The managing director of the association: What legal position does he have to the board?

Many clubs have a managing director in addition to the board. It is often not clear which legal position
he has in the club, which rights, duties and powers he has. The reasons for this are a lack of statutory
anchoring and faulty contracts. Often, there is also a considerable lack of knowledge about the liability
risks that are incurred.

Therefore, in the following article, you will learn what consequences arise from which specific contract
or club constellation, so that management and the association know what they are about and that
liability risks are avoided.

The typical designs of club practice
In practice, two scenarios are encountered:

  1. Managing Director is not a member of the BGB Executive Board
    There are different variants here. The manager is not enshrined in the statute, so he has no organ function;
  2. enshrined in the Statute without its legal status being clearly regulated;
  3. enshrined in the articles of association as a special representative in accordance with section 30 of the
  4. German Civil Code (BGB) (see our article in the May 2007 issue);

volunteer / full-time work for the association.
 

  1. Managing Director is a member of the Executive Board
    The managing director can do this

Member of the executive board and in his function as managing director at the same time special
representative after § 30 BGB its and
acting honorary or full-time.

Managing Director as Special Representative according to § 30 BGB
The Articles of Association may stipulate that the association may appoint a managing director
(honorary or full-time) in addition to the board pursuant to § 26 BGB, to whom specific tasks within the
management are assigned, which are no longer matters for the management board (§§ 27 (3), 40, 30
Civil Code).

Important: Within the framework of these tasks the managing director is entitled according to § 30
sentence 2 BGB to represent the association – like the executive committee according to § 26 BGB –
outward in the legal business traffic. The association is then liable for the actions of this managing
director in the context of the organ liability of the association according to § 31 BGB.

According to the case law of the Federal Labor Court (BAG, order of 5.5.1997, Az: 5 AZB 35/96) is a
Special Representative of an eV under § 30 BGB not as an employee under § 5 paragraph 1 of the Labor
Court Act, if his power of representation is based on the statute and the articles of association expressly
provide for the appointment of such a representative. The same opinion is also held by the
Landesarbeitsgericht Berlin (decision of 28.4.2006, Az: 6 Ta 702/06).

The managing director as a pure employee of the association

A managing director, who is not anchored in the statute of the association, has no organ function in the
association and acts as an employee (fulfillment assistance) for the executive committee. The basis is a

pure employment, in whatever form. The rules of labor law apply. Decisive is the employment contract
with the association.

No automatic authority for legal representation to the outside
An employee manager is in principle not authorized to represent the association externally in legal
transactions and to act for it. This task is basically reserved for the board according to § 26 BGB.

However, the Executive Board may grant the Managing Director individual authorizations per legal
transaction. A procuration or power of attorney representation is inadmissible in the case law according
to the case law (Higher Regional Court [OLG] Munich, judgment of 27.9.1989, Az: 7 U 24389/89).

Questions about the design of adaptation processes

For clubs that change their organization and structures and in this context also have to adapt or amend
the statutes, the question of how, for example, the CEO should be legally anchored is decisive.

It happens quite often that the former employee manager receives a function as an organ, combined
with the external representation authority for the association. It is often overlooked that this can change
the contractual status of the managing director. This is proven by two examples from the current case
law.

Can the managing director’s old employment be suspended?

The question of whether an employment relationship with an employee is to be classified as a service or
employment relationship has considerable practical significance in terms of legal consequences such as
the applicability of the Employment Protection Act.

On the occasion of the dismissal of a GmbH managing director, the BAG has made fundamental findings
on this problem area that are also relevant for club practice (judgment of 14.6.2006, file no. 5 AZR
592/05, retrieval number 062964).

An employee had worked for many years for a company with which he concluded a contract of
employment in the course of the transformation of the company on 22 June 1986, which entered into
force on 1 January 1987. He was thus appointed as Managing Director, initially for five years, with an
extension option. In addition, the salary, dismissal possibilities, a post-contractual non-competition
clause and the fact that changes and additions to the contract require written form have been regulated
in detail.

By letter of 20 December 2002, the company announced the ordinary termination of the employment
relationship. Three days later, the existing employment relationship was terminated in writing.

In court, parties essentially quarreled over whether they had a service or employment relationship. The
employee was of the opinion that his employment relationship, which was once established with the
company, had virtually rested during the appointment as managing director and had never been given
up. Therefore, it continues now. As there was an employment relationship at the time of termination,
the employment protection law applies. The pronounced dismissal did not terminate the employment
relationship, rather it persisted.

Like the previous instances, the BAG, however, decided against the managing director. The once
established employment relationship did not rest during the appointment to the managing director and

was not revived at any time. Rather, the former employment contract was repealed and replaced by the
service contract of 22 June 1986.

Reason: If a hired employee closes a manager service contract with his company, then the previous
employment relationship is conclusively canceled. It is clear to the employee that he gives up his
position as an employee – with all the consequences – by concluding the management contract.
Something else can apply in an individual case only if there are special clues in the case design. This is
the case, for example, if the appointment of the managing director is made on a temporary or
temporary basis under otherwise identical conditions.

Conclusion: It can therefore be assumed that the previous employment relationship will be canceled by
mutual agreement with the new employment contract. If the former employee is dismissed as managing
director, the previous employment relationship does not resurrect.

Revocation of the order as managing director
Transferred to the association’s board can also be a case that had to decide the OLG Karlsruhe. The
principles of the judgment clearly show that there is no connection between the appointment of an
institution and the contract of employment (judgment of 22.3.2002, Az: 14 U 46/01, call number
072108)

In this specific case, it was about the “double position” of a managing director of a GmbH as an organ
carrier and employee. He had come under criticism and was dismissed by decision of the shareholders’
meeting with immediate effect and before the expiry of the contractually agreed period of five years as
managing director. Thereupon the managing director opposite the GmbH terminated without notice the
employment relationship (service contract) and referred to the grounds u.a. to the dismissal from the
managing director position. Thereupon he filed a lawsuit against the GmbH and made compensation
under § 628 paragraph 2 BGB against the GmbH.

The OLG denied this claim for damages. The court clarified that the dismissal as managing director of the
GmbH was not a breach of contract by the GmbH, irrespective of whether the managing director gave
reason for his dismissal or not. The law (§ 38 GmbH-Law) shows that a managing director can be
dismissed at any time and without any reason.

However, according to the court, the circumstance that the replacement from the position of a director
of the legal relationship underlying the appointment as managing director (here: service contract) does
not necessarily end. It also does not preclude a dismissal from the position of a director that the service
contract with the managing director was completed for five years.

Important: The principles of the judgment can be transferred to the association board and clearly show
that there is no connection between the appointment of the association and the service contract.
Relevant in association law is the regulation of § 27 paragraph 2 BGB. Thereafter, the appointment of
the Management Board is revocable at any time, without prejudice to the right to the contractual
remuneration.

Conclusion
With reference to a board of directors or a managing director with a position in an e.V., the following
principles result:

The revocation of the order triggers – apart from cases of abuse of rights – no claim for damages of the
executive board or managing director according to § 628 paragraph 2 BGB.
 

It does not matter whether or not the employee gave the reason for the dismissal.
 

Critical statements of the association as employer to the management of the board give him no claim for
damages according to § 628 paragraph 2 BGB. An exception applies only if the criticism had no basis or is
grossly or grossly offensive.