GRP Rainer LLP: Assessing a managing director’s risk of liability

Managing directors can end up being personally liable for breaches of obligations. GRP Rainer advises managing directors, assesses their risk and takes appropriate action.

GRP Rainer Rechtsanwälte, Köln, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, München und Stuttgart führen aus: Despite the fact that corporations are liable with their business assets, this does not mean that the personal liability of managing directors is out of the question. If they intentionally or even merely negligently breach their duties, they are liable with their personal assets.

The law firm GRP Rainer LLP can assess a managing director’s risk of liability and advise on drafting contracts. In this context, it is important to largely minimize the risk to the managing director and take the appropriate preventative measures. This includes, among other things, taking out D&O insurance. The policy must set out the circumstances under which the insurance kicks in.

When it comes to the liability of managing directors, it should also be noted that both the company as well as third parties are able to assert claims if the managing director breaches his duties. As a matter of principle, he is obliged to exercise the level of care expected of a prudent businessman. This also encompasses the economic and financial management of the company. However, this does not mean that each and every decision made by a managing director that turns out to be an economic failure automatically constitutes a breach of an obligation.

In the event that claims are asserted against a managing director, GRP Rainer will assess whether a breach of duty has been committed by the managing director in the first place. This always presupposes fault on the part of the managing director. In order to determine whether there is willful or negligent fault, it is necessary to carefully examine the given facts and circumstances. The next step is to take the appropriate legal measures to fend off the claims or come to an amicable and, where possible, out-of-court settlement with the other party. In a lot of cases, the claims with respect to a D&O insurance policy need to be asserted and enforced as well.

To minimize the risk of personal liability, it is essential for managing directors to obtain competent advice from lawyers who are versed in the field of company law and thus ensure that they have the necessary legal expertise for the purposes of drafting contracts through to fending off claims for damages.

https://www.grprainer.com/en/legal-advice/company-law/managing-director.html