Directors’ Duties in Germany

>> Powers and Duties in Germany

You must act within the powers imposed by legislation, the company’s Articles of Association (“articles”) and by-laws. The articles govern how the company is to be run, including the powers and responsibilities of directors.

Duties – skill and care

When exercising directors’ powers, you are required to exhibit such a degree of skill as may reasonably be expected from a person with your knowledge and experience, as well as exercise independent judgment.

You must also exercise a degree of diligence and care in your actions as a company director. The test applied to determine ‘an acceptable level of care’ is what a reasonable person would do in looking after their own affairs.

Duties – general

In general, the entrepreneurship of the company (“Leitung des Unternehmens”) lies with the managing directors. When carrying-out the administration of the business, they have to apply the diligence of a prudent businessman, ie they have to supervise all actions of all employees and the other managing directors (cross-control).

The managing director also has a general duty of diligent management which includes, in particular, the following duties:

  • to comply with and ensure the company’s compliance with all applicable statutory and legal obligations
  • to use his best efforts to promote the purpose of the company
  • to comply with and ensure the company’s compliance with all applicable statutory and other legal obligations and requirements
  • to maintain the share capital and assets of the company
  • to pay all taxes and contributions in due course and in accordance with legal requirements
  • to call meetings as required by law or the Articles of Association
  • to ensure that the company keeps proper books of accounts and records
  • not to make or accept improper payments
  • not to compete with the business opportunities of the company
  • not to disclose trade or business secrets or any other confidential information belonging to the company

The managing directors also have to observe the instructions given by the shareholders via shareholders’ resolution.

Duties – other

There are many specific duties for a managing director, some of the more onerous have been set out below:

  • The managing director has to ensure that the company does not acquire shares which are not fully paid up, with funds that are required for the maintenance of the capital.
  • The managing directors are liable for the preparation of the annual financial statements

(“Jahresabschluss”) and the financial report (“Lagebericht”) of the company.

  • The obligation to file for insolvency within three (3) weeks when the company is over-indebted or unable to pay its creditors.
  • The managing directors have obligations with respect to taxes. Vis-á-vis the employees, the managing directors are obliged to file the monthly wage-tax notification (“Lohnsteuervoranmeldung”) and to retain the wage-taxes and forward these to the tax office (“Finanzamt”). The managing directors also have to ensure the timely preparation of the tax return (“Jahressteuererklärung”).
  • The managing directors have obligations with respect to fiduciary duties. They must preserve the economic interest of the company. Hence, the managing directors are not allowed to undertake any actions which compete with the company. Furthermore, omission of business, poor performance as well as the assumption of too higher risks can constitute a violation  of this obligation.

Safeguarding a number of legal provisions in relation to health and safety of workers, examples  of which include the following:

  • complying with environmental regulations for the produced or marketed products, the production process, the organisation of the work place and work facilities, such are public law permits, and compliance with pollution limits and general reporting duties
  • ensuring statutory accident insurance remains in place, and that there is compliance with provisions for prevention of work place accidents

Please also note anti-bribery rules, as set out in the German Criminal Code (Strafgesetzbuch). “Anti bribery” legislation means that it is prohibited to bribe:

  • any governmental official any person representing another party with whom the company is doing business with in order to coerce the individual to act in a certain manner

Latest version updated 22nd March 2018

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