Germany: BGH Decision on requirements of abuse of trust pursuant to Criminal Code

In a recently published decision, the Federal Criminal Court (“BGH”) detailed the requirements for an abuse of trust by members of a stock corporation’s management board pursuant to Section 266(1) of the Criminal Code (Federal Criminal Court, 12 October 2016, 5 StR 134/15).

The Federal Criminal Court set aside the district court’s acquittal of several members of the management board of a financial institution in connection with their approval of certain complex financial transactions. In doing so, the Federal Criminal Court clarified the relationship between the requirements for a criminal breach of trust and a violation of members’ management board duties under the Stock Corporation Act.

In its decision, the district court applied a two-step approach. First, the district court held that the members of the management board had violated their duties under Section 93(1) of the Stock Corporation Act because the members lacked adequate information when making their decision and had been aware of the information deficit. The court found that the managers could therefore not benefit from the safe haven of the busi-ness judgement rule under the Stock Corporation Act. This safe haven requires, among other things, that managers make decisions on the basis of adequate infor-mation.

Despite this, in the second step, the court refused to hold the managers criminally liable for an abuse of trust under Section 266(1) of the Criminal Code, as the managers had committed no obvious or serious violations of their duties.

The Federal Criminal Court stated that there is no room for such a two-step approach. Instead violations of Section 93(1) of the Stock Corporation Act always imply a serious or obvious violation of a manager's duties, as a violation of such duties would require, among other things, that the board members had been willing to accept entrepreneurial risks to a fully unjustifiable extent. Therefore, under Section 93(1) of the act, the court held that should the limits of business judgement be crossed and constitute a violation of the managers' core duties to the company, such a violation should be held to be so severe that it almost automatically constitutes a violation of duties under Section 266 of the Criminal Code.

The Federal Criminal Court further held that determining whether the managers had been provided with adequate information could not be decided with an objective view. Instead, the decisive question – whether a manager (as a prudent businessperson) could reasonably perceive that he had adequate information to support his actions – requires the court to consider the individual peculiarities of the facts at hand.

For more information on this topic please contact Thomas Sonnenberg.