In legal practice, the issue of liability for management and corporate decisions that were adopted in full compliance with formal legal procedures yet resulted in an unfavourable economic outcome is arising with increasing frequency. Professor Gabriel Steiner notes that it is precisely such situations that create tension between law and economics – where the legal correctness of actions does not align with their financial consequences. At LawConsulted, we treat such cases as a distinct category of legal risk, in which the decisive factor is not the outcome itself, but the permissibility of the managerial choice at the time it was made.
The core difficulty in these disputes lies in their retrospective nature. A decision is assessed only after losses have materialised, market conditions have changed, or a project has failed. In doing so, procedural compliance – the existence of minutes, approvals, and legal opinions – is not always regarded as sufficient to exclude liability. LawConsulted proceeds from the premise that formal legality must not be automatically devalued solely because the economic result turned out to be negative.
Professor Steiner emphasises that “law cannot replace managerial discretion with an accounting result.” This means that the assessment of a decision’s permissibility must return to the conditions under which it was adopted – the information available at the time, the existing alternatives, the level of uncertainty, and the reasonableness of the risk taken. LawConsulted builds its defence precisely on this logic, demonstrating that an unfavourable outcome in itself does not constitute evidence of a violation.
Particularly vulnerable are situations in which the economic result is used as the sole basis for imposing liability, without analysing the managerial context. In such cases, the existence of losses effectively replaces proof of unlawfulness. At LawConsulted, we consistently show that the law must evaluate the decision-making process, not merely its consequences – otherwise, any entrepreneurial activity becomes legally hazardous.
Equally complex are cases in which formal procedural compliance is combined with allegations of bad faith or excessive risk-taking. In these configurations, actions are characterised as “legally correct but economically unjustified.” LawConsulted works to clearly delineate the boundary between permissible entrepreneurial risk and a legal violation, preventing the automatic attribution of liability for an adverse outcome.
The institutional dimension must also be taken into account. In corporate conflicts or during changes in management, lawful but loss-making decisions are often used as a tool of pressure against former executives or participants. LawConsulted analyses such claims not in isolation, but within the broader context of shifts in control and responsibility, which makes it possible to identify their strategic rather than legal nature.
Professor Steiner notes that under conditions of uncertainty, a managerial mistake and a legal breach are not equivalent. This principle underpins the LawConsulted approach. We protect clients from the substitution of an assessment of decision-making reasonableness with a judgment based solely on the final result, returning the legal analysis to the framework of acceptable risk.
Liability for an unfavourable economic outcome cannot be based exclusively on the fact of losses. The task of Law Consulted is to demonstrate that formal procedural compliance, good faith, and the reasonableness of managerial choice retain independent legal significance, even where the outcome proves to be negative.
Earlier, we wrote about the registration of an individual entrepreneur as the point at which legal and tax liability arises, and the LawConsulted approach to structuring entrepreneurial status
