This article summarizes the obligations and tasks of the managing director at the head of a business association according to the applicable laws.
Managing Director Duties
The managing director is basically a natural person at the head of a business association, managing the independent and efficient operation of the company. He/she manages the affairs of the company, directs the work of the company within the framework set by the laws and resolutions of the members (meeting). He/she generally represents the company against third parties, before a court or other authority; his/her right of representation may be independent or joint. He/she may delegate his/her right of representation on an ad hoc basis or on a permanent basis, limiting it to a specific scope of business. The managing director basically exercises the employer’s authority with respect to the company’s employees.
In the context of operating the business association, he/she keeps the register of members, the book of resolutions, and ensures the proper management of the company’s business books.
He/she prepares and has the company’s balance sheet and asset statement approved in accordance with the legal deadlines. The company’s obligation towards its owners is to convene the general meeting in due time, prepare it properly, and have minutes of the general meeting drawn up. In the event of changes to the data kept in the company register of the company, the company shall ensure that the changes are registered in the company register.
Liability of the managing director
The managing director is liable for damages caused to the company by his/her activities as a manager. On the other hand, under certain conditions, he/she is liable towards third parties outside the company for damages caused by acting as a manager. The latter liability may arise either from a tort or from a contractual legal relationship. According to the applicable legislation, the rules of liability for damages caused by breach of contract are applied to the liability of the managing director for damages caused to the company in his/her capacity as a manager and through his/her activities. In most cases, the managing director is employed by the company within the framework of a legal relationship of agency, and in rare cases, an employment relationship. If the managing director fails to fulfill his contractual obligation and thereby causes damage to the company, he is obliged to compensate for it. The managing director has the option of exempting himself from liability: according to the previous regulation, in order to be exempted from liability, it was necessary to prove that the person concerned acted with due care in the scope of his managerial obligation, as could be expected in the given situation. According to the new Civil Code, liability for damage caused by breach of contract can only be exempted if the person concerned proves that the breach of contract was caused by circumstances beyond his control, unforeseen at the time of conclusion of the contract, and that he could not have been expected to avoid the circumstances or prevent the damage.
Simultaneously with the adoption of the annual report, or if the legal relationship of the managing director has ended in the period between the adoption of two reports, the business company acknowledges the proper performance of the managing director’s work in the given period by granting the exemption.
As a general rule, the company is liable for damages caused by the managing director in this capacity to third parties. The managing director is jointly and severally liable with the company for the damages caused only if the damage was caused intentionally. Therefore, the managing director cannot be held directly liable towards the third party for damages resulting from negligence.