Liability of managing director despite formal discharge

The formal discharge of a managing director only relieves him of liability under certain conditions. These conditions are not met if the managing director conceals expenses in the accounts.

Facts

The ruling of the Higher Regional Court of Brandenburg (OLG Brandenburg) is based on the following facts: The plaintiff, a limited liability company (GmbH) active in the construction of electrical systems, is asserting claims for damages against its former managing director because he purchased and extended a caravan for private use via the company. The acquisition and expansion took place without the consent of the other shareholders. Thus, the defendant had breached his duties as managing director and is liable to the company in this respect. In the view of the defendant, the acquisition of the caravan had been co-ordinated with the other shareholders. In addition, he had been granted formal discharge, thus excluding liability for this reason alone.

The judgment of the OLG Brandenburg of 29.06.2022, Ref. 7 U 60/21

The lower court had rejected any liability of the managing director based on the fact that the managing director had been granted formal discharge. The OLG Brandenburg now upheld the plaintiff's claim and ruled that the defendant managing director was liable for the damage that had occurred. In contrast to the lower court, the OLG did not consider the requirements for discharge to be fulfilled. The defendant was also unable to prove that the acquisition and expansion of the caravan had been coordinated with the other shareholders. The acquisition of a caravan for private use therefore violated his duties as managing director. As such, he is required to make his business decisions for the good of the company, i.e. to maintain and increase the value of the company.

Practice note

The decision of the OLG is not surprising and shows once again that in practice the formal discharge of the managing director only rarely excludes his liability. In principle, the discharge of the managing director means that the company can no longer assert a claim for damages against its managing director (so-called preclusion effect). However, this preclusion effect only covers cases in which a possible liability claim would have been recognizable to the shareholders from the information provided by the management (in particular accounting and reporting). Shareholders are expected to carefully examine the documents received and, if necessary, to ask questions. However, as the OLG correctly points out, this duty of the shareholders to inquire is limited to those cases in which there is a reason to inquire. If, however, the managing director conceals facts, the formal discharge of the managing director has no legal effect in this respect. This was the case in the present case. After all, the defendant managing director had booked the caravan under the collective item "other means of transport" and described it as a "construction trailer". These positions did not have to cause the shareholders to inquire, because they are usual for an electrical equipment construction company. This system is also reasonable as the shareholders generally do not have comprehensive knowledge of the company’s affairs and are dependent on the accuracy of the information provided. A managing director may therefore also only rely on the exculpatory effect of the formal discharge if he himself has diligently fulfilled his duties.