Liability of Board for Inadmissible Speculative Transactions – Judgement of German Federal Supreme Court (Bundesgerichtshof – BGH) dated 15 January 2013 – II ZR 90/11

  • Germany
  • 05/27/2013
  • BGH Case Law on Corporate Law

German law on stock companies: The BGH has ruled in a case where two former board members of a mortgage bank had concluded an inadmissible speculative transaction in 2001 and 2002 and were held liable. Under the responsibility of the board members sued, interest rate derivative transactions were concluded which were not used as security for interestrate risks and consequently were not covered by the object of the enterprise, constituting an inadmissible speculative transaction for a mortgage bank. Board members concluding transactions which are not covered by the object of the enterprise act undutifully and become liable for damages (section 93 paragraph 2 German Stock Corporation Act).

According to the general rules as to how to distribute the burden of presentation and burden of proof in a litigation dealing with responsibility for executive organs, the present stock company suing has sufficiently set out in detail the damage which was probably caused by undutiful behaviour, i.e. conclusion of speculative transactions.

Accordingly, it was for the board members sued to state the details and prove that the interest rate derivative transaction served as securing of interest rate risks under the mortgage bank business and that consequently no speculative transaction had been concluded. However, the burden of presentation and burden of proof for any profits to be taken into account under the speculative transaction is on the board members sued.