Faulty software attestations, certificates and attestations: Theses on the liability of the management or managers, as well as software houses, auditors and other alleged experts

A reply to Stritters Forum tips of 13.10.2007

 

Some business managers can be blinded by attestations, certificates and certifications when purchasing software: Not only the content with many ifs and buts, but especially the liability situation shows that these are regularly samples without value.

 

Manager liability

Even from a medium-sized GmbH, the management must set up a risk management system, § 91 II AktG. Quality management is also recommended as a preliminary stage. The sin of omission leads to the personal liability of the management quite a few managers have already lost their entire private assets in this way.

True risk management also includes the examination of legal and tax risks, including the question of proper insurance of the mostly unavoidable residual risks: regularly, only selected insurance brokers and consultants are in a position to provide the management with a qualified analysis and sound recommendation.

 

Software as a risk

With the use of software with contact to finances and taxes considerable damages can arise for example the refusal of the input tax deduction, the discarding of the Fibu by the finance, in the consequence a fine tax estimate, § 162 Ao. This risk must be quantified, i.e. the risk typical of the contract must be determined.

Subsequently, a prudent manager or board of directors will consider how to check the software for plausibility and which experts to consult, preferably before selection and deployment.

The management will then examine whether the company’s own equity capital would be sufficient to cope with such a loss – this refers to the company’s own insurance cover, but also to the creditworthiness of the supplier, in other words, in case of doubt, to the attempt to prove that adequate insurance cover exists there as well?

 

Auditors’ liability for attestations?

A popular approach among honorary professionals is to use general terms and conditions of business (AGB). These then attempt to limit the liability of some auditors to one or four million: Unfortunately, this only works where the law does indeed regulate it accordingly, § 323 HGB, i.e. in particular in the case of auditing.

Incidentally, i.e. precisely where the company is faced with recognisably higher risks, it is no use simply writing 1 or 4 million as a limitation of liability in the general terms and conditions: In case of doubt, the honorary professional is liable for the risk typical for the contract and this is based on higher court jurisdiction since the beginning of the 20th century!

If it is a StB- or WP-GmbH, the question of the existing insurance cover arises, not only in terms of the amount but also the delicate consideration of what other liability assets would be available to the persons making the test. A look at the creditworthiness is necessary, the result of some inquiries at a credit agency makes you sit up and take notice.

 

Auditors’ liability for advertising?

StB/WP change their face colour at regular intervals when the latest verdict of the LG Mosbach is presented to you: In a judgement of 15.08.2007, among others, a former Federal Minister and law university professor was sentenced to damages because he had acted as guarantor for an asset fund. The basis was in particular the ruling of the Federal Court of Justice (BGH) of 22 May 1980.

According to this provision, such persons are also liable if their outwardly appearing involvement creates a special state of trust: This includes, for example, companies and persons who, in view of their generally recognized and prominent professional and economic position or their status as professional experts, assume a guarantor position.

The auditors and lawyers who are listed as experts in the context of the prospectus and who also make statements in this capacity are primarily eligible for this purpose. They are expected to have professional expertise and personal reliability, with the result that their statements in the prospectus are often of decisive and decisive importance.

As the Federal Court of Justice later found, this also applies to cases in which the auditor is not even expressly mentioned by name in the prospectus.

 

Auditor advertising liability almost never insured?

It is then very sad news for the management that honorary professionals who are involved in advertising for products or product providers (including software or IT companies) are regularly not insured. This follows from the general and special insurance conditions, which do not provide cover for advertising liability.

Honorary professionals who carelessly support advertising letters, recommendations or the public dissemination of their work results are therefore liable, but often have practically no insurance cover. For this, it is probably sufficient that the auditor tolerates that his audit certificate is also used for advertising purposes.

Once again, the management will have to consider what value a certificate or attestation will still have. In addition to the creditworthiness of the issuers of such negligently used documents for advertising, the appropriate insurance would have to be clarified in a technically unambiguous manner and before the decision to purchase.

 

Stritter’s logic the question of causality!

The expert Stritter revealed that numerous software certificates are of dubious value, as they refer to older software versions that are no longer available in stores. As we have seen, this is only at first sight a fine objection for the StB/WP that he would no longer be liable after all, because his certificate affected an earlier (and therefore in doubt more faulty?) software version?

It’s just a pity that in addition to the professional liability (for the actual ancient? attestation) there is also the guarantor liability due to the toleration of an advertisement by the sales department (e.g. the software house). It is also regrettable that this is not usually included in the insurance cover for honorary employees, and is even considered to be regularly uninsurable.

 

The question of respectability?

It would hardly be surprising if someone thought that such factually often worthless certificates are nothing more than a nice marketing gag, especially without proof of adequate insurance: Trusting such seemingly worthless samples would be naive from the point of view of management. To take it practically to the extreme: An insurance broker recently described his honorary professional clients as 95% unable to discuss their own risks – the insolvency of the former world’s largest securities company in the wake of the Enron scandal could be a pointer in this direction.

 

So what is to be done?

When software is delivered, external experts must be consulted as controllers at an early stage, because it is typical for customers to receive beta versions. To prevent the buyer from becoming a free beta tester, qualified contracts must be negotiated, because the damage potential cannot be 100 times higher than the price of the software delivery.

It is little known that according to case law the costs of the employees for error correction etc. can be charged to the software house by the managing director. And there is another issue that will play a role in risk management: How do I get the source code if the software company is ever liquidated or goes bankrupt?

As already mentioned, the checking of insurance coverage and creditworthiness is indispensable in risk management, but by no means sufficient for a qualified handling of these liability issues. Numerous attestations, certificates and certifications prove to be not even worth the paper they are written on after qualified testing of the risks and side effects.

 

 

by Dr. Johannes Fiala

published on Forum Electronic Tax Audit in October 2017

 

Link: http://elektronische-steuerpruefung.de/management/fiala_testate_haftung.htm

 

 

Our office in Munich

You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.


About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
»More about Dr. Johannes Fiala

On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.

Arrange your personal appointment with us.

Make an appointment / call back service

You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.

Obtain a second legal opinion

The first telephone call about your request is free of charge.