Consultants: a liability trap for managing directors?!
Cum/ex transactions and the role played in these by banks and their governing bodies are currently the subject of a great deal of dispute and discussion. In this context, little attention is paid to the significance of legal consultant involvement and of their expert opinions regarding the “legal permissibility” of cum/ex transactions for the liability in question of the acting executive bodies. The decisive point here is probably whether or not an incorrect legal assessment or wrong legal advice by the legal consultant negates a culpability, thus rendering void an action by the governing bodies that was (potentially) in breach of duty. The question whether reliance on the “advice of an expert” ultimately has an “exculpatory” effect, however, affects not only legal issues, but ultimately all areas (e.g. scientific, technical, artistic issues) in which managing directors utilise the expertise of consultants. In a recourse case against the managing director, the selection and use of consultants by the managing director is thus of (partially) decisive importance. Of considerable importance here is the burden of proof that falls on the managing director. In a recourse action, the onus is on him/her to demonstrate that he/she was not in breach of duty or at least not culpably so.
Selection and use of consultants
Fundamental requirements for the selection of the consultant
When making the necessary selection decision, the managing director must personally ascertain that the consultant has the required specific expertise. It is therefore not sufficient that a third party (e.g. a supervisory board member) has named the consultant as a competent contact person for the issue to be examined. In order to prove the required expertise of the consultant, it is not only important that the advisor is formally qualified (e.g. as a lawyer), but also that the advisor has the required expertise and experience regarding the issue to be assessed. If the managing director is unable to assess based on the available information whether an individual selected as a consultant is sufficiently competent, this individual must not be consulted.
The consultant to be consulted must be independent, i.e. must not be guided in their deliberations by improper considerations or self-interest. The extent to which independence is already excluded by the economic dependence of the consultant, or by the consultant being bound by their instructions, depends on the individual case. For example, employees of the legal department are bound by instructions, but should not be dependent per se in this sense. By contrast, an external consultant may be dependent on the company because they receive a great many contracts from it. A prior involvement of the consultant with the issue to be examined may also negate their required independence.
Fundamental requirements for information provided to the consultant
Managing directors are strongly advised to deal with these requirements, which case law ultimately applies to the selection and use of consultants, and to ensure compliance with them. In recourse proceedings dealing with a managing director’s actions in breach of duty and in a manner detrimental to the company, it is any case only in very rare and exceptional circumstances that the culpability can be rendered void by a general statement to the effect that the managing director followed his/her consultant’s recommendation in good faith.