THE CRIMINAL LAW AMENDMENT ACT 2015 INTRODUCES SOME CHANGES TO SO-CALLED MANAGERIAL LIABILITY.
11.02.2016
What is meant by manager liability?
Manager liability includes both civil and criminal law aspects: From a civil law perspective, the focus is on claims for damages by the company or third parties caused by the negligent conduct of a company body. The managing director in particular, as a body authorized to represent the company, is exposed to a significant liability risk. He must always act as a diligent entrepreneur would in his own affairs. What this specifically means must be considered on a case-by-case basis. Particular caution is required if the company is in an economic crisis or on the verge of material insolvency. At this stage, every managing director is strongly advised to seek legal advice. A significant legal change is the mitigation of the liability requirements based on the American Business Judgement Rule. Accordingly, one is exempt from liability if one "acts in accordance with the care of a prudent and conscientious manager", does not allow oneself to be guided by "irrelevant interests" and "can assume, on the basis of appropriate information, that one is acting for the good of the company". Here, too, each case must be considered on a case-by-case basis and this limitation of liability should be treated with caution, not least because of its vague wording. In the area of criminal law, particular attention must be paid to the offence of breach of trust under Section 153 of the German Criminal Code and the crimes of fraud under Sections 156ff of the German Criminal Code. The offence of breach of trust has been interpreted very extensively, which has often brought harsh criticism to the decisions of the highest courts in recent years. In the course of the Criminal Law Amendment Act 2015, the offence was defused by making it clear that breach of trust requires financial loss and that a mere endangerment of assets is not sufficient. An abuse of authority also requires that rules that serve to protect the assets of the beneficial owner are violated in an "unacceptable manner". When the necessary unreasonableness exists depends on the specific discretion of the person in power. This wording still leaves the courts considerable scope for interpretation, although only time will tell how they will exercise this scope.