Directors’ and Officers’ Liability and the Burden of Proof

November 13, 2020

The topic of directors’ liability has received considerable media attention in connection with a number of noteworthy cases. Directors are increasingly confronted with high claims for damages as brought on behalf of the company. Under the German Stock Corporation Act, members of the board of directors and supervisory board members are liable up to the entirety of their private assets for acts of simple negligence. In addition, the burden of proof is reversed. This is one of the reasons why corporate liability has been under scrutiny for years. Nadja Danninger, former Research Assistant at the Max Planck Institute for Comparative and International Private Law considers in her dissertation the appropriate distribution of the burden of production and the burden of proof as between the company and its board members.

A particularly severe aspect of director liability lies in an evidentiary component: It is not the company that has to prove a breach of duty in a dispute over damages; rather, it is the board member that must exonerate him- or herself. This not only raises a number of problems in practice but also lacks a firm theoretical foundation. In her doctoral dissertation, Nadja Danninger examines this issue from five different perspectives: legal history, legal theory, legal practice, comparative law and legal policy.

The author traces a theoretical arch from the Roman law roots of a reversed burden of proof to today's Stock Corporation Act. She analyses whether and to what extent a change in the law appears necessary. In addition to the analysis of the underlying theory, she depicts various real-world factual constellations to show how the evidentiary balancing act can succeed in theory and practice. By examining fifteen legal systems with regard to their distribution of the burden of proof, the work explores previously uncharted terrain and thereby sheds light on the relative strengths and weaknesses of German law for the first time. At the same time, a look at international law serves as ample inspiration for a final policy recommendation.

Nadja Danninger, Organhaftung und Beweislast (Studien zum ausländischen und internationalen Privatrecht, 446), Bucerius Law School Hamburg, Tübingen 2020, PhD Thesis, XXVII + 228 pp.

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