The Legal 500

Twitter Logo Youtube Circle Icon LinkedIn Icon

GRP Rainer LLP

AUGUSTINERSTRAßE 10, 50667 COLOGNE, GERMANY
Tel:
Work +49 221 272 27 50
Fax:
Fax +49 221 272 27 52 4
Email:
Web:
www.grprainer.com
Berlin, Bonn, Cologne, Dusseldorf, Frankfurt, Hamburg and 3 more

Show all Press releases

GRP Rainer Rechtsanwälte: Assessing managers’ liability risk

July 2017

Company managers bear a high level of not only responsibility but also risk. Various measures can be taken to reduce the risk of directors’ and officers’ (D&O) liability.

When a crisis or insolvency occurs, the manager’s accountability and thus also his personal liability are issues that ever more rapidly take centre stage. Liability claims directed at executive boards, supervisory boards or managing directors can arise even in cases involving simple negligence. These can result in claims for damages or compensation against the executive bodies. We at the commercial law firm GRP Rainer Rechtsanwälte note that since such claims typically entail large sums of money they can jeopardize the existence of the companies concerned. Compounding the matter is the fact that there is a shift in the burden of proof in cases involving claims brought by a company against its own executive bodies, i.e. managers need to demonstrate that they properly fulfilled their duties.

Liability cases can arise if, for instance, taxes or social security contributions were not properly paid, disclosure and reporting obligations were infringed or executive bodies can be accused of misconduct in relation to the crisis or insolvency.

That being said, it is possible to reduce the risk of personal liability by taking appropriate measures. It is important to first of all carry out an assessment into the risk of personal liability. Additionally, one needs to keep in mind the risk of liability as early as when drafting employment contracts for managing directors, service contracts as well as any rules of procedure, and whenever possible make arrangements to limit liability.

A D&O insurance policy should also be taken out for the executive bodies, with this being tailored to the individual liability risks. This ought to deal with the insured sum as well as both retroactive and run-off coverage.

Another key element to reducing the risk of liability is to set up an effective compliance management system to ensure that statutory and contractual provisions are observed by all of the employees at the company in question.

Lawyers who are experienced in the field of company law can assess the risks as they pertain to managers’ liability and take appropriate steps to substantially reduce this risk. If claims are nevertheless raised against the executive bodies, all legal measures can be taken to fend off or, conversely, enforce said claims.

https://www.grprainer.com/en/legal-advice/company-law/executive-supervisory-board.html

Legal Developments by:
GRP Rainer LLP

Legal Developments in Germany

Legal Developments and updates from the leading lawyers in each jurisdiction. To contribute, send an email request to
  • LAG Düsseldorf: Dismissal with immediate effect valid in response to threat

    Anyone who seriously threatens their employer or superior should expect to be dismissed with immediate effect. This was confirmed by a ruling of the Landesarbeitsgericht (LAG) Düsseldorf [Regional Labour Court of Düsseldorf] from June 8, 2017 (Az.: 11 Sa 823/16).
  • Tax evasion: Only voluntary disclosure affords protection from severe penalties

    Anyone who has been caught for tax evasion should expect to be faced with severe penalties. Voluntary disclosure is the only way of returning to a state of normal tax affairs and avoiding penalties.
  • GSK Update: AIFM Marketing in Germany - The clock is ticking for U.S. and other non-EU fund managers

    Our GSK Update informs about the impact of recent German investment fund legislation (UCITS V Implementation Act) for AIF managers, who are not domiciled in the EU (“non-EU-AIFM”) and who seek to market AIF shares in Germany in accordance with applicable German investment fund law under the EU-AIFM Directive (2011/61/EU).
  • GSK expands Luxembourg presence with a new tax partner

    Opened at the beginning of March 2016, GSK Stockmann + Kollegen continues to expand its Luxembourg office. Mathilde Ostertag recently joined the Luxembourg team of Equity Partners Dr. Marcus Peter, Andreas Heinzmann and Dr. Philipp Mößner as Local Tax Partner.
  • EIA - Strengthening the role of the public

    Among other things, the recent amendment to the Environmental Impact Assessment Act has broadened the rights of (what is termed) the "affected public". The affected public consists primarily of various citizens' initiatives pursuing environmental or public-health purposes. It may for instance file an appeal against a negative decision at the screening stage (i.e., a decision according to which the given project does not require the issuance of an EIA report), and seek its annulment in court. The affected public has been granted a stronger voice also in subsequent procedures in which the fate of a building project is being decided: zoning proceedings and the proceedings on the issuance of a building permit. Taken together, these legislative changes may make it more difficult to implement projects which require an EIA report; in particular, the length of permission proceedings may be substantially extended.
  • New Top Level Domains – Noerr expert warns against trademark infringements

    On June 13, the Internet Corporation for Assigned Names and Numbers (ICANN) published the names of those who have applied for a new top level domain the ending of which may be geographic, such as "munich", industry identification such as "insurance" and even all trademark names and company descriptions such as "canon" and "adidas".
    - Noerr
  • No obligation to set up filtering systems in order to prevent copyright violations

    ECJ, decision of February 16th, 2012, ref. C-360/10 – SABAM
  • Further ECJ Ruling concerning NGO’s right of action under German environmental law

    For the second time within a short period of time, the non-governmental organisations right to challenge administrative decisions under German law is going to be subject to the jurisdiction of the European Court of Justice (ECJ). In January 2012, the German Supreme Administrative Court (Bundesverwaltungsgericht) referred a case to the ECJ for a preliminary ruling concerning the NGO’s right of action.
  • Lessons in Cross-Border M & A Transactions

    The fundamental advice for international business transactions is obvious and easy to understand: different countries have different laws, business habits and cultures. These differences may range from minor nuances, such as lengthy French business lunches or unusual Spanish office hours, to significant legal roadblocks, such as strict European employment laws.
  • Priority rental rights in insolvency

    Parties to rental contracts for commercial premises often agree priority rental rights. In practice, this concept is used to cover a whole series of legal structures. These range from fixed options for the tenant to a promise made by the landlord as a business policy that if any additional premises become available, they will be offered to the tenant. In 2010 the Berlin Court of Appeal issued a ruling on such priority rental rights in insolvency; the decision has recently been published.