The Content of the Duty of Care in the Entrepreneurs Law
The Law of Georgia on Entrepreneurs imposes on the managerial person of an entrepreneurial society duties of a special, fiduciary character. Under the first part of Article 50, the managerial person must direct the affairs of the society lawfully and with the diligence of a fair and conscientious manager — caring for it as an ordinary, prudent person would care under analogous conditions, with the belief that the action is economically most favorable to the society. This formulation unites three components: lawfulness, an objective standard of care, and the priority of the society's economic benefit.
Where the duty is breached, the managerial person answers to the society for damage caused by the culpable non-performance of the duty of good faith. The law draws an important boundary here: neither the charter nor a decision of the partners may limit the managerial person's liability for the intentional non-performance of this duty — protection against intentional harm cannot be secured either by the charter or by a resolution of the meeting.
When the Managerial Person Is Released From Liability
The law defines two significant exceptions. First, a managerial person is released from liability if, by the action, the person was executing a decision of the general meeting. That release does not operate, however, where the managerial person facilitated the adoption of the decision by providing incorrect information, or knew that the decision would cause damage and failed to notify the meeting before its adoption or execution.
Second, the freedom of entrepreneurial decision regulated by Article 52. The duty of care is not breached, and the managerial person is not obliged to compensate the damage caused to the society by an entrepreneurial decision taken, if the person could reasonably be assumed to have taken the decision on the basis of sufficient and reliable information, proceeding from the interests of the society, independently and free of a conflict of interest or the influence of others. Under this rule, a commercial error made in good faith generates no liability — but the protection does not extend to a decision adopted in breach of duties provided by law or the charter.
The Special Situation: Insolvency
Article 51 tightens the duty of care in a situation of insolvency: if the society is insolvent or faces the threat of insolvency, the managerial person must, without culpable delay and no later than 3 weeks from the moment insolvency arose, declare insolvency under the procedure established by the Law of Georgia on Rehabilitation and Collective Satisfaction of Creditors. At that point the attention of the managerial person is no longer directed to the society's owners alone — in a situation where the society's assets in effect serve the creditors, the deepening of damage is a function of that person's decisions. The declaration is not culpably delayed if the managerial person duly performs the duty of care.