When it comes to the question of personal liability of GmbH managing directors, you have to distinguish different aspects. On the one hand, there is the issue of internal and external liability. Any damage suffered by the GmbH or its shareholders leads to liability in the internal relationship. Claims for damages by third parties, such as business partners, are accompanied by liability in the external relationship. You also have to distinguish whether you are liable as a shareholder managing director or as a third-party managing director. Other important aspects in this context are liability in the event of insolvency and for taxes vis-à-vis the tax office.

1. Liability of the GmbH Managing Directors – Introduction

A GmbH has a very big advantage over most partnerships: Its shareholders are liable only with their capital contribution. Therefore, the actual name behind the common abbreviation is correct: limited liability company. No matter what you hire as managing director, employee or employee of a GmbH, the GmbH is only liable with its share capital. And since the share capital is usually only the legally required minimum capital of EUR 25,000, the financial risk for GmbH shareholders is rather manageable.

But is that really true? And what about the liability of the GmbH managing directors? If the GmbH is limited in its liability, then maybe one or more GmbH managing directors in the liability? Well, as it looks, there are some aspects related to the limitation of liability of a GmbH, whose background is worthy of a blog post. So let's get started.

2. Liability of the GmbH Partner Managing Director vs. External Managing Director

Let’s start with some distinctions that are relevant for explanation – and outline. For example, it is possible for a GmbH to found it either alone or together with several partners. In both cases, you can decide whether you want to represent and manage the GmbH as managing director yourself, or whether you want to hire a foreign person for this purpose. In the latter case, one speaks of a third-party manager. Often, however, it is the case that you found a GmbH alone and also run it alone. If two or more shareholders establish a GmbH, you can decide whether to take over the management together, transfer the management to only one or only some of the shareholders or consider third-party managers – in addition or acting alone.

3. Liability of the GmbH Managing Directors internally and externally

Then there is another aspect, according to which one has to distinguish the liability of GmbH managing directors. On the one hand, the liability to the own GmbH or its shareholders may be given. This is called internal adhesion. On the other hand, however, adhesion in the external relationship is also possible. Here you can further distinguish whether it is a liability to third parties, including banks, or to the financial authorities. This is because different legal standards apply, namely either civil law or tax law. But more on that in a moment.

4. Liability of the GmbH shareholders in detail

4.1. Internal liability of the GmbH Managing Directors

4.1.1. Internal liability of the GmbH shareholders Managing Director

For a GmbH with only one shareholder, internal liability is almost always without great relevance. After all, one would refer oneself to liability in the event of damage. Only in the case of insolvency can this be different. The insolvency administrator represents the GmbH. On this basis, he can hold the shareholder liable for his actions as managing director.

However, if a GmbH has several shareholders, there may be a potential liability for one managing director, possibly also for several. In this constellation, a discharge can be agreed in advance in the company contract, so that the managing director or directors can manage the GmbH without the constant risk of liability. Another option is special D&O insurance, which managing directors can take out for their own protection. In the event of damage, it then jumps in. In addition, you can also hire several managing directors and transfer different competences to them. Thus, managing directors are only liable for such cases that are subject to their responsibility.

4.1.2. Internal liability of third-party managers

A third-party managing director is also exposed to the risk of liability towards the GmbH he manages. If the shareholders want to give the external managing director more freedom of action, they can also agree on a discharge. Again, managing director insurance is a way to minimize the risk of liability. Even if the directors are removed, there is some protection.

4.2. External liability

Here there is no difference between a shareholder managing director and a third-party managing director. In both cases, the limitation of liability of the GmbH applies in principle. In the case of insolvency, however, this is different. In this case, there may be a liability on a private level in justified cases connected with certain actions of the GmbH Managing Directors. In particular, in the case of payments via debitorised bank accounts, the rights of third parties in relation to the servicing of civil claims may be affected.

Equally important is the liability of the GmbH managing directors in the tax context. If a GmbH managing director fails to pay the payroll tax or the sales tax in time, he is liable as a tax debtor in accordance with §§ 34, 35 and 69 AO. Since these are basic duties of a GmbH Managing Director, a discharge to this duty should be excluded for most shareholders.

5. Liability of the GmbH Managing Directors – Conclusion

Let’s summarize our findings: If you are the sole GmbH shareholder and run the GmbH also as managing director, the risks of actual liability are virtually limited to the case of insolvency. Only in external relations can a liability risk be important in certain cases (tax liabilities).

For external managers, on the other hand, you are exposed to the risk of liability both internally and externally. At least in the internal ratio, however, the risk of adhesion can be minimized. Options for this are either the conclusion of a D&O insurance or the discharge by shareholder resolution. A restriction of competence to certain activities may also be considered.

Furthermore, the liability of the GmbH managing directors for taxes of all kinds must be considered. This is due to the fact that the legislature has regulated this separately in tax law. This applies irrespective of whether you are a GmbH Managing Director or a third-party Managing Director.

And fourth, the insolvency case represents a considerable risk for GmbH managing directors of all kinds. Because an insolvency administrator may, due to actions of the managing directors, hold them responsible for incurred liabilities. This applies both internally and – and especially – externally.