“I was just a figurehead…”, “I was only formally appointed; the real manager was someone else…”, “My friends asked me to fill the role formally…”, “I didn’t control the funds; there was another manager.” Such and similar excuses, heard when examining issues of managerial liability, often baffle lawyers.
"It may be the result of innocent naivety or blind trust, or perhaps a lack of basic understanding and knowledge, but sometimes these cases can also be the result of deliberate action," says Egidijus Langys, Managing Partner at AVOCAD. He says that the most important thing is not to blame, but to help managers avoid such situations or to get out of them as soon as possible. So, how can we protect ourselves from the potential risks that can arise from the formal performance of managerial duties?
Limits to the responsibilities of the actual and formal manager
Before the holidays, the Supreme Court of Lithuania (SCL) issued an important clarification that distinguishes between the formal, or in other words legal, and de facto liability of a company's manager. This clarification is of particular relevance for those who find themselves caught between formal duties and real managerial control.
"Today's leader, in my opinion, is either a hero or a madman," Langys wryly remarks. According to the lawyer, managers must work with the utmost care, competence and compliance with the law, because the limits of liability can be wide and sometimes very unexpected.
The mere existence of a de facto manager does not exclude the liability of a formal manager. If both managers committed illegal acts, the question is whether they acted as accomplices. "It must be assessed whether the managers acted jointly with the intention to cause damage (subjective complicity) or whether the interaction of several actions simply led to the consequences (objective complicity)," explains Egidijus Langys.
Liability for aiding and abetting in court
One of the most common cases is when a person agrees to become a formal manager out of friendship or a simple request. Such a manager may believe that nothing serious will happen: after all, he or she has done nothing but sign a few documents. "But even in this case, the liability remains because the activity was carried out in his name. The formally appointed manager who signs the documents often does not look into the details and relies on the actual manager, but in court all this proves subjective complicity," warns Langys.
It is therefore necessary to assess the risks if you are asked to become a formal manager, whatever the purpose. "If you are already a formal manager and blindly follow the instructions of others, you should step down as soon as possible. It is important to remember that leadership is not only a responsibility, but also a huge risk, so a responsible approach to this role is vital.
What liability can a manager face?
According to AVOCAD's Managing Partner, the manager may be subject to civil, administrative or even criminal liability depending on the nature and extent of the damage caused. "For example, if a manager signed documents without looking at the information contained in them and this caused financial damage, he or she may be liable for damages," explains Mr Langys. In cases of criminal liability, the manager can face fines, imprisonment or even imprisonment.
"That's why it's important not only to understand the limits of your responsibilities, but also to ensure that all actions are legal and justified. Leadership is not only an opportunity to develop your career, but also a responsibility for all the consequences that may arise from poor decisions," emphasises Langys.
Current ruling: order of the Supreme Court of Lithuania in civil case No e3K-3-243-403/2024 of 16 December 2024.