GERMANY Law and Practice Contributed by: Eva Nase and Kay-Uwe Neumann, POELLATH
market fraud) general civil law remedies may provide an opportunity for claims of sharehold - ers. However, the courts have traditionally been cau - tious in recognising such claims. Liability The liability of a member of a management and supervising body in an AG, SE and KGaA cannot be limited, as this would in particular qualify as an impermissible waiver by the company upfront – ie, prior to the expiry of the three-year period (see 4.8 Consequences and Enforcement of Breach of Directors’ Duties ). However, D&O insurance for the members of the management and supervising body is permissible and com - mon 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 manage - ment board of an AG, SE and KGaA are obliged to bear a deduction of at least 10% of the dam - age to one-and-a-half times their annual fixed salary at maximum. 4.10 Approvals and Restrictions Concerning Payments to Directors/ Officers Remuneration of the Management Board The remuneration of the management board members of an AG and a two-tier system SE is resolved by the supervisory board and contrac - tually agreed upon in the service contract. In listed companies, the supervisory board has to determine the principles of the remunera - tion of the members of the management board in a remuneration system, which is subject to approval by the general meeting upon its intro - duction 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 maximum total remuneration of the management board) but provides for further rules with respect to its contents relating to different aspects of the remuneration of the management board if those aspects are foreseen in the remunera - tion system. However, the DCGK makes sev - eral recommendations with respect to criteria to be described in the remuneration system – eg, the ratio between the fixed remuneration and the variable remuneration based on short- and long-term incentives, as well as the performance and non-performance indicators for determining payment of variable remuneration. The supervisory board then determines the actual remuneration of each member of the management board based on the remuneration system. The supervisory board and the man - agement board have to prepare a remuneration report regarding the past financial year, which is subject to a non-binding approval by the annual general meeting. Neither the resolution on the remuneration system nor the resolution on the remuneration report can be objected to by means of a contesting action or an action for annulment by a shareholder. Restrictions As regards restrictions on the remuneration of the members of the management board, the AktG requires that the overall remuneration of
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