GER: Director’s Liability in a Managing Limited Partner GmbH

Jun 2, 2023 Benn-Ibler Rechtsanwälte

In principle, the managing director of a managing limited liability company of a German GmbH & Co. KG is answerable in the event of negligent management for the damages incurred by the limited partnership. This is also true if running the limited partnership is not the sole or essential task of the GmbH, according to the German Federal Supreme Court (Bundesgerichtshof, hereinafter BGH).

In the case at hand, the insolvency administrator of a GmbH & Co. KG filed a lawsuit. According to the partnership agreement, the GmbH as limited partner was authorised to manage the company. The defendant was appointed as additional managing director of the managing limited partner. The GmbH & Co. KG raised investor funds and made them available to a public limited company (hereinafter AG) as a loan. It was specified in the loan agreement that the loans were to be substantially secured. The plaintiff insolvency administrator of the GmbH & Co. KG now brought a claim against the defendant managing director on account of the bank transfer to the AG. The defendant did not have any involvement in the transfer itself. At the time of the transfer, only a small part of the investors’ money had been secured, contrary to the stipulations in the loan agreement.

The defendant managing director objected that the liability of managing directors under Section 43(2) of the Limited Liability Companies Act (Gesetz betreffend die Gesellschaften mit beschränkter Haftung, hereinafter GmbHG) does not apply to him. Both the lower courts and the BGH did not follow this view.

According to established case law by the BGH, the scope of protection concerning board membership and employment relationship existing between the limited partner GmbH and its managing director also extends to the limited partnership with regard to the managing director’s liability under Section 43 (2) GmbHG in the case of negligent management. In the case at hand, the managing director of the limited partnership had violated his duties as managing director by not preventing the money transfer to the AG. He would have been required to carefully examine the provisions of the loan. If he had managed the business and exercised his supervisory duties in accordance with his duties, he would have noticed the missing collateral. The managing director’s liability was also not precluded by the fact that, according to the internal allocation of responsibilities, it was not the sole or main task of the limited liability company to manage the business.

BGH, II ZR 162/21 (14.03.2023)