GERMANY Law and Practice Contributed by: Eva Nase and Kay-Uwe Neumann, POELLATH
In principle, the supervisory board is responsible and – according to case law – even has a duty to assert damage claims to the management board members. The company may waive its damage claims or enter into settlement arrangements on these claims only if three years have lapsed since the claim arose and the general meeting resolved thereupon without a minority of the shareholders (at least 10% of the share capital) raising an objection. Where members of the supervisory board culpably breach their duties, the management board is respon - sible for pursuing possible damage claims against the supervisory board members jointly and severally. Claims Against Members of Corporate Governance The rights and obligations on asserting claims against members of corporate governance bodies in an AG, SE and KGaA are independent of whether or not the members of these respective bodies have been dis - charged. Another particular consequence of a breach of duty in a listed company is that the company may be obliged to disclose it to the capital market by way of ad hoc notification. In the case of a GmbH, the consequences of a breach of the duties of managing directors are, to a great extent, comparable to an AG. In general, the manag - ing directors, like the management board members, are not directly liable to the creditors of the company. The shareholders’ meeting has the right to pursue damage claims and to decide about the dismissal of managing directors and the termination of the service contract. In contrast to the situation in the AG, if the sharehold - ers’ meeting has discharged the managing director knowing the facts underlying such a breach, the dis - charge leads to an exclusion of liability. 3.9 Other Claims/Enforcement Against Directors/Officers Certain special law remedies and, in the case of wil - ful misconduct, general civil law remedies exist. From the company’s point of view, these do not generally extend claims any further than those under corporate law. Since shareholders do not have a direct claim against the members of management and supervising
bodies under corporate law, in certain situations (eg, capital market fraud) general civil law remedies may provide an opportunity for claims of shareholders. However, the courts have traditionally been cautious in recognising such claims. Liability The liability of a member of a management and super - vising body in an AG, SE and KGaA cannot be lim - ited, as this would qualify as an impermissible waiver by the company upfront – ie, prior to the expiry of the three-year period (see 3.8 Breach of Directors’ Duties ). However, D&O insurance for the members of the management and supervising body is permis - sible and common in practice, in order to protect them against risks arising from their professional activities for the company. Premiums are generally paid by the company, although members of the management board of an AG, SE and KGaA are obliged to bear a deduction of at least 10% of the damage to one-and- a-half times their annual fixed salary at maximum. The remuneration of the management board members of an AG and a two-tier system SE is resolved by the supervisory board and contractually agreed upon in the service contract. In listed companies, the supervisory board has to determine the principles of the remuneration of the members of the management board in a remunera - tion system, which is subject to approval by the gen - eral meeting upon its introduction and any material changes thereto, at least every four years. However, the resolution on the approval is non-binding and thus has no effect on the legitimacy of the remuneration. Nevertheless, if the general meeting does not approve the remuneration system, a reviewed remuneration system has to be presented at the next annual general meeting for approval. Contents With respect to the contents of the remuneration system, the AktG only requires a few elements to be included in every remuneration system (eg, a maxi - mum total remuneration of the management board) 3.10 Payments to Directors/Officers Remuneration of the Management Board
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