Background to the judgment
The underlying case concerned a managing director who was held responsible for significant shortages of ammunition and clay pigeons in a shooting range business. After his dismissal in 2020, the plaintiff discovered shortages that were attributed to inadequate accounting and stocktaking.
The Higher Regional Court of Cologne ruled that the managing director was liable for the damage incurred as he had breached his duty of care as a prudent businessman.
Duties of care of a prudent businessman
A prudent businessman is obliged to conduct business in such a way that no damage is caused to the company. This includes
- Careful bookkeeping
- Regular control of inventories
- Establishment of suitable internal control mechanisms
In this case, the defendant was unable to prove that he had taken measures to prevent stock shortages.
In liability matters, the burden of proof initially lies with the company: it must prove that the managing director has breached his duties.
- Burden of proof on the company: proof of breach of duty and damage
- Discharge by the managing director: proof that he exercised due care
The higher regional court clarified that the burden of proof for breaches of duty is transferred to the managing director as soon as a breach of duty can be assumed.
Consequences for managing directors
This ruling shows that managing directors
- must take their responsibility for proper management seriously.
- should be able to demonstrate measures to prevent damage.
- minimize risks through clear internal processes.
The judgment of the Higher Regional Court of Cologne makes it clear:
- Managing directors must comply with the due diligence obligations of a prudent businessman at all times.
- Inadequate documentation can have serious consequences.
- The burden of proof can quickly shift to the managing director in the event of a breach of duty.
Recommended action:
- Ensure complete documentation and control of business processes.
- Develop an understanding of the legal requirements for your role.
