Delegation of management by the board of directors: organizational regulations and liability

Larger joint-stock companies have a management board as well as an executive management. However, by law the administration of the company primarily lies with the management board. The management board can delegate these tasks to individual members or third parties if it has statutory authorization to do so. For effective delegation, a management board resolution is required. However, a formal organization regulation is advisable.

In our last post, we explained to you that for the delegation of executive management by the management board, the authorization to delegate must be statutorily established. Only when this is in place can the management board delegate the executive management tasks in accordance with the organizational regulations. This is done through a valid delegation decision of the entire management board. A written organizational regulation is mandatory in this regard. It does not have to be a formal regulation, as a recorded majority decision of the management board also satisfies the requirements. However, it is necessary that the resolution, or the organizational regulations, organize the management, designate the necessary positions, describe their tasks, and particularly govern the reporting.

If a qualified delegation exists (authorization in the statutes, organizational regulations/recorded resolution, and no delegation of non-transferable tasks), the management board limits its liability to the extent of the delegated tasks. It is then only liable for careful selection, instruction, and monitoring. On the other hand, without a qualified delegation, the management board is liable even without breach of duty.

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