GERMANY Trends and Developments Contributed by: Stephan Waldhausen, Moritz Pellmann, Justus Anacker and Cristina Hajek Gross, Freshfields
Complex Business Judgements The accelerating complexity of global mar - kets, regulatory frameworks, and technological disruption has elevated the stakes of board- level decision-making. Strategic decisions are increasingly made in contexts where information is incomplete, risks are multilayered and interde - pendent, and outcomes are difficult to predict. However, complexity does not absolve respon - sibility. On the contrary, it demands a more structured and disciplined decision-making approach. In such an environment, inadequate board judgement can quickly escalate into personal and corporate liability. Over the past decade, there has been a significant increase in cases where not only compliance incidents but also business judgements made by boards have been retrospectively investigated if they resulted in (significant) losses. Additionally, the expecta - tions for engagement and supervision by super - visory boards have risen, effectively tightening the duties of their members. Consequently, it is increasingly important for board members to focus on meeting the requirements of the Busi - ness Judgement Rule (BJR). Failure to do so shifts the burden of proof to the board members, requiring them to demonstrate that they were acting in alignment with their duties. Meeting the BJR requirements safeguards board members from liability. This requires that decisions are made (i) on the basis of adequate information; (ii) in the best interest of the company; and (iii) in good faith and without conflicts of interests. To meet this standard, boards should embed the following questions in their decision-making processes: • Is our business judgement based on ade - quate information?
• To the extent AI-generated information is used in the decision-making process, have we complied with the six key principles regarding AI usage set out above? • Have underlying assumptions been critically reviewed and checked for plausibility? • Is external (independent) professional advice required to ensure the adequacy of the infor - mation basis or to provide guidance on an unclear legal framework? • Have all relevant business opportunities (including alternative scenarios) and risks for each of the relevant decision options been adequately assessed and balanced against each other? • Are board members subject to potential con - flicts of interest? • Are we aware of the burden of proof and, if so, is there a proper documentation process in place, laying out that the BJR requirements are met (also taking into account the aspects mentioned in the aforementioned bullets)? In a high-stakes environment, governance is measured by action, not intention. Boards that can clearly demonstrate how and why decisions were made are not only better protected under the law, but also more effective in practice. Embedding disciplined judgement processes is essential to managing liability, maintaining credibility, and making decisions that stand up to scrutiny.
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