices Law.

May operational work instructions be legally given as binding?

Yes, operational work instructions can, in principle, be issued on a legally binding basis by management or authorized governing bodies, provided that this is done within the scope of managerial authority (§ 106 GewO) and in compliance with applicable law. However, work instructions must not violate statutory provisions, collective agreements, or company agreements and must be proportionate. In certain circumstances, there is an obligation to consult or involve the works council (§ 87 BetrVG). Disregard of lawful work instructions can result in labor law consequences, up to and including termination.

What statutory reporting and notification obligations exist in operating?

In daily business, companies are subject to numerous statutory reporting and notification obligations. These include, among others, registrations with social security agencies (§ 28a SGB IV), tax returns and tax registrations (AO), accident notifications (SGB VII), labor law notifications in case of mass layoffs (§ 17 KSchG), insolvency filing notifications (§ 15a InsO), as well as sector-specific reporting obligations, for example to supervisory authorities (BaFin, trade office, data protection authority). Violations of these obligations can result in regulatory offenses, fines, and—in serious cases—criminal sanctions.

What is the legal status of company and service instructions in operating?

Company and service instructions are internal regulations issued by management or authorized governing bodies on the basis of their right to issue directives. They specify general statutory requirements and company policies for day-to-day business operations. Their legal effect is primarily based on labor law and, if applicable, on collective agreements. While company instructions primarily aim for safe and legally compliant procedures (e.g., occupational safety, data protection, IT use), service instructions often have a broader organizational function. Their effectiveness requires proper notification and, where necessary, involvement of the works council. Violations can have labor law consequences, such as warnings or dismissal.