Many managing directors rely on a misunderstanding: that the GmbH limits their liability. For the shareholders that is true. For you it is the opposite. You are personally liable, with your private assets, and more often than most assume. A sober assessment: when liability applies, which cases are typical and what a D&O policy delivers.
The GmbH protects the capital, not the managing director
The point of the GmbH is limited liability. For the company's debts, only the company's assets are answerable to creditors (Section 13(2) of the German Limited Liability Companies Act, GmbHG). The shareholders risk their contribution, no more. That is exactly what the legal form is for.
The managing director stands outside this protection. As a governing body of the company, they owe it the care of a prudent businessperson. Where they breach their duties culpably, they are liable to the GmbH for the loss, personally and without limit (Section 43 GmbHG). Even the shareholder-managing director is not exempt, because the GmbH is a separate legal person. If it becomes insolvent, an insolvency administrator pursues its claims, including against the former managing director.
Why the risk is rising now
The most common trigger of managing-director liability is insolvency, and the number of cases is climbing. With every proceeding an insolvency administrator steps in, whose task is to secure claims for the creditors. That includes examining whether the managing director must answer personally for financial losses.
Source: German Federal Statistical Office, corporate insolvencies 2024 (final result).
Internal liability: the most common case, with a reversed burden of proof
The most common case in practice is internal liability: the company itself pursues its managing director, in a crisis represented by the insolvency administrator, sometimes by a successor or a co-shareholder. The standard is strict. Even slight negligence is enough, and the liability is not capped in amount.
The burden of proof is particularly uncomfortable. Under the case law, the company need only set out that a loss has arisen and that a breach of duty appears possible. The rest falls to the managing director.
In a dispute it is not the company that has to prove your fault. You, as managing director, have to prove that you acted with due care. This reversal of the burden of proof makes even a single allegation dangerous.
Where liability arises in everyday business
It does not take spectacular mistakes. The typical cases lie in normal operations:
The managing director is personally liable for unpaid taxes such as payroll tax or VAT.
Where employee contributions go unpaid, the director is not only liable, they even commit a criminal offence.
For payments made after insolvency has set in, the director is liable, often reviewed in hindsight.
Poor investments, unclear contracts or a failure to supervise can amount to a breach of duty.
What a D&O policy delivers, and what it does not
A D&O policy is financial-loss liability cover for governing bodies. It performs two tasks at once. First, it defends against unjustified claims and bears the legal and court costs, which are often high well before any judgment. Second, it covers the compensation in the case of justified, negligent breaches of duty, up to the agreed sum insured. Its focus is exactly where most cases arise: on internal liability.
The limits matter just as much. Deliberate and knowing breaches of duty are not covered, and fines and penalties cannot be insured. The precise scope, such as the sum insured and the excess, depends on the plan chosen. As a rule the company bears the premiums for its governing bodies; the tax treatment belongs in the discussion with the tax advisor.
A D&O policy does not replace careful management, it catches the moment it fails. Its real value shows early: it pays for the defence, even where an allegation turns out in the end to be unfounded.
The personal liability under Section 43 GmbHG applies regardless of company size. It affects the salaried external managing director as much as the shareholder-managing director, and where there are several managing directors they are jointly and severally liable. Precisely where no large private assets stand ready as a buffer, a single claim can become existential.
Frequently asked questions
Does the GmbH not protect me from personal liability?
No. Section 13 GmbHG limits liability towards creditors to the company's assets. That protects the shareholders and their contribution. As managing director you are liable under Section 43 GmbHG personally and without limit for culpable breaches of duty. Even shareholder-managing directors are affected, because the GmbH is a separate legal person.
Who typically brings a claim against the managing director?
Usually the company itself. In insolvency the insolvency administrator pursues these claims, often against the former managing director too. This is internal liability, the most common D&O case in practice. For unpaid taxes and social contributions the tax office and the social security bodies can also come after the director directly (Section 69 AO, Section 266a StGB).
What does a D&O policy cover, and what does it not?
As a rule it takes on two things: the defence against unjustified claims together with the legal and court costs, and the compensation in the case of justified, negligent breaches of duty, up to the agreed sum insured. Not covered are deliberate or knowing breaches of duty as well as fines and penalties. The exact scope depends on the plan chosen.
Do I need this even as the director of a small GmbH?
The personal liability under Section 43 GmbHG applies regardless of company size. Precisely where no large private assets stand ready as a buffer, a single claim can become existential. It is also relevant where there are several managing directors, because they are jointly and severally liable.
Further reading
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How is your personal liability protected today? In an initial consultation we assess your risk and clarify what a D&O policy can deliver in your situation. No obligation, in Berlin at Gendarmenmarkt or online.
This content is general information and no substitute for individual legal or tax advice. Examining the individual case belongs in the hands of a lawyer and a tax advisor.