• D&O Liability: Recourse Claims against Executive Board, Managing Directors or Supervisory Board
  • May 20, 2015
  • Law Firm: GRP Rainer LLP - Munich Office
  • Recourse can be taken against governing entities such as managing directors, executive boards or supervisory boards where mistakes are made in managing the company. The extent of recourse claims is disputed.

    GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: Even in the case of simple negligence, a company can take action against its governing entities such as managing directors, executive boards or supervisory boards. However, the extent of this internal liability of entities vis-à-vis the company and to what extent recourse claims are justified is debateable.

    By its decision of January 20, 2015, the Düsseldorf Regional Labour Court recently rejected unlimited liability for members of company entities with respect to recourse claims of a company and in so doing largely confirmed the case law of the Essen Labour Court of December 19, 2013 (1 Ca 657/13). The case concerned recourse claims brought by a company against a managing director due to violations of competition law. The company demanded compensation from the managing director in the amount of 193 million euros, justifying this by saying that the latter knew of the agreements on price and quotas and tolerated them, or at least breached his duty of supervision. The Essen Labour Court and Düsseldorf Regional Labour Court dismissed the claim.

    The Regional Labour Court held that the fine imposed by the German Federal Cartel Office (Bundeskartellamt) on the company was not recoverable in relation to the defendant as a natural person. In its view, this follows from the function of the company fine, as the company also obtained an advantage from the cartel infringement. It must therefore be extracted from the company and not the person who acted. Furthermore, competition law also makes a distinction in cases involving financial penalties between companies and natural persons. Fines for natural persons are limited to one million euros, whereas for companies they can amount to up to ten per cent of turnover, which is another reason why the fine could not be passed on to the managing director. Additionally, the Essen Labour Court had pointed out that evidence of the cartel in the context of a compliance review was not sufficiently pursued. To this extent, the superior bodies are partially to blame.

    The governing entities of a company can protect themselves against liability claims with measures such as a compliance management system or by taking out D&O insurance. For further measures to enforce and fend off claims, they can turn to lawyers who are experienced in the field of company law.