Managing Director Liability: What You Need to Know to Minimize Risks
Are you the managing director of a GmbH and want to learn more about the potential liability risks of your position? You're in the right place!

Feel free to contact us anytime for a no-obligation initial consultation at info@kern-peters.de or +49 (0) 89 21 55 2286.
We Are Seeing a Steady Increase in Lawsuits and Claims for Damages Against GmbH Managing Directors.
Significant liability risks often threaten even financial stability—but it doesn't have to be this way!
In this article, we explore the various aspects of managing director liability in a GmbH and provide essential information on what you need to pay attention to.
Overview:
- The Role of the Managing Director
- Duties of a Merchant as a Standard for Action
- Distinguishing Between Risk and Breach of Duty
- Liability as a Managing Director
- Liability with Personal Assets
- Statute of Limitations and Exoneration of the Managing Director
- Protection Against Liability Risks
- Conclusion
- FAQ on Managing Director Liability: Everything You Need to Know at a Glance
1. The Role of the Managing Director
A GmbH must appoint at least one person as a managing director. According to § 6 of the GmbH Act, this role can only be held by natural persons with full legal capacity.
The managing director of a GmbH can either be one of the shareholders themselves or an external individual, referred to as a managing shareholder.
In larger GmbHs, the responsibilities are often divided among several managing directors, with each assuming different departments or areas of responsibility. However, the liability of each individual is subject to the principle of collective responsibility. This means that a managing director responsible for a specific department is still liable for other areas.
Caution:
Even during the founding phase of a company, the managing director assumes liability as soon as they act on behalf of the company. Thus, the liability risk begins with the acceptance of the managing director position.
2. Duties of a Merchant as a Standard for Action
As a managing director of a GmbH, you are required under § 43 of the GmbH Act to exercise the care of a prudent businessman. This means your actions must align with those of a responsible business leader who independently manages the assets of others.
Specifically, these duties of care include:
- Adhering to legally mandated behavioral regulations
- Following the instructions of the shareholders' meeting while considering other duties of care
- Maintaining loyalty to the company
- Fulfilling organizational duties, such as implementing adequate oversight and control mechanisms for individuals to whom tasks have been delegated that would otherwise fall under the direct responsibility of the managing director
In addition, managing directors must adhere to numerous other obligations that must always be observed. These include, in particular:
- Managing directors must perform their duties with the required care and loyalty, always acting in the best interest of the GmbH.
- In the event of insolvency or over-indebtedness of the GmbH, timely filing for insolvency is legally required.
- Compliance with laws and regulations is mandatory, particularly in the areas of taxation, occupational safety, and environmental protection.
- Proper bookkeeping and accounting must be maintained to ensure transparency and compliance.
Failing to fulfill your duties as a managing director can result in claims for damages being brought against you personally!
Depending on which legal obligations are violated, you may be liable either to the GmbH or to third parties. Liability to the GmbH is referred to as internal liability, while liability to third parties is known as external liability.
3. Distinguishing Between Risk and Breach of Duty
As a managing director, it is your central responsibility to take all necessary organizational, commercial, and personnel measures to fulfill the company's purpose.
The scope of tasks is extensive, encompassing numerous situations where errors or breaches of duty may occur. Courts recognize the significance of this responsible role and take entrepreneurial risks into account to a reasonable extent during liability proceedings. The primary objective of the role—to achieve business success—should not be hindered by excessive liability risks.

Are you unsure where this leniency has its limits or what the potential consequences of a contemplated action might be? Contact us!
4. Liability as a Managing Director
If a managing director acts contrary to the duty of care expected of a prudent businessman, they are liable.
This is based on the principle that the managing director is an administrator of others' assets, not an entrepreneur themselves. They are not personally liable to third parties for the company's obligations, nor are they required to compensate the company for losses incurred during their tenure. This means the GmbH alone bears the entrepreneurial risk.
However, this liability exclusion applies only if the managing director performs their duties properly, diligently, and conscientiously. It is their responsibility to manage the company using established business management principles and in compliance with applicable legal regulations. Lack of knowledge or experience is not a valid excuse to avoid these obligations!
As a result, managing directors are liable for breaches of duty that cause damage to the GmbH, its shareholders, creditors, or third parties.
Depending on the legal aspect that is violated, managing directors face internal liability (towards the GmbH) or external liability (towards third parties such as health insurers, tax authorities, or creditors).
In general, a managing director's liability may extend to the following areas:
- Civil Liability: For damages caused to the GmbH or third parties due to negligence, breaches of contract, or other violations of duty.
- Tax Liability: For issues such as missing or insufficient tax payments.
- Criminal Liability: For violations of laws or regulations, such as fraud or tax evasion.
Please note:
Liability is not divisible! If a company has multiple managing directors, they are jointly and severally liable - even for the responsibilities of one another.
5. Liability with Personal Assets
If you, as the managing director of a GmbH, fail to observe the duty of care expected of a prudent businessman, you are personally and legally liable to the GmbH for damages—this is known as internal liability.
Practical examples of internal liability include Errors in contract management, Exceeding the limits of representation authority, Purchasing privately used items at the company's expense, Making payments after insolvency proceedings have commenced.
For employed managing directors, the scope of liability is usually defined in the managing director's employment contract.
Caution: Under the following conditions, liability may extend to your personal assets:
- Breach of duty towards the company
- Evidence of negligence or intent
- Financial loss or disadvantages for the GmbH
- Causal connection between the breach of duty and the damage
- Conflicts of interest with the GmbH
- Criminal offenses such as fraud, bribery, embezzlement, or tolerating or aiding criminal acts
6. Statute of Limitations and Exoneration of the Managing Director
Claims for damages by the company against the managing director expire after 5 years in accordance with § 43 of the GmbH Act. The same applies to claims arising from breaches of duty under the managing director’s employment contract (BGH, judgment dated June 12, 1989, Ref. II ZR 334/87).
The limitation period begins not at the time the damage becomes known but at the time it occurs or is caused.
If a managing director is discharged under § 46 of the GmbH Act, any subsequent assertion of claims is excluded if such claims were identifiable based on the accountability report, including all disclosed documents, when assessed with due diligence. However, if detectability was hindered or concealed, the effect of the discharge does not apply.
Note: There is no legal entitlement to discharge within the framework of the shareholders' meeting! It is at the discretion of the shareholders whether to grant or deny it (BGH, judgment dated May 20, 1985, Ref. II ZR 165/84).
7. Protection Against Liability Risks
To minimize liability risks, you can take various measures and consider the following options:
- Document major decisions and actions to have evidence available in case of disputes. Seek legal advice before taking on the position or at the latest when issues arise.
- Since multiple managing directors are jointly and severally liable, ensure that your rights to information regarding other departments are not restricted.
- The managing director's contract can include liability limitations. You should take advantage of this option, though grossly negligent or intentional behavior cannot be excluded.
- Agree to an earlier statute of limitations for claims.
- Include a reversal of the burden of proof in your employment contract. This can provide relief for you as a managing director.
- Consider taking out directors and officers (D&O) liability insurance to protect yourself from personal liability.
- Legal frameworks are subject to change, so we recommend staying informed about legislative amendments and compliance requirements.
- Document major decisions and actions to have evidence available in case of disputes.
We highly recommend seeking legal advice on these important and potentially far-reaching matters to discuss your opinions and their implementation. You can reach us at info@kern-peters.de or 089 21 55 2286
8. Conclusion
- Liability Risks Are Real: The increasing number of lawsuits and claims for damages against GmbH managing directors highlights that liability risks are a serious issue that can threaten financial stability.
- Managing Director Role and Responsibility: As a managing director, you bear significant responsibility and are liable for your actions and decisions.
- Duties of a Merchant and Due Care: Managing directors must exercise the care of a prudent businessman, which means adhering to legal regulations and acting in the best interest of the GmbH.
- Managing directors are liable not only to the GmbH itself but also to third parties, such as creditors, health insurers, and tax authorities, depending on the nature of the breach of duty.
- Liability with Personal Assets: In cases of gross negligence or intent, managing directors may be held personally liable with their private assets.
- Statute of Limitations and Exoneration: Claims for damages expire after 5 years.
- Protection Against Liability Risks: There are various measures to minimize liability risks.
- Given the potential far-reaching consequences, we strongly recommend seeking legal advice.
9. FAQ on Managing Director Liability: Everything You Need to Know at a Glance
What Are the Duties of GmbH Managing Directors?
GmbH managing directors have numerous duties, including the Compliance with legal regulations, the Adherence to the duties of a prudent businessman, the Fulfillment of organizational responsibilities and Ensuring loyalty to the company.
In Which Cases Is the Managing Director of a GmbH Liable?
If a managing director acts contrary to the duty of care expected of a prudent businessman, they are held liable. Managing directors are consequently liable for breaches of duty that cause damage to the GmbH, its shareholders, creditors, or third parties. The liability of a managing director can extend to civil, criminal, or tax law areas.
When Are GmbH Managing Directors Personally Liable with Their Private Assets?
Managing directors of a GmbH can be held personally liable with their private assets if breaches of duty toward the company are proven, there is financial damage, and a causal connection exists. Criminal offenses or conflicts of interest can also lead to personal liability.
How Can GmbH Managing Directors Protect Themselves Against Liability Risks?
GmbH managing directors can protect themselves through legal advice, provisions in the managing director contract, directors and officers (D&O) liability insurance, and a reversal of the burden of proof. Additionally, they should stay updated on legal changes and compliance requirements and document their decisions and actions to provide evidence in case of disputes.
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