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ARTICLE · 07 JULY 2026

Liability Risks Arising From De Facto Management

Mayer Brown
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In small family businesses and medium-sized enterprises, individuals who assume management functions without formal appointment face significant legal exposure as "de facto managing directors." This risk becomes particularly acute during corporate crises when shareholders take operational control or when financing banks deploy representatives with extensive decision-making authority. German courts have developed comprehensive case law establishing that such individuals bear the same duties and liabilities a

GermanyCorporate/Commercial Law
Marco Wilhelm
Marco Wilhelm
Malte Richter
Malte Richter
Tina Hoffmann
Tina Hoffmann
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I. WHY THIS TOPIC IS IMPORTANT

The risk of liability as a “de facto managing director” (faktischer Geschäftsführer) is particularly elevated in small family businesses and medium-sized enterprises. This risk arises when an individual assumes management functions without having been formally appointed as a managing director or registered in the commercial register (Handelsregister). The consequences are significant: for all actions and decisions taken in that capacity, a de facto managing director is subject to the same duties and liabilities as a formally appointed managing director.
Such situations frequently arise during a corporate crisis — for example, when shareholders assume operational responsibilities and make decisions that fall within the exclusive purview of management, or when a financing bank effectively intervenes in corporate governance by deploying a representative with extensive decision-making authority.

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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