Liability of Management Board Members for Corporate Fines Imposed Under Capital Markets Law

This article first examines the principles of proper conduct for management board members and their liability, as well as the general functioning of fines for violations of capital markets law regulations. This is illustrated using the example of a fine imposed for a breach of the duty of care by a board member in the context of financial reporting (the so-called “balance sheet oath”) (Higher Regional Court (OLG) Frankfurt, judgment of October 21, 2025 – 31 U 3/25 – not yet final). Finally, options for avoiding or mitigating the personal liability of board members are explored.

Principles of Proper Conduct for Management Board Members and Their Liability

Members of the management board must observe a variety of duties in the course of their actions. These can be broadly summarized as the duties of management and business conduct, representation toward third parties, care, legality, confidentiality, loyalty, as well as organization and supervision.

According to Section 93 (1) sentence 1 AktG, management board members must exercise the care of a prudent and conscientious manager. If they act within the scope of a business decision based on adequate information and for the benefit of the company, the specific action is generally covered by the privilege of the Business Judgment Rule (Section 93 (1) sentence 2 AktG). They can invoke the requirements of the Business Judgment Rule in any subsequent liability litigation to prevent being held liable by the company for their actions.

If management board members have breached the aforementioned duties, they are liable to the company for damages under the conditions of Section 93 (2) sentence 1 AktG. In this regard, the legislature has provided for joint and several liability of all members of the management board. This means that a member may also be held liable even if they did not commit the specific breach of duty themselves, but rather another board member or managing director did.

Increased Duty of Legality for Listed Corporations and Sanctions for Violations

The aforementioned duties of legality are expanded if the company is listed on the capital market, particularly if the shares are traded on the regulated market. In the case of a stock exchange listing on an organized market, a variety of capital markets law regulations apply, such as the Stock Exchange Act (BörsG), the Securities Trading Act (WpHG), the Securities Acquisition and Takeover Act (WpÜG), the Market Abuse Regulation (MAR), and other European regulations.

Regardless of criminal sanctions, European legal acts provide that violations of these duties must be punished with appropriate administrative sanctions. Therefore, in accordance with the requirements of the European legislature, the German legislature threatens fines for almost all capital markets law mandates and prohibitions applicable in Germany in the central provision of Section 120 WpHG. Since the MAR also applies to issuers listed on the open market (Freiverkehr), the imposition of a fine is also a possibility in the event of a violation of the MAR here.

Since many of the duties are personal duties, the primary addressees of the fines under the legal system of Section 120 WpHG are the natural persons acting (the management board members). Furthermore, the legislature has provided for the possibility of imposing a so-called corporate fine (company-related fine according to Section 30 of the Act on Regulatory Offenses (OWiG)) regarding certain capital markets law duties. In this case, the fine is directed against the legal entity whose responsible persons in a management position have violated the duties of Section 120 WpHG, which are subject to fines.

This corporate fine exists alongside the individual sanctioning of the person acting (so-called unified proceedings). Nevertheless, Section 30 OWiG is not an independent fine offense, but rather requires a so-called reference act, i.e., the misconduct of a natural person. Section 30 (4) OWiG clarifies that a fine can also be imposed if individual proceedings against the person acting were not initiated, were discontinued, or if punishment was otherwise waived (so-called independent proceedings). In summary, it is therefore possible to initiate and execute fine proceedings for the same legal violation either only against the person acting, only against the company, or against both.

The possibility of a corporate fine represents a sharp sword, as the legislature has provided within the framework of Section 120 WpHG that the fine imposed on the company can be higher than the one against the person acting. Depending on the specific violation, amounts of up to EUR 15 million and 15 percent of the total turnover achieved by the legal entity or association of persons in the financial year preceding the authority’s decision are possible.

In Germany, the Federal Financial Supervisory Authority (BaFin) is responsible for investigating and punishing violations in the area of the WpHG. In its administrative practice, the corporate fine plays a central role in its sanctioning practice—likely for the reasons just described. BaFin has set out how it proceeds when setting fines under the WpHG for regularly occurring violations of central WpHG provisions in a guide (WpHG Fine Guidelines II, as of March 2024).

The Company’s Right of Recourse

If such a corporate fine is ultimately imposed on the corporation, the supervisory board must check, in accordance with Sections 93 and 116 AktG, whether the management board is to be held liable for the fine. Section 93 (2) sentence 1 AktG serves as the legal basis for this claim. Its purpose is to protect the assets of the corporation from the wrongful acts of its management board members and to create a claim for damages in favor of the company.

By making management board members personally accountable for breaches of the duty of care, not only is compensation for the company’s damage achieved, but an incentive for careful and conscientious management is also created.

Of course, D&O insurance may mitigate the risk of a claim for the management board. The liability risk is particularly explosive due to the potentially significantly higher amounts compared to a fine imposed directly on the person acting, as well as the joint and several liability of all board members together, even though only one member of the board may have violated legal regulations in the specific case. Furthermore, the basic burden of proof for the absence of a breach of duty lies with the management board according to Section 93 (2) sentence 2 AktG.

A prerequisite for recourse is that a capital markets law duty has been violated. In addition, the breach of duty must be the cause of the damage incurred. According to the controversial but prevailing view, such damage can also consist of a fine as well as legal costs and attorney fees.

Regarding fault, the standard of care of a prudent and conscientious manager applies, whereby even slight negligence can lead to liability. Insofar as liability has not been excluded by a (termination) agreement, board members can still be held liable even after their departure, as the following case from the OLG Frankfurt shows.

The Case of the OLG Frankfurt

The plaintiff, a listed corporation (“AG“), demanded compensation from its former and, at that time, sole management board member (also the “defendant“) by way of internal recourse for a BaFin fine of EUR 290,000 plus legal fees imposed on it. In fulfillment of its duty of care, the AG had taken out D&O insurance for the defendant to limit a liability risk that could threaten his existence.

On August 16, 2018, the AG had published a semi-annual financial report without the legally required so-called balance sheet oath by the management board. By letter dated June 21, 2021, BaFin initiated regulatory offense proceedings in accordance with Section 120 (12) No. 5 WpHG and initially announced a fine of EUR 900,000. The AG informed the board member, who had already been dismissed at that time, and requested a statement. However, he ignored the request.

Following legal correspondence, the AG and BaFin agreed on a reduced fine of EUR 290,000, with the AG waiving its right to appeal. Immediately after this fine was set by BaFin’s notice, the AG paid the EUR 290,000 plus fees and expenses. It then demanded reimbursement of the paid sum and legal fees from the defendant. After he refused to pay, the AG filed a lawsuit for payment of the costs it had incurred and prevailed. The subsequent appeal filed by the former board member before the OLG Frankfurt was largely unsuccessful.

The Grounds for the Decision of the OLG Frankfurt

The OLG Frankfurt decided, as the regional court had previously, that the defendant had violated his duties as an officer by omitting the balance sheet oath and that a claim for damages by the AG under Section 93 (2) sentence 1 AktG was therefore to be affirmed. The submission of the balance sheet oath is a highly personal duty of the management board. In the present case, the sole board member had also acted culpably, as he failed to refute the negligence of his actions.

In the view of the OLG Frankfurt, the damage incurred by the AG (fine and further costs) was causally linked to this breach of duty regarding the missing balance sheet oath. The fact that the plaintiff had agreed to a reduction in the fine proceedings did not break the chain of causation. The defendant had not substantiated that a lower fine or no fine at all would have been imposed if appeal proceedings had been carried out.

A central point of contention in the appeal proceedings was the question of whether a corporate fine imposed on the company is even subject to recourse. This is controversial in literature and case law, particularly in light of its purpose. Arguments against recourse include that the punitive and preventive character of the (corporate) fine would be undermined if the company could pass it on to the officer in the internal relationship.

Furthermore, the risk of double burden (“double fining”) is seen. In addition, the law on regulatory offenses provides for different fine frameworks for companies and natural persons. Unrestricted recourse would override this legislative valuation. It is also problematic if D&O insurance covers the fine, as this would amount to inadmissible self-damage coverage via passing it on to the officers and finally to the D&O insurance, contrary to the purpose of the law.

The OLG Frankfurt did not follow this argument. Instead, it justified the possibility of recourse for a corporate fine by stating that the punitive part of the fine represents a financial loss for the company, which must be replaced by the board members acting in breach of duty according to general civil and corporate liability principles.

The sovereign sanctioning purpose is fulfilled with the payment of the fine; whether the company subsequently seeks recourse in the internal relationship is not relevant from the perspective of fine law and is governed exclusively by civil law standards. The possibility of recourse is also intended to strengthen the preventive effect, as it encourages board members to exercise greater care. In the view of the OLG Frankfurt, a general exclusion of recourse would lead to evaluative contradictions and eliminate the behavior-steering effect of fine recourse.

The court further clarified that Section 93 (2) AktG, according to its wording, covers any damage caused by a breach of duty without excluding fines. A teleological reduction of Section 93 AktG is therefore not required, as there is no unplanned regulatory gap in this regard. The possibility of fining officers and the company side by side also does not preclude recourse in the view of the OLG Frankfurt. Even with recourse, a residual sanction usually remains with the company, for example due to limited D&O insurance coverage, litigation and insolvency risks, or reputational damage.

The court also rejected a limitation of liability. Thus, full recourse for the corporate fine imposed on the corporation is possible, even if this can factually lead to higher liability than the personal fining possibility by BaFin under Section 120 WpHG.

A reduction based on the corporation’s duty of care is not an option, particularly because D&O insurance existed for the benefit of the defendant. Contrary to the defendant’s view, this does not represent immoral self-damage coverage, as it does not secure the public-law sanction itself, but rather the company’s civil-law claim for compensation. A limitation based on fine-law assessment criteria is also not provided for in the civil-law recourse system.

Regarding legal costs, the OLG Frankfurt confirmed in principle their recoverability as an adequately caused damage item.

Conclusion

The judgment is in line with the view predominantly held in literature to date regarding the possibility of recourse for corporate fines against the company’s officers. A clarifying decision by the highest court on this issue is still pending. In the present proceedings, an appeal was filed with the Federal Court of Justice (BGH), so a clarification of this question is expected soon.

However, management board members and managing directors must expect—not least because of the present case law of the OLG Frankfurt—to be held liable for corporate fines under Section 93 (2) sentence 1 AktG. In addition to the actual fine, this also includes interest as well as legal costs and attorney fees. If a fine has been imposed on them personally, it may even happen that they have to pay twice for the same action.

Recommendations for Action

Effective limitation of personal liability can be achieved by taking out D&O insurance. Furthermore, in light of the release from liability through the Business Judgment Rule, management board members should document their decision in writing prior to taking or omitting a specific action and, in the case of situations that are not completely clear or involve capital markets law questions, seek (external) legal advice if they do not possess the necessary expertise themselves.

Against the background of recent case law, termination agreements are also gaining importance, insofar as they effectively and finally exclude recourse claims. This is particularly relevant in antitrust law, as antitrust fines are often only set years after the creation or termination of the cartel—or after a management body has left the company—and thus create significant downstream liability risks.

For recourse against the management board in the case of an antitrust fine, the suspension and referral order of the Federal Court of Justice of February 11, 2025 (Ref. KZR 74/23) must also be observed. These proceedings concern the question of whether Art. 101 TFEU could potentially preclude recourse against the acting bodies for a fine in antitrust proceedings, which the European Court of Justice (“ECJ“) must now decide. Until a decision by the ECJ on a possible restriction, recourse via Section 93 (2) sentence 1 AktG remains possible in principle.

If a corporate fine is actually set, the supervisory board is responsible for examining and enforcing corresponding recourse claims against the management board (Sections 116, 93 AktG). If the management board cannot prove to the supervisory board that it has met the requirements of the Business Judgment Rule, the supervisory board must initiate and enforce the recourse—ideally with the assistance of legal advisors.

Otherwise, it in turn violates its duties. Since an ECJ decision on the compatibility of recourse claims regarding antitrust fines with Union law is still pending, supervisory boards should, if necessary, work toward preventing the statute of limitations from expiring by concluding a waiver of the statute of limitations.

Furthermore, it is generally advisable for the company or the supervisory board to seek legal advice as quickly as possible in fine proceedings and during the subsequent examination of recourse claims against the acting bodies in order to fulfill their respective duties as a company body. This is because the company or the supervisory board should set the right course as part of the corporate defense in order to increase the prospects for recourse against the management board and, if applicable, the D&O insurance.

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