Managing director liability in a GmbH: When you personally bear liability – and how to protect yourself

When is a GmbH managing director personally liable? Not automatically, but only if a specific liability condition is met. This is particularly likely in the event of a breach of the management duties (§ 43 GmbHG), a late insolvency application (§ 15a InsO), improper payments after the insolvency has become due (§ 15b InsO), violations of tax obligations, non-deducted employee contributions to social security, and own criminal wrongdoing.

The liability limitation of the GmbH generally protects the shareholders. However, managers can be personally liable if they violate their own statutory or organizational obligations: towards the company in a crisis, towards insolvency administrators and creditors, and under the respective statutory requirements towards the tax authorities and social security institutions for unpaid taxes or social security contributions. Part of these risks can be significantly reduced through organization, documentation, and timely advice.

When is a GmbH managing director personally liable?

Two terms help in the classification. In-house custody is the liability of the managing director towards the GmbH itself, that is, towards the company that he or she manages. External liability is the personal liability towards third parties, such as creditors of the GmbH, the tax authorities or the social security institutions.

The most important liability areas can thus be summarized as follows:

1. Liability towards the GmbH: The managing director culpably breaches his duties as an organ, and the company suffers damage as a result (managing director → GmbH → § 43 GmbHG).
2. Liability in the corporate crisis and insolvency: Despite insolvency or overindebtedness, the managing director does not file an insolvency application in a timely manner or makes inadmissible payments after the insolvency has become due (managing director → insolvency status → §§ 15a, 15b InsO).
3. Liability towards tax authorities and social security: Company taxes are not paid as a result of intentional or grossly negligent breach of duty (manager → tax office → §§ 34, 69 AO), or employee contributions to social security are deliberately withheld (manager → social security provider → § 823, paragraph 2 BGB, in conjunction with § 266a StGB).
4. Liability towards individual creditors: Creditors suffer damage because the insolvency application was submitted late (§ 823, paragraph 2, BGB, in conjunction with § 15a InsO).
5. Personal criminal liability: The managing director himself commits an unlawful act, such as deceiving contractual partners, and is liable for it in addition to the company.

Liability towards the GmbH pursuant to § 43 GmbHG

After § 43, paragraph 1 of the GmbHG Managing directors must exercise the diligence of a proper businessperson in matters concerning the company. If they negligently violate this duty, they are liable to the company for the resulting damages; several managing directors are liable as joint debtors (§ 43, paragraph 2, GmbHG). The standard is not the individual abilities of the managing director, but rather what can be expected of a proper business manager in a comparable situation.

Entrepreneurial discretion: the Business Judgment Rule

Not every decision that turns out to be a mistake later on constitutes a breach of duty. The jurisprudence also applies the idea of § 93, paragraph 1, sentence 2 of the AktG to the managing director of a GmbH: A breach of duty does not exist if the managing director could reasonably assume, based on reasonable information, to act in the best interests of the company when making an entrepreneurial decision. A sufficient basis of information, the absence of conflicts of interest, and a decision that is not unreasonable are prerequisites.

The Business Judgment Rule only applies to entrepreneurial decision-making, Thus, questions where there are several acceptable ways to proceed – such as an investment, the development of a new market, or the choice of a supplier. It does not protect when the law clearly prescribes or prohibits a specific action. This includes, in particular, the obligation to file for insolvency, the tax obligations, the capital preservation regulations, and the prohibition on payment after entering the insolvency stage. There is no discretion left for the managing director to rely on.

Who has to prove something?

In accordance with § 93, paragraph 2, sentence 2 of the AktG, the company must demonstrate and prove that it has suffered damage that can be attributed to potentially negligent conduct by the managing director. The managing director must then prove that he acted in accordance with the law or that he is not at fault. Therefore, careful documentation of important decisions for managing directors is more than just a formality.

Instructions, consent, and discharge

If the Managing Director acts on the instructions of Shareholders' meeting or with the consent of all the shareholders, he is generally not liable to the company. However, this only applies insofar as the instruction is lawful and its compliance does not violate mandatory statutory provisions or creditor protection regulations. The managing director is not required to follow a unlawful instruction, and it does not relieve him of liability. This relief effect ends where creditor protection begins: For payments contrary to the capital conservation regulations (§ 30 GmbHG) and for the prohibited acquisition of own shares (§ 33 GmbHG), the managing director remains liable for damages insofar as the compensation is necessary to satisfy the creditors (§ 43, para. 3, GmbHG). The relief granted by the shareholders’ meeting generally excludes claims for damages that were apparent upon a careful examination of the submitted documents.

Statute of limitations and limitation period

The shareholders’ meeting decides on the assertion of claims against the managing director (§ 46 No. 8 GmbHG); in insolvency proceedings, the insolvency administrator asserts the claims. The claims under § 43 GmbHG expire after five years (§ 43 Abs. 4 GmbHG).

Several Managing Directors: What a division of responsibilities achieves

If several directors are appointed, they can divide the tasks among themselves. A division of responsibilities can be a relief, but it does not completely eliminate responsibility. According to the Federal Court of Justice, effective division of responsibilities requires a clear and unambiguous delineation of tasks that is shared by all directors, ensures the complete performance of tasks by professionally and personally qualified individuals, and upholds the overall management’s authority over non-delegable matters (Judgment of 06.11.2018, II ZR 11/17).

A written form is not necessarily required thereafter. However, written documentation is regularly the appropriate means of proving the division in the event of a dispute; without it, the managing director is easily able to provide evidence. Even in the event of effective division, each managing director remains obligated to supervise the others. For monitoring the economic situation and the duty to apply for insolvency, each managing director bears the responsibility themselves; in a crisis, the control obligations increase significantly.

Managing director liability in crisis and insolvency: §§ 15a, 15b InsO

Special liability risks arise when the company falls into economic difficulties. Even before reaching insolvency, it is liable. Section 1 StaRUG the management, continuously monitoring developments that could endanger the continued existence of the company, and taking countermeasures if necessary. Bankruptcy petition obligation (§ 15a InsO) and payment ban (§ 15b InsO) are two different obligations: the first concerns the timely filing of the petition, the second the handling of the company’s assets upon entering the insolvency stage.

Obligation to file for insolvency after § 15a InsO

If the GmbH becomes insolvent or overindebted, the managing director must file for insolvency without any culpable delay – no later than three weeks after the insolvency has occurred and six weeks after the overindebtedness has occurred (Section 15a, paragraph 1 of the InsO). The deadlines are maximum deadlines, not general waiting periods: they may only be exhausted as long as a restructuring is carried out seriously and with a justified prospect of success. If it is already clear beforehand that the insolvency cannot be resolved in time, the application must be submitted immediately. Whoever deliberately or negligently fails to submit the application, does not submit it correctly or does not submit it in a timely manner, commits a criminal offense (§ 15a Abs. 4 and 5 InsO).

A company is insolvent when it is unable to meet its due payment obligations (§ 17, para. 2 InsO). It is overindebted when its assets no longer cover its liabilities, unless the continuation is predominantly likely in the next twelve months, given the circumstances (§ 19, para. 2 InsO).

Payment ban under § 15b InsO

Upon the entry into insolvency or overindebtedness, the managing director may no longer make payments for the company, unless they are in accordance with the diligence of a proper and conscientious business manager (Section 15b, paragraph 1 of the InsO). The provision has replaced the former § 64 of the GmbHG as of January 1, 2021; the case law on the old law is largely continued. The term “payment” is to be understood broadly and also covers other asset outflows, such as deposits in a balance account maintained in accordance with a plan.

The law distinguishes between two phases:

• Within the application period: Payments in the ordinary course of business, in particular for the maintenance of business operations, are considered to be in accordance with the diligence of a prudent business manager, as long as the managing director takes measures to sustainably eliminate insolvency risk or prepares a bankruptcy application with the required diligence (§ 15b, para. 2 InsO).
• After the application deadline: If the application is not submitted in time, payments are generally no longer compatible with the diligence of a proper business manager (§ 15b, paragraph 3, InsO).

Anyone who makes payments in contravention of § 15b, paragraph 1 of the InsO is generally liable to reimburse the company (§ 15b, paragraph 4 of the InsO). Unlike under the old law, the managing director can prove that creditors have suffered less damage; in that case, his liability is limited to that damage. The burden of proof lies with the managing director. The claims generally expire after five years; in the case of listed companies, the deadline is ten years (§ 15b, paragraph 7 of the InsO). In practice, the insolvency administrator asserts this – often years after the relevant payments.

Insolvency evasion: Liability towards creditors

If the managing director violates the filing requirement, he is also personally liable to the creditors under § 823(2) BGB in conjunction with § 15a InsO. Creditors whose claims existed already at the time of insolvency (old creditors) can claim the so-called quota damage, i.e., the amount by which their insolvency ratio has decreased due to the delay. Those who only contract with the company afterwards (new creditors) can, in principle, claim to be treated as if they had not entered into the contract.

This liability does not necessarily end with the departure from office. The Federal Court of Justice has ruled that a dismissed managing director is generally also liable for damages incurred by new investors who entered into contractual relations with the company only after his departure – provided that the danger situation created by his breach of the duty to report exists even after the damage has occurred (Judgment of 23.07.2024, II ZR 206/22). The fact that the successor also violates the duty to file a report does not exonerate him. The situation is different if the company had recovered significantly in the interim. A reprimand in the crisis therefore does not remove liability for previously committed breaches of duty.

Managing director liability for taxes and social security contributions

Taxes: §§ 34, 69 AO

The managing director is responsible for fulfilling the company’s tax obligations and, in particular, ensuring that taxes are paid from the company’s funds (§ 34 AO). He is personally liable under Section 69 of the AO only insofar as taxes result from intentional or grossly negligent If these obligations are not fulfilled or not paid in a timely manner. The tax office then takes action by issuing a liability notice. The Federal Finance Court’s case law strictly applies to the payroll tax: If the funds are not sufficient to cover full wages, including payroll tax, the wages must be reduced to the extent that the resulting payroll tax can be deducted. For several managing directors, the Federal Finance Court requires a written agreement for tax relief through departmental allocation.

For the conflict with the payment ban, Section 15b, paragraph 8, of the InsO contains a special conflict rule: If taxes are not paid between the onset of insolvency and the decision of the insolvency court, or are not paid in a timely manner, there is no violation of tax obligations, provided that the managing director complies with his/her reporting obligations under Section 15a of the InsO.

Social security: § 823, paragraph 2, BGB, in conjunction with § 266a StGB

The withholding of employees' contributions to social insurance is illegal under Section 266a of the Criminal Code criminal offense. If the requirements of this provision are met, the managing director is also personally liable to the social security institutions for the withheld contributions under § 823, paragraph 2, BGB. In particular, intent is required; conditional intent is sufficient. Whether and how contributions can be agreed upon in the crisis with the payment ban of § 15b InsO must be examined on a case-by-case basis; with regard to the former § 64 GmbHG, the jurisprudence has deemed the payment of employee contributions to be compatible with the diligence of a proper business manager.

Further liability pitfalls in everyday life

• Missing legal form supplement: The company’s name must contain the designation „limited liability company“ or an intelligible abbreviation (§ 4 GmbHG), in which Limited Liability Company (Ltd.) the addition „Unternehmergesellschaft (haftungsbeschränkt)“ or „UG (haftungsbeschränkt)“ (§ 5a, paragraph 1, GmbHG). If the managing director does not include this addition, he may be personally liable under legal principles, because the contracting party could assume unlimited liability (for the UG: BGH, judgment of 12 June 2012, II ZR 256/11).
• Act before registration: Anyone who acts in their own name before the company is registered in the commercial register is personally liable (§ 11, paragraph 2 of the GmbHG).
• Payments to shareholders: Payments to shareholders from the assets required to maintain the share capital are prohibited (§ 30 GmbHG); the managing director is liable for compensation (§ 43, paragraph 3, GmbHG). If a payment to shareholders leads to insolvency, § 15b, paragraph 5, InsO also applies.
• Criminal liability: If the managing director himself commits an unlawful act, such as fraud against contractual partners, he is personally liable for it in addition to the company.

The liability principles at a glance

When is a managing director not personally liable?

A managing director is not automatically personally liable just because

• the GmbH incurs losses;
• a business decision turns out to be detrimental later on;
• the company is unable to pay a particular creditor;
• an entrepreneurial decision had no economic success.

Depending on the individual case, personal liability may be waived if the Business Judgment Rule applies, the managing director acted on reasonable information basis, no legal duty was violated, an effective allocation of responsibilities existed, and the remaining monitoring obligations were met, or no own criminal conduct is present.

However, mandatory insolvency law, tax law, and creditor protection obligations cannot be waived through internal agreements, directives from the shareholders, or provisions in the employment contract.

D&O insurance for directors: What it covers and where its limits lie

The D&O insurance (Directors-and-Officers’ insurance) is a property damage liability insurance that the company concludes for its organs. It covers claims by the company and third parties against the managing director according to the terms and conditions. It can provide important financial protection for the managing director – but usually not a complete one. What claims are covered depends on the specific insurance contract.

Many insurance conditions routinely exclude wilful breaches of duty. Some higher regional courts had held that, in the event of a belated filing of insolvency claims, the subsequent payments after insolvency had matured were also to be considered wilful breaches of duty and the insurer would therefore be liable to pay no compensation. The Federal Court of Justice countered this (judgment of 19 November 2025, IV ZR 66/25):

• The knowledge must relate to the specific tortious breach of duty.
• Late filing of an application does not automatically indicate knowledge of any subsequent payment.
• The burden of proof and evidence for the exclusion lies primarily with the insurer.

The decision was made regarding the former § 64 of the GmbHG. The extent to which it is transferable to claims under § 15b of the InsO has not been conclusively clarified and is assessed differently in the literature.

What directors should pay attention to when purchasing D&O insurance:

• Sum insured in relation to the company's turnover and risks;
• whether claims under § 15b InsO are explicitly included in the insurance coverage;
• Regulations on the follow-up to ousted directors;
• Rules for reporting damage that must be observed upon the first signs of a claim being made.

This is how you limit your personal liability risk

1. Continuously monitor the economic situation. Rolling liquidity planning and an up-to-date overview of outstanding liabilities are the basis for identifying insolvency and over-indebtedness in a timely manner (§ 1 StaRUG).
2. Document decisions. Be clear about the key decisions you made, what information was available, which alternatives were considered, and why you made the decision. This is your basis for the Business Judgment Rule and for demonstrating compliance with the discharge criteria.
3. Organize the distribution of responsibilities in writing. For several executives: clear, complete and shared responsibilities, regular mutual information and monitoring.
4. Seek and review expert advice. Anyone who seeks advice from an independent, professionally qualified advisor who fully explains the circumstances and whose advice is subject to their own plausibility check can be relieved of the burden (BGH, judgment of 20.09.2011, II ZR 234/09). A mere informal inquiry is not sufficient for this purpose.
5. Involve shareholders. In risky decisions, seek a lawful resolution or lawful directive from the shareholders' meeting. This protects the company in proportion, but not against creditors and not in the event of violations of capital conservation or insolvency obligations.
6. Do not control payments in a schematic manner during the crisis. In a crisis, payments must not be prioritized schematically. Section 15b, paragraph 8, InsO contains a special conflict rule for tax liabilities; in the case of social security contributions, there are also criminal and liability risks under § 266a StGB. Therefore, when insolvency is imminent or has already occurred, payment control should be immediately reviewed from an insolvency law perspective and the application deadlines should be kept in mind.
7. Check for D&O insurance. Clear up the scope, coverage amount, and lien before the crisis, not after.

Many of these milestones are set at the very beginning of the process. Guidance on how to design the Company agreements and the regulations for managing directors You can find it in our article on company formation in Cologne.

They are being taken advantage of: the first steps

If the insolvency administrator, the tax office, or the company responds with claims for compensation, you should proceed in a structured manner:

• Write down deadlines in the letter and don’t acknowledge anything too quickly;
• inform the D&O insurance immediately, if one exists;
• secure your own documents: liquidity plans, minutes, emails, letters from advisors, business distribution;
• Have the statute of limitations and the date of alleged insolvency maturity checked – it is the central point of dispute in many proceedings;
• When receiving liability orders from the tax office, observe the one-month appeal period.

Frequently asked questions

Read more

• Commercial and company law in Cologne – Consulting and representation for shareholders, managing directors and companies.
• Shareholder dispute in a limited liability company (GmbH): exclusion, severance payment and deadlines – if the conflict between the shareholders escalates, for example in the dismissal of a shareholder managing director.
• Forming a GmbH in Cologne: Procedure, Costs and Typical Mistakes – the design of the company agreement as a basis for clear responsibilities.
• Setting up a UG: Procedure, costs, share capital and mistakes – with the special features regarding the addition of legal form.