The managing director agreement is the central document governing the relationship between the managing director and the GmbH. It regulates remuneration (including bonuses and benefits), working time, vacation entitlement, post-contractual non-compete obligations, and termination rights. Unlike employment contracts, managing director agreements are not subject to employment law protections in most cases — they are governed by service contract law, which makes careful drafting all the more important.
The managing director of a GmbH is subject to extensive duties under the GmbH Act (GmbHG) and general company law. The core duty is to manage the company's affairs with the care of a prudent businessperson. This includes maintaining proper accounts, filing tax returns on time, keeping the shareholders informed, and complying with all applicable laws. Particular importance attaches to the obligation to file for insolvency in a timely manner when the company faces insolvency or over-indebtedness.
The personal liability of managing directors is a subject that is often underestimated. While the GmbH as a legal entity generally shields shareholders from personal liability, the managing director faces a different exposure. Internal liability to the company arises when the managing director breaches their duty of care and causes damage to the company. External liability can arise in relation to the company's creditors — particularly in insolvency situations and for tax and social security arrears.
The departure of a managing director — whether voluntary or involuntary — requires careful legal management. Key issues include the continued validity of the managing director agreement, the handling of outstanding remuneration claims, the scope and enforceability of post-contractual non-compete obligations, and the terms of any separation agreement. The legal assessment differs significantly depending on whether the managing director is also a shareholder of the company.
The legal status of a managing director depends on the specific circumstances. In principle, a managing director of a GmbH is not an employee but acts on the basis of a service contract. However, in certain constellations — particularly where the managing director holds no or only a minor shareholding and is subject to instructions — a managing director may be treated as an employee for social security purposes.
Shareholders can revoke the appointment of a managing director at any time without giving reasons, unless the articles of association restrict this right. The revocation terminates the managing director's authority to represent the company. However, the underlying managing director service agreement continues in force — its termination is governed by the contractual notice provisions and any special termination rights.
A managing director is personally liable to the company when they breach their duty of care and cause damage. Particularly relevant scenarios include: making payments after the company has become insolvent, failing to file for insolvency in time, failing to pay over employees' social security contributions, and tax offences. Third-party liability is possible in cases of fraudulent conduct or intentional breach of statute.
A managing director agreement should at minimum address: the scope of responsibilities and authority to act, remuneration and bonus arrangements, working time and vacation, information and reporting obligations to shareholders, post-contractual non-compete provisions, and termination provisions. Particular care is required with post-contractual non-compete clauses — they require compensation payment and must be limited in scope and duration to be enforceable.
Liability can be avoided through diligent preparation, thorough documentation, and strict adherence to all duties. It is crucial to constantly monitor the company's financial situation to ensure compliance with insolvency filing obligations. Decisions should be made based on adequate information and properly documented. Shareholder resolutions must be formally recorded. For complex or high-risk decisions, expert advice should be sought. Shareholder instructions must be reviewed for legality, and any legal concerns should be formally challenged. A robust governance structure with clear responsibilities and regular reporting obligations helps prevent errors. While D&O insurance can mitigate liability risks, it does not substitute for the careful fulfillment of duties. We analyze your liability risks and develop strategies for risk minimization.
