Duties of managing directors in the internal organization of the company

Managing directors are allowed to take certain risks. In particular, economic expediency is not subject to judicial review. However, the managing director's duty of care requires the dual control principle if the company's activities have a tendency to cause damage.

Facts of the case

The following facts form the basis of the ruling of the Nuremberg Higher Regional Court (Oberlandesgerichrt, "OLG"): The plaintiff is a GmbH & Co. KG (a limited partnership with a limited liability company as a partner). It issued credits to its customers in the form of fuel cards. It limited these by means of fuel limits. However, it did not check compliance with them, which led to bad debts. Six years after these incidents, the defendant managing director took part in a training course. The subject of this training was the granting of credits to customers and the principle of dual control to be observed in this context. However, he did not implement this measure. A short time later, an employee manipulated accounts: Certain customers whom this employee had recruited were in financial difficulties. The employee therefore billed "his" customers' refueling operations to other customers. Although he was not responsible for these transactions, the employee had extensive access. He was able to manipulate the billing in such a way that complaints were only addressed to him. The managing director considered blocking the fuel cards when the customers' credit lines were almost exhausted. Instead, however, the employee made the proposal to work for the financially weak customer himself as an authorized officer. The managing director agreed. Ultimately, the plaintiff became aware of the actual circumstances and the employee's "retransfers". The plaintiff therefore claimed damages from the defendant managing director.

The district court upheld the claim. The defendant appealed.

The judgment of the OLG Nuremberg of March 30, 2022, Case No. 12 U 152019

The appeal was not successful. The liability of the managing director was confirmed by the OLG. The managing director had violated his duties of care. The scope of the duties of care to be observed is based on the diligence of a reasonable businessman. In this respect, there is a wide scope for assessment. In particular, economic expediency is not subject to judicial review and business risks may also be taken within certain limits. However, the leeway is exceeded if the risk of damage is clear and there are no reasonable grounds for taking it. If personal injury or significant financial impact could result from improper performance, such a clear risk of harm exists. In this case, the introduction of the dual control principle is necessary. Since the defendant managing director did not introduce the dual control principle despite training and claims in the past, he violated his duty of care.

Comment

The ruling provides information on the duties of care that managing directors must observe in their internal organization. A managing director's essential duty is to establish an organizational structure that ensures that employees act lawfully. Above all, compliance measures for monitoring and control are the subject of such a structure. How such instruments are designed is part of the discretion of the management.

The OLG Nuremberg states that the dual control principle applies in the case of activities prone to damage. Such activities are given, if personal injury or major financial damage is possible. By providing a concrete instrument, the court creates legal certainty. A detailed examination of one's own organization is particularly advisable if the managing director is aware of a susceptibility to damage on the basis of his own experience and relevant training.

The objection of the managing director that compliance with the dual control principle would not have been possible due to the lack of personnel was not relevant for the court. If delegation of monitoring duties is ruled out, the management must carry out the necessary monitoring measures itself. If it can delegate them, it must carefully select and monitor the supervisors.