The German federal supreme court (BGH) has held that criminal liability due to embezzlement pursuant to sec. 266 of the German Criminal Code is excluded, if a member of the executive board of a German stock corporation (AG) acts within the limits of the so-called business judgement rule. According to this rule, a member of the executive board cannot be held responsible for a detrimental managerial decision under the principles of a breach of its corporate law duty of care if he or she could reasonably believe, based on appropriate information, that such managerial decision was in the company’s best interest. In its judgement the BGH has also emphasised that a breach of the duty to obtain appropriate information before making a managerial decision does only indicate, but not necessarily constitute, a breach of corporate law duties of care which may trigger criminal responsibility. In view of the BGH’s previous judicial practice it can be assumed that these principles also apply accordingly to the managerial conduct of managing directors of a limited liability company (GmbH).

Based on the generally accepted principle that criminal responsibility due to embezzlement requires a severe or evident breach of duties, the BGH reiterates, that a breach of the corporate law duty of care automatically qualifies as severe within the meaning of the criminal offence of embezzlement. The court expressly disapproves of a two-step examination as conducted by the previous instance, that had first determined that a breach of duty had occurred and has subsequently investigated whether such breach had been severe. However, pursuant to the BGH’s view the aspect of severeness needs to be taken into account when establishing whether the  corporate law duty of care has at all been breached. Only severe misconduct may in the BGH’s opinion be qualified as such breach and is definitely excluded, if a board member has acted within the limits of his or her managerial discretion as defined by the business judgement rule. Even if these limits have been overstepped by way of a failure to obtain appropriate information before making the respective managerial decision, this does pursuant to the BGH not necessarily constitute, but is only an indication for, a breach of duty. Ultimately, the court concludes, only evidently inacceptable managerial conduct qualifies as a breach of the duty of care.

Please click here for the German text of the judgement. If you are interested in further information, please do not hesitate to contact Christine Oppenhoff.