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A New Judgement May End a Decade of Debate - Liability of the Employed Managing Director

A New Judgement May End a Decade of Debate - Liability of the Employed Managing Director

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A new ruling of the Curia has finally settled the long-lasting debate on whether the general rules of civil law or the provisions of the Labour Code apply to the liability for damages of the employed managing director.

The interpretation difficulties have arisen from the single fact that the Labour Code – which refers to the applicable provisions of the Labour Code regarding the compensation for damages – does not contain any reference to the relevant section of the Civil Code, which establishes the general liability clause applicable to the managing directors in the event of contract breach.

  • The judgment published in 2023 stated that the liability of an employed managing director for damages is to be assessed according to the general rules of the Labour Code, meaning that the employer must prove
  • that the employee in such position did not act as expected in the given situation,
  •  the damage and its amount, as well as
  •  the existence of the causal link.

As per the reasoning of the new judgement, the Curia states that contrary to the provisions of the Labor Code, according to which the provisions of civil law apply to damages caused by an executive employee in the context of managerial activities, the Labour Code in force during the assessed damage does not refer to the rules of civil law, which leads to the partial turning of the burden of proof.

By Borbala Maglai, Attorney at Law, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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