If a managing director negligently or intentionally violates his duties he is liable to the company for damages, jointly and severally with any other managing director who is also in breach of their duties. A managing director can be held liable for payments made by the company after over- indebtedness was ascertained or illiquidity arose, particularly where those payments would not have been made by a diligent and prudent businessman. In exceptional cases, the managing directors can also be liable directly to the shareholders or third parties.
In several cases, misconduct of a managing director can lead to criminal liabilities, e.g. in case of:
In principle, a managing director cannot be held liable if the actions undertaken by him were approved by a shareholder resolution, unless such actions are illegal or the shareholder/general meeting resolution was contrary to the company’s Articles or bylaws. In such case the managing director is obliged to ignore any instructions received by the shareholders.
Any agreements between the company and the director excluding or limiting the director’s liability are prohibited by law.
The shareholders may grant full discharge to release a managing director from his liability for damages, but only three years after such a claim arose and upon the consent of the general meeting.
Please note, the liabilities of a managing director to third parties cannot be limited.
Several authorities of a managing director can be delegated to holders of a special proxy or authorised representatives. Nevertheless, the managing directors remain responsible for observing their obligations and can, hence, be liable for the actions of their delegates.
D&O insurance can be obtained against the liabilities of the managing director’s to the company or third parties. Conditions vary and depend on the particular insurance company. It is possible to have an umbrella agreement for all managing directors within the group. Under Slovak law, third parties generally do not have a direct claim against the managing director, only the company. However, the company’s creditors can claim damages from the directors if the company is unable to pay the creditor’s claims.
Please note that the D&O insurance does not protect the managing director against his criminal liabilities.