GERMANY Law and Practice Contributed by: Eva Nase and Kay-Uwe Neumann, POELLATH
7.2 Requirements for Directors Concerning Management Risk and Internal Controls In an AG, SE and a KGaA, the management board must install a system to detect and moni - tor risks to the continued existence of the com - pany. However, it is best practice to maintain several systems and refined rules (for example, through reporting lines and codes of conduct) to ensure internal compliance and effective risk management. Specifically, the management board of a listed company is required by law to establish an internal control and risk manage - ment system. The supervisory board will review the existence and effectiveness of such meas - ures. Managing directors of a GmbH are also expressly obliged to take measures for the early detection of a crisis. According to German case law, effective com - pliance management systems are also required in order to fulfil the duty of care owed to the company.
• in an AG and SE, a list of supervisory and administrative board members; • in a GmbH, a list of shareholders; and • subsequent amendments to the above-men- tioned points. Those filings are publicly available at www.han - delsregister.de, which contains all entries in the commercial register filed since 2007. The entry in the commercial register is constitu - tive in certain cases (eg, foundation, mergers or changes of legal form of the company), which means the measure will only become effective upon its entry in the commercial register. In other cases, failures to make filings may result in a fine from the registry court. 7. Audit, Risk and Internal Controls 7.1 Appointment of External Auditors A company has to appoint an external auditor unless it is a small company (based on the cri - teria set out in 4.11 Disclosure of Payments to Directors/Officers ). The key requirements gov - erning the relationship between the company and the auditor are set out in the HGB. The audi - tor is appointed by the general or shareholders’ meeting. In an AG and two-tier system SE, the supervisory board is responsible for issuing the actual audit mandate; while in a single-tier sys - tem SE it is the administrative board, and in a GmbH it is the managing directors.
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