Is the managing director/executive (shareholder) of an LLC directly liable for damage caused to a third party?

9. 3. 2023

Until 2013 - when the "old" Civil Code was in force - executives were not liable to third parties for damages in the performance of their duties; it was always necessary to turn to the company as a damaging party to which the consequences of the actions of the executive or the board of directors were attributed. This was due to the fact that the Civil Code explicitly excluded the contractual and tort liability of so-called helpers who "were used for the activity of another".

However, the new Civil Code with effect from 1 January 2014 has brought a new perspective to the issue of liability for damage with Section 2914: "Whoever uses an agent, employee or other helper in the course of his activities shall compensate for the damage caused by him in the same way as if he had caused it himself. If, however, a person undertakes to perform an act independently in the performance of another person, he shall not be deemed to be a helper, but if that other person negligently selected him or inadequately supervised him, he shall be liable for the performance of his duty to indemnify."

The purpose of this provision was to strengthen the protection of the damaged party. The Supreme Court, also referring to the Labor Code and the limitation of the employee's liability for (negligent) damage, has tended to the interpretation that, in general, the "own" obligation to compensate for damage is proportional to the autonomy in the performance of the activity or function: according to the criteria of whether the person performs the activity for another person (the main person) according to his instructions or orders, under his appropriate control and whether he is in a subordinate position to him. If the principal uses an "independent helper" for his or her activities (carrying out the activity on his or her own behalf and at his or her own risk), the helper is liable for the damage together with the principal. Otherwise, only the principal is liable for the damage.

In the case of a managing director (even though he was also an employee of the company), the Supreme Court has now ruled unequivocally:

The activity of the managing director (shareholder) is not of the nature of dependent work performed in a relationship of superiority of the employer and subordination of the employee; the managing director (shareholder) controls his/her own work activity and is therefore directly liable for damage caused to a third party.

Managing directors and statutory bodies should also bear this in mind when accepting a position in a company. We cannot but recommend that the new legislation be taken into account concluding a liability insurance.

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