Business Judgement Rule
In sec. 93 para. 1 sentence 2 Companies Act German lawmaker has provided for the Business Judgement Rule with respect to members of the board of directors of a stock company. There it says: “Negligiance is not given, if the board member reasonably can assume, that it acts on the basis of adequate information to the benefit of the company.” It is crucial for board members that they have to prove that they are not liable for damages caused by such decisions, sec. 93 para. 2 sentence 2 Companies Act. As claims against board members often are filed after their dismissal the prove of good leadership remains, however, in the company, there is often a situation of lack of evidence. The liability risks are tremendous. E.g. in the case of ThyssenKrupp the dismissed managers are held responsible for damages by bad investments up to Euro 10 billion in Brasil and the U.S. The supervisory booard of ThyssenKrupp had declared that the directors had given false information to that the supervisors could not control effectively.
In this respect one has to see that not every bad investment or damage must necessarily cause a liability case. Sec. 93 para. 1 sentence 2 Companies Act states that there is a “right to errors or mistakes” if the directors act on the basis of adequate information. The German Federal Court demands an obviously irresponsible action of the respective director, especially inadequate risks, in order to rule a personal liability. A circumstantial evidence can be e.g. considerable deviations from usual practices (e.g. purchase of a company without due diligence; crediting without security etc.). In the end, the assessment depends on a variaty of individual circumstances as directors decisions often have to be made in complicated situations. In case of uncertainty the director should call for legal expertise of a business attorney to countercheck his entrepreneur decision.