Management Responsibilities in Limited Liability Companies

Abstract

A liberalization regulation in the corporate structure and the reduction of administrative burdens for corporation leads to a substantial flexibility in the obligation of the management within a corporation, giving the management a wider margin for business decisions. However, this development reinforces the accountability and requirements for the corporation management. The management responsibility and situations concerning management decisions and their assessment thereof are the central focus point in this thesis. For this purpose, it will through an economic theoretic perspective be relevant to illuminate within the law-practice and its standards are seen from a society overall perspective whether the optimal state of law can be reached. The legal analysis is based on case law concerning the responsible management obligations including some of the most important cases that have set a precedent for future similar cases will. The analysis will correspondingly examine the framework for the management’s liability according to the general rules of Danish law of tort law, containing when the conditions for raising a claim against the management are met. To substantiate this analysis, is it necessary for the thesis to determine whether there is a difference in the liability assessment according to whether it is a financial company or a capital company. The thesis will subsequently make an economic analysis which will be based on the current legislation where the economic rationales behind tort law and the business judgement rule will describe the consequences of current legal regulation. To give the economic analysis a realistic picture of the problem statement in this thesis in relation to the management responsibility and requirements, the use of the principal-agent theory will among others shed light on this. An explanation from the economic analysis merged with whether the jurisprudences level of efficiency and its influence is the accurate handling of duties is by a game-theoretical case introduced an analysis based on the ideal world, which includes the management’s level of vigilance, the state's liability standard and the management’s incentive to take upon risk. This analysis will illuminate whether the current state of the law is from an overall society perspective efficient with several assumptions.