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The Liability Risks as Managing Director: What You Need to Know in 2025

The Liability Risks as Managing Director: What You Need to Know in 2025

As a managing director, you are not only responsible for the strategy and operation of your business – you are also confronted with significant personal liability risks. Legislation and case law continuously exacerbate these risks. In this comprehensive article, you will learn about which liability risks will concern you in 2025, how recent judgments – especially the BGH ruling of July 2024 – expand your responsibilities, and what measures you should take to protect yourself and your company.

liability risks

1. Basic Liability Norms for Managing Directors

As a managing director, you are obliged under § 43 GmbHG to apply the care of a diligent and conscientious business manager. This means you must make all business decisions in the best interest of the company, observing legal and contractual duties. If there are breaches of duty, you are generally personally liable for the damage caused – even in cases of negligence.

In case of a dispute, the company only needs to prove that damage resulted from your actions or omissions. The burden of proof that you acted dutifully lies with you.

2. Breach of Duty of Care: The Biggest Liability Risk

Your duties of care include in particular:

  • The proper conduct of business

  • The regular review of the financial situation

  • The timely and complete submission of tax returns

  • The establishment and monitoring of an appropriate compliance management system

If you breach these duties, you are personally liable to the company, shareholders, and other stakeholders. Duty breaches related to insolvency delay and compliance violations are particularly severe.

3. Insolvency Delay: New Liability Dimensions after BGH Ruling July 2024

The BGH ruling of 23.07.2024 (II ZR 206/22) has significantly tightened liability for managing directors in the case of insolvency delay.

What does this mean for you?

  • Ongoing Liability: Your liability does not automatically end when you leave the management. If you breached the insolvency filing obligation during your term and thereby created a continuing danger, you remain liable even after you step down.

  • Liability for New Creditors: You are liable not only for damages during your tenure, but also for those that arise after you leave through new contracts of the insolvent company with new creditors, provided the breach of duty was causative5.

  • Limited Discharge Options: Discharge is only possible if the company has sustainably recovered after your breach of duty and only becomes insolvent again later.

Practical Consequence:
You must always keep an eye on the financial situation of your company and promptly file for insolvency in case of insolvency or over-indebtedness. A failure can cost you dearly even years after stepping down.

4. Compliance Management: Duty and Risk Source at the Same Time

Another central liability risk is the lack or inadequacy of a compliance management system (CMS). Case law requires you to create a corporate organization that ensures legality and efficiency.

Your duties:

  • Establishment of a CMS that prevents legal violations in the company

  • Implementation of control mechanisms (e.g., two-person principle)

  • Conducting employee training

  • Introduction of documentation and whistleblower systems

  • Regular review and improvement of the CMS

Liability Trap:
If you fail to take these measures, you are personally liable for resulting damages – even if you did not commit the violations yourself.

5. Supply Chain Due Diligence Act (LkSG): New ESG Liability Risks

Since 2023, the Supply Chain Due Diligence Act (LkSG) applies to large companies, and from 2024 also to companies with over 1,000 employees. As a managing director, you must ensure that your company meets the human rights and environmental due diligence obligations throughout the supply chain.

Risks:

  • Fines for violations

  • Exclusion from public contracts

  • Civil liability for damages in the supply chain

Your task:
You must establish processes to identify, minimize, and document risks in the supply chain. If you cannot demonstrate that you have adequately dealt with the legal situation and taken appropriate measures, you are personally liable for damages.

Update: Omnibus Procedures and Amendments to the Supply Chain Act 2025

Reduction of Due Diligence Obligations: Due diligence obligations will in future basically be limited to direct business partners. Indirect suppliers must only be included in risk management on a case-by-case basis – that is, when there are specific indications of risks.

Fundamental changes are also pending at the national level:

  • Abolition of the Reporting Obligation: The reporting obligation under the LkSG is to be abolished immediately. Due diligence obligations will remain in place until the implementation of the European directive (CSDDD), but will no longer be sanctioned – with the exception of massive human rights violations.

  • New Law Planned: The LkSG is to be replaced by a “Law on International Corporate Responsibility” that implements the CSDDD into national law. Until then, the due diligence obligations of the LkSG will continue to apply, but without the previous sanctioning severity.

  • Restricted Scope: In the future, only companies with more than 1,000 employees and an annual turnover of over 450 million euros will be covered. This will significantly reduce the number of companies affected.

  • Clarification of Due Diligence Obligations: Due diligence obligations will be focused on massive human rights violations. Sanctions for other risks will be abolished, reducing the practical liability burden for managing directors.

  • Smaller Companies (< 500 employees) are largely exempt or only have to provide limited information.

Note New EU Regulations: In parallel, other EU regulations come into effect, such as the EU Battery Regulation (from August 2025), the EU Deforestation Regulation (from December 2025), and the EU Forced Labor Regulation (from December 2027). These tighten due diligence obligations in certain industries and supply chains.

6. Antitrust Law: Liability for Fines and Investigation Costs

Antitrust violations are another serious liability risk. If there is an antitrust procedure, fines can be imposed on the company and you personally. In addition, you are liable for investigation and defense costs if you have breached your corporate duties7.

Open Legal Question:
Whether you as a managing director can also be held personally liable for the company’s antitrust fines is currently the subject of a proceeding before the ECJ. The uncertainty remains – and with it the risk7.

7. Increased Liability through Recent Case Law

The trend in case law is clearly towards increased liability. This is shown not only by the BGH ruling on insolvency delay, but also by judgments such as in the Wirecard trial and the so-called “Neubürger case law” on compliance liability.

Key Lessons:

  • You must not blindly rely on colleagues or consultants (“principle of mistrust”).

  • The Business Judgment Rule only protects you if you decide on a solid information base and recognize and address existential risks.

  • For unclear legal questions, you must obtain external legal advice if in doubt and document your decisions.

8. Personal Liability: Civil, Criminal, and Regulatory

Your liability as a managing director is multifaceted:

  • Civil Liability: Towards the company, but also towards third parties (e.g., new creditors after the BGH ruling).

  • Criminal Liability: In cases of intentional breaches of duty, such as fraud, breach of trust, insolvency delay.

  • Regulatory Liability: For violations of the LkSG, antitrust law, data protection, anti-money laundering.

9. Typical Liability Traps at a Glance

  • Late or omitted insolvency filing

  • Lack or inadequate compliance organization

  • Disregard of duties of care in financial monitoring and tax declarations

  • Violations of the Supply Chain Act (LkSG)

  • Antitrust violations and lack of clarification

  • Blind trust in colleagues or consultants without own review

  • Lack of documentation of decisions

  • Insufficient training and control of employees

10. How can you Minimize your Liability Risk?

1. Take Duties of Care Seriously:
Monitor the economic situation of your company continuously and react immediately in crises.

2. Establish Compliance Management:
Implement an effective CMS tailored to the risks of your company. Document all measures and train your employees regularly.

3. Check Supply Chain Processes:
Ensure that your company meets the LkSG requirements. Conduct risk analyses and preventive measures and document everything carefully.

4. Stay Informed:
Follow current legislative changes and case law. Obtain external advice in case of uncertainty.

5. Document Decisions:
Record all significant decisions and their basis in writing. This helps in case of liability to provide evidence.

6. React Early in Crises:
File for insolvency immediately in case of impending insolvency. Do not wait until the situation worsens – this can catch up with you years later.

7. Review Personal D&O Insurance:
A Directors & Officers insurance can protect against the financial consequences of a liability in an emergency. Check whether the insurance coverage is current and adequate.

Conclusion: Liability Risks are Becoming More Differentiated

The omnibus procedure and the planned changes to the LkSG lead to the fact that the liability risks for managing directors in the area of supply chain compliance and ESG reporting obligations are overall decreasing but becoming more complex. The requirements will focus more heavily on large companies and direct suppliers. Civil liability will be restricted to national regulations, reporting obligations will be reduced and implementation obligations stretched.

Despite the relief, you should not neglect risk management and supply chain monitoring. Because in the case of specific indications of risks – especially massive human rights violations – you remain responsible.

Further Sources