The managing directors of a limited liability company (in Germany: GmbH) are required to exercise the care of a prudent businessman in the affairs of the company. If they violate this duty, they are jointly and severally liable to the company for the damage incurred pursuant to section 43 (2) of the Act on Limited Liability Companies (GmbHG).
The duties of the managing directors in individual cases have been specified by case law in a multitude of decisions. When analysing the development of this case law, it can be observed that the due diligence requirements imposed on management bodies are becoming increasingly strict.
TheHigher Regional Court (OLG) in Nuremberg has now taken up the case law of the Federal Supreme Court (BGH), according to which “the managing director … (must) organise the company managed by him in such a way that he has an overview of the economic and financial situation of the company at all times. This may require a monitoring system with which risks to the company’s continued existencecan be recorded and controlled.” (Judgement of 30.03.2022, 12 U 1520/19).
In this context, the managing director is in particular “required to set up a compliance management system, i.e. to take organisational precautions to prevent the commission of legal violations by the company or its employees. In doing so, the managing director is not only obliged to monitor the course of business or to have it monitored in such a way that he can expect the business to be conducted properly under normal circumstances; rather, he must go further and intervene immediately if indications of misconduct become apparent.”
The OLG Nuremberg has concretised these duties of the managing director to the effect that the managing directors of a GmbH are obliged to introduce the two-man rule within the scope of so-called “critical work processes”, i.e. processes which, if not carried out properly, could result in personal injury or considerable financial consequences.
In the specific case decided by the Nuremberg Higher Regional Court, the mineral oil company suing its former managing director had suffered damage because employees had issued fuel cards to customers (to the extent that this corresponded to the business model), but some customers had exceeded the limit of the cards. Nothing was done about this and some of these customers subsequently dropped out due to insolvency. This damage – according to the OLG Nuremberg – could have been prevented if the management had introduced a control by means of the dual control principle within the scope of the administration and issuing of fuel cards. The OLG Nuremberg ordered the defendant managing director to compensate the company for the damage caused by the loss of its customers in the amount of approximately EUR 800,000.
The decision of the OLG Nuremberg is trend-setting, as the court considers a specific compliance measure to be mandatory under certain circumstances, although it is general opinion that there is management discretion in the introduction of appropriate compliance measures. At the same time, the principles referred to in the decision also apply to management bodies of other companies (e.g., public limited companies, limited partnerships, general partnerships) or associations. This is due to the fact that the management bodies provided for under company law are also obliged to act in accordance with the standard of care of a prudent businessman. It is therefore advisable to check one’s own “critical work processes” and, if necessary, to introduce the dual control principle.