GERMANY Law and Practice Contributed by: Eva Nase and Kay-Uwe Neumann, POELLATH
supervisory board in the case of codetermina - tion are generally appointed by employee elec - tions. The appointment and dismissal of the managing directors of a GmbH is, in principle, the respon - sibility of the shareholders’ meeting. The term of office may be indefinite. A person who has been convicted of certain criminal offences (eg, fraud) may not be a mem - ber of a management board nor a managing director. 4.5 Rules/Requirements Concerning Independence of Directors Management Board The members of the management board of an AG are subject to a duty of loyalty to the company, must observe the best interests of the company, and are bound by a non-compete obligation for the duration of office. They must disclose con - flicts of interest to the supervisory board without undue delay. The DCGK also makes statements to that effect. In certain situations, members of the management board should thus either abstain from casting votes or not even partici - pate in the meeting or the relevant topic. Supervisory Board The members of the supervisory board of an AG and a two-tier system SE and of the administra - tive board of a single-tier system SE are also bound by a duty of loyalty, but there are no mandatory statutory provisions that require and define independence. However, a few restric - tions aiming at independence prohibit an individ - ual from becoming a member of the supervisory or administrative board – eg, where the individ - ual is part of the management of a subsidiary of the company. Nevertheless, the DCGK requires
a certain degree of independence to avoid con - flicts of interest. In this respect, the supervisory board shall determine an appropriate number of independ - ent members. The DCGK gives indicators for determining the independence of members of the supervisory board. These include personal or business relationships with the company, the management board, controlling sharehold - ers and major competitors that may cause a substantial or not merely temporary conflict of interest. 4.6 Legal Duties of Directors/Officers Members of management bodies must conduct the company’s affairs with the due care of a prudent and diligent businessman, in particular in accordance with the applicable laws and the articles of association (duty of legality, including and of ever-increasing importance the duty to establish and maintain an effective compliance management system). In the case of entrepre - neurial decisions, the so-called business judge - ment rule applies in order to eliminate hindsight bias when legally evaluating the management bodies’ past conduct. This means that members of the management board may be exempt from liability if they had reasonably assumed that they were acting on the basis of adequate information and in the best interests of the company. The same applies to the members of the super - visory and administrative board. However, their differing tasks and roles in the corporate govern - ance of the respective company lead to a differ - ent emphasis of duties. 4.7 Responsibility/Accountability of Directors In principle, members of management and supervising bodies owe their duties primarily to
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