The Munich District Court N° I has decided that each
individual board member (Vorstandsmitglied) has to ensure
that his company is organized and monitored in such a way that no
violations of the law take place.
Such organization duty is only sufficient once a compliance
organization is established which ensures loss prevention and risk
control. Crucial for the scope of the organization is the type,
size and structure of the company. The establishment of a
functioning compliance system is part of the overall responsibility
of the board (Vorstand).
In the case at hand, the board member had been responsible for
the corporate finance and legal department, and is accused of not
having implemented effective measures against bribe payments
despite having knowledge of such bribes being paid abroad.
Since at least 1999 there were signs of a system of black
accounts. Since 2001 Business Conduct Guidelines had been
implemented, which require full compliance with the law; these
Guidelines were also part of the board member's service
agreement with the company.
According to the Court, each board member must comply with all,
including foreign regulations affecting the company. There is no
justification for bribes, even in jurisdictions where economic
success is only feasible when bribe payments are effected. Each
board member is individually responsible for the establishment and
monitoring of a functioning compliance- and monitoring system,
which has to be adequate for the type, size and structure of the
The Court ruled that ensuring the effective functioning of a
compliance system is an original, non -delegable, duty of every
board; although a board member may delegate certain tasks, he must
ensure that that a functioning reporting structure is implemented
in order to endow the board with the relevant information to
monitor the compliance system.
In practice, we advise our clients to implement an effective
compliance system and strongly recommend adapting existing
compliance systems on a regular basis to the changing needs and
scopes of our client's companies. It is important to keep in
mind that the implementation of such structures is not only
essential for the company but also serves to avoid personal
liabilities of individual board members.
Munich District Court N° I, judgment dated 10 December 2013
– 5 HKO 1387/10
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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