DE: BGH on the basis for personal legal liability

Apr 8, 2022 Benn-Ibler Rechtsanwälte

The acting representative of an entrepreneurial company is personally liable if the company appears in external relationships without any indication of the legal form and reference to the limitation of liability, according to the German Federal Supreme Court (Bundesgerichtshof, BGH).

The defendant was the managing director and sole shareholder of an entrepreneurial company (Unternehmergesellschaft, “UG”) in the field of financial brokerage and investment advice. The plaintiff invested in a high-risk asset owned by the entrepreneurial company. The defendant conducted the previous advisory discussions and acted on behalf of the entrepreneurial company, but without the addition of “limited liability” ("haftungsbeschränkt") required by law. The addition "UG" was also only partially used by the defendant. The plaintiff now wants damages from the defendant due to faulty investment advice.

The BGH agreed the plaintiff. If an entrepreneurial company within the meaning of Section 5a of the German Act on Limited Liability Companies (Gesetz betreffend die Gesellschaften mit beschränkter Haftung, GmbHG) does not - as provided for by law - indicate its legal form and the limitation of liability in the company name, its representative appearing in legal transactions is liable for the incorrect legal appearance thereby created according to Sec. 311 para 2 and 3 analogous to Sec. 179 of the German Civil Code (Bürgerliches Gesetzbuch, BGB).

Without the required addition of "limited liability", the contracting party would otherwise be given the impression that a natural person is liable without limitation and consequently also with his or her entire private assets. This is particularly relevant in the legal form of an entrepreneurial company. Without the addition, according to Sec. 5a GmbHG, there is no indication of limited liability in the case of an entrepreneurial company. And it is precisely with this legal form that compliance with the specified designation is of particular relevance in business dealings, because no minimum share capital is provided for in the case of the entrepreneurial company. In order to make the limited liability and a possibly higher risk of default clearly visible to business transactions, it is so important to use the legally required addition.

BGH, III ZR 210/20 (13.01.2022)