The decisive question is whether, after leaving office, the managing director continues to perform another key role within the scheme or whether the conclusion of the specific contract had already been “set in motion” during their time in office.

Facts

Until July 2020, the defendant was the sole member of the board of directors and managing director of a stock corporation (Aktiengesellschaft – AG) established in Switzerland. Until November 2020, he was also the sole shareholder and managing director of its German subsidiary, a GmbH incorporated in 2020.

In March 2020, the claimant received two offers from the AG for fixed-interest investments. Subsequently, on 6 November 2020, the GmbH sent her an agreement for a silent partnership interest and requested that she sign and return it.

On 9 December 2020, the claimant subscribed for a silent partnership interest in the GmbH in the amount of EUR 30,000 and paid that amount in full. However, she received no payments in respect of her investment. Also on 9 December 2020, bankruptcy proceedings were opened in respect of the assets of the AG. The claimant brought a claim against the former managing director and another individual, jointly and severally, for damages of EUR 30,000 plus interest on the grounds of intentional damage contrary to public policy pursuant to section 826 of the German Civil Code (Bürgerliches Gesetzbuch – BGB), subject to the concurrent transfer of the rights arising from the investment.

The Regional Court (Landgericht – LG) dismissed the action in its entirety. On appeal against the former managing director, the appellate court found substantially in favour of the claimant. The managing director appealed against that judgment to the BGH on a point of law. The appeal was unsuccessful.

Decision

The BGH first confirmed its settled case-law according to which managing directors and de facto managing directors may be held personally liable for intentionally causing damage contrary to public policy pursuant to section 826 BGB where the business model for which they are responsible was designed from the outset to deceive and harm investors. In such circumstances, ordinary experience alone supported the conclusion that a managing director acting in a prominent role essential to the scheme had acted at least with conditional intent if they nevertheless failed to obtain sufficient information about the legal framework governing the distribution of the investments.

The decisive issue in the case, however, was whether the managing director’s personal liability also extended to investment agreements concluded only after their removal from office. Applying general principles of causation in the law of damages, the BGH answered this question in the affirmative.

A managing director’s liability for intentionally causing damage contrary to public policy by supporting a fraudulent investment scheme therefore also extends to contracts concluded after their removal from office if (i) they continue to perform another key role within the scheme after leaving office or (ii) the conclusion of the specific contract had already been “set in motion” during their time as managing director.

Practical Implications of the Decision

For managing directors of limited liability companies, the decision significantly extends the potential period of liability. The BGH makes clear that a managing director’s liability does not automatically end when they leave office. Personal liability may also extend to losses arising only after their departure, provided that the conclusion of the specific contract can be traced, both factually and chronologically, to their earlier activities or that the individual continues to perform a key role supporting the scheme.

In doing so, the BGH consistently continues its case-law on the liability of former managing directors. In July 2024, it had already held that, under the principles governing liability for delayed filing for insolvency, a former managing director may also be liable for losses suffered by creditors who entered into contractual relations with the insolvent company only after the managing director had left office (judgment of 23 July 2024, II ZR 206/22). In such cases, liability arises because the situation of risk created by the failure to file for insolvency in due time continued to exist when the loss occurred.