Liability of business managers

Before taking on the job as the manager of a commercial company, whether as a partner or otherwise, an entrepreneur needs to understand the level of responsibility that this entails.

A commercial company has a legal personality distinct from that of the members that compose it, but it acts through its representatives, the management.

Whether or not they are partners, the managers can be held personally liable if they commit a management error.

In addition, managing partners are exposed to the risk of losing their contribution in the event of bankruptcy.

Who is concerned

Business managers, whether they are partners/shareholders or not, are liable for mistakes committed during their mandate as:

The financial liability of partners and/or shareholders is:

  • unlimited joint and several if said partners/shareholders are:
    • entrepreneur in their own name (sole proprietorship);
    • partner in a partnership (SENC) or a cooperative company (SC);
    • general partner in a limited partnership (SECS);
    • general shareholder in a partnership limited by shares (SECA);
  • unlimited and proportional to the number of partners in a civil company (société civile);
  • limited to the amount of their contributions if said partners/shareholders are:
    • partner in a limited liability company (SARL);
    • limited partner in a limited partnership (SECS);
    • limited shareholder in a partnership limited by shares (SECA);
    • shareholder in a public limited company (SA) or a European company (SE).

How to proceed

Liability during business operation

Violation of the articles of association or legal provisions

The business managers of a company are jointly and severally liable to the company and to third parties for all damages resulting from infringements of the law on commercial companies or the articles of association of the company.

Example: the business manager acts outside of the company objectives.

Cases can be brought by either the company (decided during the general meeting) or by third parties (an individual shareholder or a creditor).

Any business manager that has not taken part in the infringements in question can be discharged of responsibility if no blame for the fault can be placed on him and if he has denounced the infringements at the first general meeting following the moment he learned about the infringements.

Management error

The business manager is liable towards the company for management errors committed. Management errors are errors that would not have been committed by a normally diligent and prudent business manager, and that could easily have been avoided.


  • the business manager makes investments, in full knowledge of the facts, that are unnecessary or too costly for the company;
  • the business manager does not inform the general meeting about the true situation of the company;
  • the business manager does not attend the general meetings;
  • the business manager has abusively dismissed an employee of the company.

Legal action can only be taken upon decision made by a simple majority vote at the company shareholders’ general meeting, or by the trustee in the event of bankruptcy or by the liquidator in the case of liquidation.

The company can however renounce its right to take action against the business managers by granting a discharge at the general meeting for decisions taken during the financial year concerned.

Financial difficulties

In capital companies ('SA' and 'SARL'), the business managers, whether shareholders or partners, are in principle liable up to the limit of their respective contributions.

In practice this limitation of liability must nevertheless be seen in context. The weakness of the guarantee provided by the share capital often leads banking establishments to make the granting of loans to a company subject to obtaining personal guarantees from the partners or business managers.

In partnerships, on the other hand, the managing partners are indefinitely and jointly and severally liable for all the commitments of the company.

Liability in the event of bankruptcy

Bankruptcy is not in itself a punishable offence. However, if it is the result of an error committed by the business manager, the bankruptcy engages the responsibility of the business manager.

Civil liability

Management errors

In the case of an error committed by the business manager, the victim (generally a person that has no contractual relationship with the company) can take legal action against him personally (article 1382 of the Civil Code).

In practice however, the victim generally brings a case against the company, which is often more solvent.

Liability due to the faults of others

The company can be sued for third-party liability in the case of an error committed by an employee provided that:

  • the employee at fault is linked to the company by an employment contract or as a representative;
  • the fault committed is linked to the job of the employee.

In this case the company must compensate the victim.

However, if the person at fault was chosen by the business manager himself, the company can take action against him (article 1384 paragraph 3) and claim reimbursement of the amount paid.

Criminal liability

Criminal liability of business managers

The business manager can be held criminally responsible if he personally commits fraudulent acts such as:

  • abuse of trust;
  • fraud;
  • infringement of the law on commercial companies or the law on dishonest commercial practices, etc.

In such a case, the question of delegation does not arise.

Moreover, unlike civil liability, it is not possible to take out criminal liability insurance.

Criminal liability of a legal person

Criminal liability of a legal person was introduced in Luxembourg legislation in 2010. Companies, as well as business managers, can now be held criminally liable and prosecuted and sentenced.

All legal persons are concerned, except the State and the communes.

Criminal liability of a legal person does not exclude that of natural persons who may be the authors or accomplices to the same offence. Both the legal and the natural person may be charged at the same time.

Legal persons may incur the following criminal (peine criminelle) and correctional (peine correctionnelle) sanctions:

Exceptional cases of criminal liability due to the acts of others

In principle, one can only be held responsible for one's own acts. Nevertheless there are exceptional cases where one must take responsibility for the acts of others, notably for employees or other subordinates.

For craft and industrial businesses subject to the regulations laid down in the interest of public health and safety, where criminal liability falls mainly on the business managers on whom the conditions and operational methods of their industries are imposed.

The business manager must therefore in principle ensure a delegation of powers to his employees, which gives them sufficient authority and autonomy and provides them with the necessary means for observing the rules governing the activity in question.

He must also prove by all legal means that there was no lack of surveillance or error of method, since the organisation was initially set up to avoid such offences.

Example: an infringement of the law on waste prevention and management does not automatically engage the responsibility of the business manager if the latter can prove that he gave clear and precise orders to his subordinates who, in addition, had the means and the power to execute them as stated.

Criminal offences concerning the law on commercial companies

The law of 10 August 1915 on commercial companies lays down criminal penalties in the the following cases:

  • abuse of company assets;
  • abuse of power and votes;
  • failure to call a general meeting;
  • non-presentation of accounts.
Abuse of company assets

Imprisonment of 1 to 5 years and a fine of EUR 500 to EUR 25,000 or one of these sentences only is the punishment for a de jure or de facto business manager that, in bad faith, 'makes use of the company's assets or credit in a way that he knows is against its interests, for personal gain or to favour another company or business in which he has a direct or indirect interest'. Two conditions must be met:

  • the business manager must use the assets (movable or immovable) of the company for personal gain;
  • he must act in bad faith, in other words he is fully aware that his act harms the company and only profits himself. Simple negligence is not sufficient.
    Bad faith must be proven by the plaintiff and must be determined on the day the offence was committed.
    However, if the offence extends over time, it must be determined on the day that the act ceased.

Example: the business manager uses company funds in order to finance his private travel or family holidays.

Cases for abuse of company assets must be brought by the company. They become statute barred after 5 years.

Abuse of powers and votes

A business manager is guilty of an abuse of powers and votes if he uses powers of attorney or a delegation of the powers granted to him:

  • for personal gain and against the company interests;
  • or to favour another company in which he has a direct or indirect interest.

Example: certain partners of Company A give power of attorney to the business manager who then has an absolute majority of the votes cast. He takes the opportunity to commit Company A to another Company B in which he is the only partner without Company A gaining any advantage.

Cases for the abuse of power and vote must be brought by the company.

If a business manager is found guilty he can be sentenced to imprisonment for one to 5 years and a fine of EUR 500 to EUR 25,000 or only one of these sentences.

Failure to call a general meeting

A business manager who fails to call a general meeting within three weeks of a request made to him can be fined EUR 500 to EUR 25,000.

Cases for failure to call a general meeting are brought by the partners or the shareholders.

Non-presentation of accounts

A fine of EUR 500 to EUR 25,000 will be imposed on business managers or directors who have not submitted the following documents to the general meeting within 6 months of the end of the financial year:

  • the annual accounts (these accounts give an accurate overview of the financial situation of the company);
  • the consolidated accounts (these accounts group together and present in a single document the results of all companies in the case of subsidiaries or holdings in other companies);
  • the management report (internal document giving a complete and accurate picture of the company) and the attestation from the person responsible for auditing the company.

Cases for non-presentation of accounts are brought by the partners or the shareholders where applicable.

Liability towards the Luxembourg Inland Revenue

As representatives of the company, business managers are subject to all the obligations incumbent on a legal person (declarations, payment of taxes, etc.).

In the event of default on this obligation, synonymous with an insufficient payment of taxes, business managers can be declared liable towards the tax authorities.


  • not deducting income tax on the wages of employees and not forwarding it to the tax authorities;
  • secret distribution of benefits.

Where the actions of the business manager or director cause prejudice to the authorities, his fiscal responsibility is engaged and he must compensate the State.

Two conditions must be met in order to engage the responsibility of the business manager:

  • the tax office must identify a dereliction of duty of the business manager;
  • the behaviour of the business manager must be at fault.

It is up to the authorities to assess the level of misconduct of the business manager or the persons against which they bring their case.

Liability towards Social Security

Social security legislation provides for a number of sanctions against business managers or other employers that fail to comply with certain obligations.

Firstly there are fines concerning order, which punish non-compliance by business managers with the law or regulations.

Example: business managers that fail to declare salaries or declare them late, or fail to pay social security contributions when due, can be fined an amount not exceeding EUR 2,500.

Then there are criminal sanctions, where the business manager disregards the law or receives payments fraudulently.

The following are punishable by a fine of EUR 251 to EUR 6,250:

  • the business manager or employer knowingly excludes, through agreements or working regulations, the total or partial application of legal provisions, to the detriment of the insured persons, or restricts their freedom to accept or carry out the tasks of an honorary position granted to them by the same law;
  • the business manager or employer knowingly makes deductions from the wages of the insured persons that are not authorised by the law;
  • the business manager or employer has not used the deductions made by him for insurance purposes.

In this last case, when the guilty party acts with fraudulent intent, he could be sentenced from 8 days to 3 months of imprisonment.

Those who fraudulently cause social security institutions to provide benefits, a pension, assistance or other benefits not due or only partially due will be punished by imprisonment from one month to 5 years and a fine of EUR 251 to EUR 15,000.

An attempted offence is punishable by imprisonment from 8 days to 2 years and a fine of EUR 251 to EUR 10,000.

Liability in terms of authorisation of establishment

In the case of the unauthorised operation of a business, the establishment will be ordered to close and the business manager will be held criminally responsible.

Moreover, when the applicant has been involved in a bankruptcy or forced liquidation, without his professional integrity being stained, the Minister may make the granting of a new business permit subject to the completion of accelerated training offered by the competent employers’ association.

Liability in the event of violation of operating conditions

In the case of an infringement of the legal provisions concerning classified establishments, the business manager can be held criminally responsible.

The unauthorised operation of an establishment or the illegal modification of an establishment could result in the partial or total closure of the establishment.

Special liability conditions for directors or members of the management board

Loss of half of the capital

In the event of the loss of half of the capital of a public limited company, the directors or members of the management board are required to call an extraordinary general meeting to decide on the possible dissolution of the company within 2 months of the time when the loss was or should have been identified.

The general meeting must then deliberate under the conditions laid down for extraordinary general meetings. Where the loss amounts to 3/4 of the capital, 1/4 of the votes of the shareholders present or represented is sufficient to approve the decision.

Legal person acting as director or member of the management board

When a legal person is appointed as a director or a member of the management board, the legal person must appoint a permanent representative that is responsible for the execution of this task for and on behalf of the legal person.

The representative is subject to the same conditions and assumes the same civil liability as if he were to carry out this task on his own account, without prejudice to the joint and several liability of the legal person that he represents.

Who to contact

Double click to activate the map
Last update