The Tasks and Responsibilities of a Managing Director

This article outlines the obligations and responsibilities of a managing director of a company based on current legal regulations.

Managing Director’s Tasks

The managing director is fundamentally the natural person who leads the economic company and directs its independent and efficient operations. The managing director handles the company’s affairs and manages the company’s work within the framework defined by laws and the decisions of the shareholders’ meeting. In general, the managing director represents the company in relation to third parties, before courts, and other authorities. The representative authority may be either independent or joint. This authority can be delegated on a case-by-case basis or restricted to specific matters. Regarding the company’s employees, the managing director essentially exercises employer authority.

In terms of company management, the managing director is responsible for maintaining the shareholder register, the resolutions book, and ensuring the proper management of the company’s business records.

Following statutory deadlines, the managing director prepares and has the company’s balance sheet and asset statement approved. The managing director is also obligated to ensure the proper convening, preparation, and minutes-taking of the shareholders’ meeting. In the case of any changes to the company’s data in the company registry, the managing director is responsible for ensuring that these changes are registered accordingly.

Responsibilities of a Managing Director

The managing director is liable for any damage caused to the company through his or her managerial activities. Additionally, under specific conditions, the managing director may be held responsible for damages caused to third parties outside the company while acting in their capacity as managing director. This responsibility may arise from both tortious and contractual relations.

According to current legislation, the rules of liability for damages caused by a breach of contract apply to the managing director’s responsibility for damage caused to the company in the course of managing the company. The managing director is typically employed under a mandate agreement, and less frequently under an employment contract. If the managing director fails to fulfill their contractual obligations, causing harm to the company, they are obligated to compensate for the damage.

The managing director may be exempted from liability if they can prove that they acted with due diligence in the performance of their duties, as would have been expected in the given situation. Under the new Civil Code, the managing director can only be exempt from liability for damages resulting from a breach of contract if they prove that the breach was caused by an unforeseeable circumstance beyond their control at the time of contract formation, and it was not expected that the circumstance could be avoided or the damage prevented.

Upon the approval of the annual report or, if the managing director’s term ends between two annual reports, the company acknowledges the proper performance of the managing director’s duties during that period by granting a discharge.

Regarding third-party claims, the company is primarily liable for any damages caused by the managing director in this capacity. The managing director is only jointly and severally liable with the company if the damage was caused intentionally. Therefore, the managing director cannot be held directly liable to external parties for damage caused by negligence.

Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)

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