Availability of director´s liability

In our modern society economic activity is largely conducted by corporations, in particular by (both private and public) corporations with limited liability (GmbH and AG in Austria). Such corporations are merely legal constructs. They need people to act on their behalf. These people the managing directors have a duty to manage the company with due care. If the directors breach their duty, they are liable to the company (and in exceptional cases also to third parties) for the resulting damage. In principle, this liability is based on general tort law. The liability of managing directors is, however, stricter in order to take into account the special circumstances of corporations, i.e. the presence of other stakeholders, especially (minority) shareholders and creditors. While liability is largely non-mandatory (dispositive) for the injured party under general tort law (i.e. the injured party can dispose of the liability, in particular waive it), there are special restrictions in place for the liability of managing directors to ensure the necessary protection of shareholders and creditors. Consequently, the corporation cannot arbitrarily dispose of the managerial liability because this liability also affects its shareholders and creditors. The aim of this analysis is to work out more precisely the limits of disposability (or formulated the other way round: the scope of the statutory limitations of disposability). Much has already been written on this topic, but it cannot yet be considered sufficiently clarified. In the academic literature, almost every conceivable position is represented and based on a wide variety of different arguments. The publication elaborates the limits of disposability along the different types of dispositions and the various interests (especially individual and minority shareholders as well as the corporations creditors). The historical analysis of the applicable statutory limitations of disposability in conjunction with the legal form comparison proved to offer interesting new insights. One key finding is that creditor protection does not extend as far as is often assumed in the literature. Instead of making the directors obligations (and the resulting liability) mandatory in the interest of creditors, the legislator pursues an indirect approach: By imposing a mandatory obligation on the shareholders to raise (and maintain) a certain amount of equity capital, the shareholders are disciplined in the handling of the company`s assets (which also include claims for damages against directors) in such a way that they incidentally preserve the creditors interests. Hence, the shareholders may (to a certain extent) dispose of the directors liability.