GERMANY Law and Practice Contributed by: Jan-Ove Becker and Lukas Heber, Littler
Act on Corporate Due Diligence Obligations in Supply Chain
The supervisory board must review the content of the report. This reporting obligation affects large, capital market-oriented companies that employ more than 500 employees on average over the year. A company is classified as a large company if it meets two of the following criteria: i) it employs at least 250 employees; ii) its balance sheet total exceeds EUR25 million; iii) its sales revenue in the 12 months prior to the balance sheet date exceeds EUR45 million. In the event of incorrect presentation or con - cealment of the company’s circumstances, the members of the body authorised to represent the company or the supervisory board may be punished with a fine or imprisonment. In the event of improper reporting, the members of the body authorised to represent the company or the supervisory board may be fined up to the higher of EUR2 million or twice the economic advan - tage gained from the administrative offence, where the economic advantage includes profits made and losses avoided and may be estimat- ed. The fine may also be imposed on the com - pany. The company may be liable to investors for damages. Competition law injunctions against the company are also possible. Under certain circumstances, the legal representatives may be liable for damages to the company. Large non-capital market-oriented corporations or large capital market-oriented companies that employ fewer than 500 people are obliged to report on non-financial performance indica - tors, such as information on environmental and employee matters, if this is relevant for under - standing the course of business or the situation of the company.
(Lieferkettensorgfaltspflichtengesetz, LkSG) Companies must submit an annual report to the Federal Office of Economics and Export Control ( Bundesamt für Wirtschaft und Ausfuhrkontrolle , BAFA) on the implementation of due diligence obligations. The report must provide compre - hensible information on: • whether and which human rights and environ - mental risks the company has identified; • what the company has done to fulfil its due diligence obligations; • how the company assesses the impact and effectiveness of the measures; and • what conclusions it draws from the assess - ment for future action. The report must be electronically submitted to BAFA in German no later than four months after the end of the fiscal year. It must also be made publicly available online no later than four months after the end of the fiscal year and must be available for seven years. If no violations of duty were found, then this must be plausibly stated in the report. No further explanations are then required. Company and business secrets must be duly protected. See 2.2.2 Corporate Human Rights Due Dili- gence Legislation for the affected companies and the consequences of non-compliance. Corporate Sustainability Reporting Directive (CSRD) The CSRD entered into force on 5 January 2023 and had to be transformed into German national law until 6 July 2024 at the latest. This means that it is not applicable at the moment but will be in the near future.
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