Allocation of responsibilities and directors’ liability

Recently, the Higher Regional Court of Düsseldorf rendered a decision about the discharge of directors’ liabilities in the case of an internal allocation of responsibilities. According to this decision, the managing director of a GmbH (German limited liability company) cannot deny responsibility for not paying the social security contribution for his employees by claiming that he is merely responsible for marketing, development and production and not entitled to make payments for the company.

The court held that every managing director of a GmbH is liable for all duties of the company due to the “universal responsibility” of the director’s position. This includes public duties such as the payment of social security contributions. Even if responsibilities are assigned to another managing director or employee, a supervisory duty remains, which forces the managing director to act provided that the assignee does not fulfill the assigned responsibility properly. During a financial crisis of the company the managing director shall not rely on the assignee’s assertions, but has to control whether the social security contributions are actually paid. Only if the supervisory duties of the managing director are executed and documented properly, the director’s liabilities may be discharged. Managing directors should therefore already in their own interest arrange for the necessary documentation – in particular in the crisis of a company.