As a managing director you have many responsibilities in a limited company - we show you which ones

The director is the legal representative of the limited company. They represent the company in and out of court. They are responsible for the day-to-day running of the company and provide strategic direction. 
The management board is one of the compulsory bodies of a limited company, along with the general meeting of shareholders. 

Our team will give you a brief overview of the main differences between directors and shareholders: 

The shareholders of a limited company are people who own shares in the limited company and/or have voting rights. They may or may not be involved in strategic decisions within the company. Shareholders are listed in the company's articles of association and take part in the shareholders' meeting, the company's other mandatory body. This is where the main decisions and resolutions concerning the company are made.
The directors act as the company's external representatives and oversee the day-to-day running of the company. Our team will explain the exact duties and responsibilities you will have as a director below.

In principle, every limited company needs at least one or more directors. This person must have unrestricted legal capacity and be a natural person. It is possible, for example, for shareholders to become directors. In most cases, no special qualifications are required. There are, of course, always exceptions. 
People who have committed certain offences in the past, such as delaying bankruptcy, are barred from running a company for several years.  

When you take over the management of a limited company, you will be faced with many tasks and responsibilities. Among other things, you will be responsible for

• Representing the company externally
• Ensuring all the details of proper accounting
• Fulfilling your duty of loyalty to the company
• Pursuing the company's objects and objectives
• Duty to inform the shareholders about the company's affairs
• Convening general meetings.

The list of your responsibilities goes on. Our team will be happy to help you get a full picture - even when it comes to optimising your liquidity planning.

As already mentioned, every GmbH needs a managing director immediately upon formation. Otherwise, the company is not authorised to act. As a managing director, you may independently enter into obligations on behalf of the company, i.e. conduct business and conclude contracts with customers or suppliers, for example. There are several ways to become a managing director who represents the GmbH. The process of becoming a managing director is also called an appointment. The appointment of the management goes through 

• a partnership agreement
• a shareholders' resolution
• and by entry in the commercial register.

Attention! If you choose the route via the articles of association, you should bear in mind that you must notarise any changes. 
The termination of the management activity takes place through the so-called dismissal. This requires a majority resolution by the shareholders' meeting. Normally, the articles of association stipulate that the dismissal may only take place by stating an important reason.

In a one-person GmbH, it is common for you to fulfil the status of both a shareholder and the management. Formal dismissal is not necessary here, for example, as you combine both bodies in your person. The most important thing you should pay attention to is that you exempt yourself from the so-called self-contracting obligation in accordance with Section 181 BGB. This basically states that you are not allowed to enter into contracts with yourself. If this is waived, you will be able to enter into obligations and conclude transactions with yourself in the GmbH, which gives you freedom of action. 

A director's agreement may contain important details such as 

• The duties of the directors
• Details of the rights and obligations of the parties
• The director's salary

Information about non-competition clauses are recorded. In the event of a dispute between management and shareholders, it can help to find solutions quickly. However, it is not legally required. Ultimately, however, it is always better to have such a contract in place, also with a view to possible audits.

What to look out for: If you are setting up a one-person GmbH, an employment contract is particularly advisable. Without an employment contract, the tax office will quickly regard your director's salary as a hidden profit distribution!

Most founders choose the GmbH because of its liability privilege - the GmbH is only ever liable to third parties with the company's entire assets. Internally, the private assets of the shareholders and management are not affected. 
However, there are exceptions. This is particularly the case if you breach your duties of care as a director. The following behaviour can lead to private liability: 

• Duty to file for bankruptcy: Any director who fails to file for insolvency in time in the event of the GmbH's insolvency may be held personally liable.
• Duty to provide information: If you withhold important, company-critical information from the shareholders, your personal liability is in question.
• Duty of loyalty: Directors are responsible for pursuing the interests and objects of the company. Anyone who grossly fails to do so may be held personally liable.
• Misappropriation: Anyone who misappropriates company assets or even uses them for personal expenses is misappropriating company funds.
• Prohibitions and restrictions: Gross disregard for legal prohibitions or harm to third parties can lead to personal liability.
• Maintaining a legal appearance: If you appear to be a sole trader in business dealings - i.e. if you make a genuine corporate commitment that is of no relevance to your business partner.

Directors of a limited company have a huge responsibility. They have to manage the company strategically and operationally, fulfil duties and can even be held personally liable if they fail to do so. It is therefore crucial to prepare well for this role and not to neglect legal requirements such as the management contract. However, with a solid structure and sound knowledge, the risk can be well managed.