Last Updated on May 29, 2021 by LawEuro
Stock Corporation Act (Laws / Regulations of Germany)
Part 4
Constitution of the stock corporation
Chapter 1
Management board
Section 76
Management of the stock corporation
(1) The management board is to manage the affairs of the company on its own responsibility.
(2) The management board may consist of one or several persons. In the case of companies having a share capital of more than three million euros, the management board is to be comprised of at least two (2) persons unless the by-laws stipulate that it is to consist of one (1) person. The regulations governing the appointment of a member of the board responsible for human resources and social welfare matters (Arbeitsdirektor) shall remain unaffected.
(3) Solely a natural person having legal capacity without any restrictions may be a member of the management board. No-one may be a member of the management board who
1. As a person under custodianship as concerns matters of his property, is subject wholly or in part to a reservation of consent (section 1903 of the Civil Code (BGB));
2. Based on a court ruling or an enforceable decision by an administrative authority, is prohibited from exercising a profession, a professional activity, a trade, or commercial activities, inasmuch as the purpose of the stock corporation corresponds, as a whole or in part, to the subject matter addressed by the prohibition;
3. Has been convicted for one or several criminal offences committed intentionally and consisting of any of the following:
a) Failure to file the application for opening insolvency proceedings (delay in filing a petition for insolvency),
b) Criminal offences pursuant to sections 283 to 283d of the Criminal Code (StGB) (insolvency offences),
c) Provision of false information pursuant to section 399 of the present Act or section 82 of the Limited Liability Companies Act (GmbHG),
d) False representation of facts pursuant to section 400 of the present Act, section 331 of the Commercial Code (HGB), section 313 of the Transformation Act (UmwG), or section 17 of the Act on the Financial Accounting by Certain Enterprises and Corporate Groups (PublG), or who
e) Has been convicted pursuant to sections 263 to 264a or sections 265b to 266a of the Criminal Code (StGB) to imprisonment of at least one (1) year;
This disqualification shall apply for the duration of five (5) years from the date on which the corresponding judgment has become final and conclusive; in this context, that period shall not be included in the computation in which the perpetrator was detained in an institution upon the order of governmental authorities.
The second sentence, no. 3 shall apply mutatis mutandis in the case of a conviction being handed down abroad for an offence that is comparable to the offences set out in no. 3 of the second sentence.
(4) The management board of companies that are listed on the stock exchange or that are subject to co-determination rights shall stipulate target values for the percentage of women working in positions at the first and second management levels below the management board. Where the percentage of women is lower than 30 percent at the time the target values are stipulated, the target values stipulated may not be lower than the percentage respectively attained at that time. Concurrently, periods are to be set within which the target values are to be attained. In each case, the periods may not be longer than five years.
Section 77
Management
(1) Where the management board consists of several persons, any and all members of the management board shall have authority to manage the affairs of the company only jointly. The by-laws or the rules of procedure of the management board may make determinations in derogation herefrom; however, they may not stipulate that, in the case of differences of opinion in the management board, one or several members of the management board may take a decision overriding the view held by the majority of its members.
(2) Unless the by-laws stipulate that it is incumbent on the supervisory board to establish rules of procedure, or the supervisory board so establishes rules of procedure for the management board, the management board may itself establish its rules of procedure. The by-laws may bindingly provide for individual aspects of the rules of procedure. Resolutions adopted by the management board regarding the rules of procedure must be adopted unanimously.
Section 78
Representation
(1) The management board shall represent the company before the courts and outside of court. Where a company does not have a management board (lack of management), the company shall be represented by the supervisory board for the case that declarations of intent are made to it or documents served.
(2) Where the management board consists of several persons, any and all members of the management board shall have authority to represent the company only jointly, unless the by-laws stipulate otherwise. Where a declaration of intent is to be made to the company, it shall suffice for such declaration to be made to a member of the management board or, in the case governed by subsection (1), second sentence, to a member of the supervisory board. Declarations of intent to the company may be made, and documents for the company may be served, to the company’s representatives set out in subsection (1) at the address entered in the Commercial Register. Notwithstanding the above, the declarations may be made and the documents served also at the registered address of the person authorised to receive service of documents pursuant to section 39 (1), second sentence.
(3) The by-laws may also stipulate that individual members of the management board shall have authority to represent the company alone or jointly with an officer of the company vested with full commercial power of attorney (Prokurist). The supervisory board may make the same stipulation provided the by-laws have granted it authority to do so. In these cases, subsection (2), second sentence, shall apply mutatis mutandis.
(4) Members of the management board having authority to represent the company jointly may grant authority to individual members to engage in specific transactions or specific types of transactions. This shall apply mutatis mutandis if an individual member of the management board has authority to represent the company jointly with an officer of the company vested with full commercial power of attorney (Prokurist).
Section 79
(repealed)
Section 80
Particulars shown on business letters
(1) All business letters, regardless of the format they may have, that are addressed to a specific recipient must set out the following particulars: the legal structure and the seat of the company, the court of registration at the seat of the company and the number under which the company has been entered in the Commercial Register, as well as all members of the management board and the chairman of the supervisory board, providing their family names and at least one fully spelled-out first name. The chairman of the management board is to be designated as such. Where information is provided regarding the company’s capital, then its share capital must be set out in any case, as must be the aggregate amount of the contributions still outstanding if the issue price has not been fully paid for the shares of stock.
(2) The particulars pursuant to subsection (1), first sentence, and subsection (2) need not be provided in the case of notifications or reports issued in the context of an existing business relationship and for which pre-printed forms are customarily used that simply are to be completed by the filling in the specific information respectively required for the individual case.
(3) Order forms shall be deemed to be business letters in the sense of subsection (1). Subsection (2) shall have no application in their regard.
(4) All business letters and order forms used by a branch office of a stock corporation having its seat abroad must set out the register in which the branch office is entered and the number under which it is entered in each register; in all other cases the regulations of subsections (1) to (3) shall apply regarding the particulars concerning the principal place of business and the branch office unless foreign law necessitates deviations herefrom. Where the foreign company is in the process of being wound up, this fact is to be stated, as are all liquidators.
Section 81
Modifications to the composition of the management board and changes to the power of representation of its members
(1) The management board is to file an application for entry in the Commercial Register of each modification to the composition of the management board or change of the power of representation conferred upon a member of the management board.
(2) The records and documents concerning the modification or change are to be attached, as the original or as a publicly certified copy, to the application for entry in the register.
(3) The new members of the management board are to give an assurance in the application for entry in the register that no circumstances are given that would disqualify them from being appointed pursuant to section 76 (3), second sentence, no. 2 and 3, or pursuant to the third sentence of said provision, and that they have been instructed concerning their unrestricted obligation to provide information to the court. Section 37 (2), second sentence, shall apply.
(4) (repealed)
Section 82
Restrictions on the power to represent the company and to manage its affairs
(1) It is not possible to restrict the power of representation of the management board.
(2) In their relationship to the company, the members of the management board are under obligation to comply with the restrictions on the authority to manage the affairs of the company that have been established, in the context of creating the regulations governing the stock corporation, in the by-laws, by the supervisory board, the general meeting, as well as by the rules of procedure of the management board and of the supervisory board.
Section 83
Preparations for and implementation of resolutions adopted by the general meeting
(1) Upon the general meeting’s corresponding demand, the management board shall be under obligation to make preparations for measures falling within the sphere of responsibility of the general meeting. The same shall apply to the preparations for contracts and the conclusion of same that will enter into force only with the consent of the general meeting. The resolution must be adopted by those majority ratios of the votes cast at the general meeting that are required for the measures themselves or for the consent to the contract.
(2) The management board is under obligation to implement the measures that the general meeting has resolved upon within the framework of its powers.
Section 84
Appointment of members of the management board and removal from office
(1) The supervisory board shall appoint members of the management board for a maximum term of five (5) years. A re-appointment or extension of the term of office, in each case for a maximum of five (5) years, shall be permissible. This shall require a new resolution to be adopted by the supervisory board, which may be so adopted at the earliest one (1) year prior to expiry of the current term of office. Solely for appointments for a term shorter than five (5) years may an extension of the term of office be provided for without a new resolution being adopted by the supervisory board, the pre-requisite being that this does not result in a total term of office longer than five (5) years. This shall apply mutatis mutandis to the employment agreement; however, the employment agreement may provide that it shall continue in force until the expiry of the term where the term of office is extended.
(2) Where several persons are appointed as members of the management board, the supervisory board may designate one member as chairman of the management board.
(3) The supervisory board may revoke the appointment as member of the management board and the designation as chairman of the management board for grave cause. Such grave cause shall consist of, in particular, gross dereliction of duties, inability to properly manage the company’s affairs, or a vote of no confidence by the general meeting, unless the confidence has been withdrawn on grounds that are manifestly irrelevant. This shall apply also to the management board appointed by the first supervisory board. The withdrawal is valid until its invalidity has been finally and conclusively determined by a court’s declaratory judgment. The claims attaching to the employment agreement shall be governed by the general regulations.
(4) The regulations of the Act on the Co-Determination by Employees in the Supervisory Boards and Management Boards of Mining Enterprises and Enterprises in the Iron- and Steel-Producing Industry, in the clean version published in the Federal Law Gazette (Bundesgesetzblatt) Part III, classification number 801-2, (MontanMitbestG) regarding the special majority required for a resolution to be adopted by the supervisory board regarding the appointment of a member of the board responsible for human resources and social welfare matters (Arbeitsdirektor) or the revocation of his appointment shall remain unaffected.
Section 85
Appointment by the court
(1) Where the management board lacks a required member, then in urgent cases the court is to appoint such member upon the corresponding petition by a party involved. A complaint may permissibly be lodged against the decision taken.
(2) The office of the court-appointed member of the management board shall expire in any case once the deficiency has been remedied.
(3) The court-appointed member of the management board shall be entitled to reimbursement for his reasonable cash expenditures and to remuneration for his activities. Where the court-appointed member of the management board and the company do not come to an agreement, the court shall determine the expenditures and the remuneration. A complaint may permissibly be lodged against the decision taken; filing a complaint on points of law is precluded. Based on the decision taken, compulsory enforcement may be pursued in accordance with the Code of Civil Procedure (ZPO).
Section 86
(repealed)
Section 87
Principles applying to the emoluments of the members of the management board
(1) In establishing the overall emoluments of the individual member of the management board (salary, profit-sharing, expense allowances, insurance premiums, commissions, incentive-based remuneration commitments such as, for example, stock options and collateral performance of any kind), the supervisory board is to ensure that they are appropriate in relation to the tasks and performance of the member of the management board and to the economic situation of the company and that, unless particular reasons so require, the customary remuneration is not exceeded. For companies listed on the stock exchange, the remuneration structure is to be oriented towards the promotion of a sustainable development of the enterprise. Accordingly, a multi-year assessment basis should govern the variable remuneration components; the supervisory board should agree a means of providing for limitations in order to take account of extraordinary developments. The first sentence shall apply mutatis mutandis to pensions, surviving dependents’ pension benefits, and benefits of a similar nature.
(2) Where the economic situation of the company deteriorates at a time following the above determinations such that the continued granting of the emoluments pursuant to subsection (1) would be inequitable for the company, the supervisory board or, in the case governed by section 85 subsection (3), the court is to reduce the emoluments to a reasonable amount upon a corresponding petition having been filed by the supervisory board. Pensions, surviving dependents’ pension benefits, and benefits of a similar nature may only be reduced pursuant to the first sentence in the first three (3) years following the date on which the management board member ceases to work for the company. Such reduction shall not affect the employment agreement in any other regard. However, the member of the management board may terminate his employment agreement with effect as per the end of the following calendar quarter, observing a period of notice of six (6) weeks.
(3) Where insolvency proceedings are opened for the company’s assets and the insolvency administrator terminates the employment agreement of a member of the management board, such member may demand compensation for the damages suffered, as a result of the service relationship having been cancelled, only for the two (2) years following the date on which the service relationship has expired.
Section 88
Prohibition of competition
(1) The members of the management board may not carry on a trade without the consent of the supervisory board, nor may they pursue any business in the company’s line of business, regardless of whether this is for their own account or that of others. Unless they have obtained such consent, they may also not be members of the management board of some other trading company, or managing directors or general partners thereof. The consent of the supervisory board may be granted only for specific trading activities or trading companies or for specific types of transactions.
(2) Where a member of the management board violates this prohibition, the company may demand compensation of its damages. It may instead demand of the member of the management board that he shall allow the transactions he has entered into for his own account to be considered transactions entered into for the account of the company, and that he surrender the remuneration obtained for the transactions entered into for the account of some other party, or that he assign his claim to the remuneration.
(3) The company’s claims shall become statute-barred following the expiry of three (3) months from the point in time at which the other members of the management board and the members of the supervisory board become aware of the measure resulting in the obligation to provide compensation for damages, or have reason, barring gross negligence, to become aware of same. Such claims shall become statute-barred, irrespective of this awareness, or grossly negligent lack of awareness, following the expiry of five (5) years from the date on which they have arisen.
Section 89
Loans granted to members of the management board
(1) The company may grant loans to the members of its management board only on the basis of a resolution adopted by the supervisory board. Such resolution may be adopted only for specific loan transactions, or types of loan transactions, and may not be adopted longer than three (3) months in advance of same. The resolution is to provide for the interest accruing on the loan and the repayment of same. Allowing members of the management board to draw amounts in excess of the emoluments to which they are entitled, namely also allowing them to draw advances towards emoluments, shall be equivalent to granting a loan. This shall not apply to loans not exceeding a monthly salary.
(2) The company may grant loans to its officers vested with full commercial power of attorney (Prokurist) and its agents empowered to bind the company in all aspects of its business (Handlungsbevollmächtigte) only with the consent of the supervisory board. Only upon having obtained the consent of its supervisory board may a controlling company grant loans to any of the following of the controlled company: the legal representatives, officers vested with full commercial power of attorney, or agents empowered to bind the company in all aspects of its business; only upon having obtained the consent of the supervisory board of the controlling enterprise may a controlled company grant loans to any of the following of the controlling company: the legal representatives, officers vested with full commercial power of attorney, or agents empowered to bind the company in all aspects of its business. Subsection (1), second to fifth sentences, shall apply mutatis mutandis.
(3) Subsection (2) shall apply also to loans granted to spouses, partners in a civil union, or a minor child of a member of the management board, of some other legal representative, of an officer vested with full commercial power of attorney (Prokurist), or of an agent empowered to bind the company in all aspects of its business (Handlungsbevollmächtigte). Said subsection furthermore shall apply to loans granted to a third party acting for the account of these persons or for the account of a member of the management board, of some other legal representative, of an officer vested with full commercial power of attorney, or of an agent empowered to bind the company in all aspects of its business.
(4) Where a member of the management board, an officer vested with full commercial power of attorney (Prokurist) or an agent empowered to bind the company in all aspects of its business (Handlungsbevollmächtigte) concurrently is a legal representative or member of the supervisory board of some other legal entity or partner of a commercial partnership, the company may grant a loan to such legal entity or commercial partnership only with the consent of the supervisory board; subsection (1), second and third sentences, shall apply mutatis mutandis. This shall not apply if the legal entity or the commercial partnership is affiliated with the company or if the loan is granted in order to enable the payment for goods that the company delivers to the legal entity or the commercial partnership.
(5) Where a loan is granted in contravention of the stipulations of subsections (1) to (4), the loan is to be repaid immediately, irrespective of any agreements to the contrary, unless the supervisory board retroactively grants its consent.
(6) Where the company is a credit institution or financial services provider to which section 15 of the Banking Act (KWG) is to be applied, the regulations of the Banking Act shall apply instead of subsections (1) to (5).
Section 90
Reports to the supervisory board
(1) The management board shall report to the supervisory board on the following topics:
1. The business policy it intends to pursue and other fundamental matters of corporate planning (in particular financial planning, investment planning, and human resources planning), in which context any instances are to be addressed in which actual developments deviate from the targets previously reported and the reasons therefor are to be provided;
2. The company’s profitability, in particular the return on equity;
3. The course of business, in particular the sales of the company, and its economic situation;
4. Transactions that may have a significant impact on the profitability or liquidity of the company.
Where the company is a parent company (section 290 subsections (1), (2) of the Commercial Code (HGB)), the report is to also address subsidiary companies and joint ventures (section 310 (1) of the Commercial Code (HGB)). Furthermore, a report also is to be submitted to the chairman of the supervisory board on the occasion of other important events; a business process ongoing at an affiliated enterprise of which the management board has become aware and which is suited to significantly influence the economic situation of the company is likewise to be regarded as an important event occasioning such a report.
(2) The reports pursuant to subsection (1), first sentence, nos. 1 to 4 are to be submitted as follows:
1. The reports set out in no. 1: at least once a year, unless changes of the situation or new issues mandate that a report be submitted without undue delay;
2. The reports set out in no. 2: at the meeting of the supervisory board at which the annual accounts are deliberated;
3. The reports set out in no. 3: regularly, at least once per quarter;
4. The reports set out in no. 4: if possible, in such good time that the supervisory board has the opportunity to state its position prior to the transactions in question being entered into.
(3) The supervisory board may demand at any point in time that the management board submit a report to it concerning matters of the company, its legal and business relations with affiliated enterprises, as well as business processes ongoing at these enterprises that are suited to significantly influence the economic situation of the company. An individual member may demand as well that such a report be submitted, however, the addressee shall be solely the supervisory board.
(4) The reports are to correspond to the principles of conscientious and faithful accounting. They are to be submitted in as good a time as possible and, to the exception of the report set out in subsection (1), third sentence, as a rule are to be provided in text form.
(5) Each member of the supervisory board is entitled to obtain knowledge of the reports. Insofar as the reports have been submitted in text form, they shall also be transmitted to each member of the supervisory board upon a corresponding demand being made, unless the supervisory board has resolved otherwise. The chairman of the supervisory board is to notify the members of the supervisory board concerning the reports pursuant to subsection (1), third sentence, at the latest at the next meeting of the supervisory board.
Section 91
Organisation; accounting
(1) The management board is to ensure that the required journal, required general ledger, and other required records are kept.
(2) The management board is to take suitable measures, and in particular is to institute a monitoring system, in order to allow developments jeopardising the company’s continued existence to be identified at an early point in time.
Section 92
Obligations of the management board in the case of loss, over-indebtedness, or inability to pay debts as they fall due
(1) Should it become apparent in the course of drawing up the annual balance sheet or an interim balance sheet, or if it is to be assumed in duly assessing the circumstances, that a loss amounting to half of the share capital has been incurred, the management board is to convene the general meeting without undue delay and is to notify it of this fact.
(2) Upon the company having become unable to pay its debts as they fall due, or upon its over-indebtedness having become apparent, the management board shall be prohibited from making any payments. This shall not apply to any payments that, also after this time, are in keeping with the due care of a prudent manager faithfully complying with his duties. The management board shall be under the same obligation for payments to stockholders insofar as these would have caused the company, without fail, to become unable to pay its debts as they fall due, unless this was not recognisable even if the skill and care designated in section 93 (1), first sentence, had been exercised.
Section 93
Duty of the members of the management board to exercise skill and care, liability and responsibilities
(1) In managing the affairs of the company, the members of the management board are to exercise the due care of a prudent manager faithfully complying with his duties. No dereliction of duties shall be given in those instances in which the member of the management board, in taking an entrepreneurial decision, was within his rights to reasonably assume that he was acting on the basis of adequate information and in the best interests of the company. The members of the management board are to respect the secrecy of any confidential information and secrets of the company, particularly trade secrets or business secrets, of which they have become aware in the context of their activities in the management board. The obligation set out in the third sentence shall not apply vis-à-vis an audit and enforcement panel recognised pursuant to section 342b of the Commercial Code (HGB) in the context of an audit performed by this panel.
(2) Members of the management board acting in dereliction of their duties are liable as joint and several debtors to compensate the company for any damage resulting therefrom. Where it is in dispute whether or not they exercised the due care of a prudent manager faithfully complying with his duties, the onus of proof shall be on them. Where the company has taken out insurance to protect a member of the management board against risks arising from his professional activities for the company, the insurance policy is to provide for a deductible of at least ten (10) percent of the damage, up to a minimum of one hundred and fifty (150) percent of the annual fixed remuneration of the member of the management board.
(3) The members of the management board shall be under obligation to provide compensation particularly in those instances in which, in contravention of the present Act,
1. Contributions are restituted to the stockholders,
2. Stockholders are paid interest or participate in the profits,
3. Treasury shares of stock in the company or in some other company have been subscribed to, purchased, accepted in pledge, or redeemed,
4. Shares of stock are issued prior to the issue price for them having been fully paid in,
5. The company’s assets are distributed,
6. Payments are made in contravention of section 92 (2),
7. Remunerations are granted to members of the supervisory board,
8. Loans are granted,
9. Shares of a new issue are issued in the context of the conditional capital increase and this is done outside of the purpose specified therefor or prior to the equivalent value having been fully paid.
(4) The obligation to provide compensation shall not arise vis-à-vis the company where the action taken is based on a lawful resolution adopted by the general meeting. The fact that the supervisory board has endorsed the action does not preclude the obligation to provide compensation. The company may waive its claims to compensation, or conclude a compromise regarding these claims, only once three (3) years have lapsed since the arisal of the claim, and only in those cases in which the general meeting approves this being done and no minority, the aggregate of whose shares is at least equivalent to one tenth of the share capital, raises an objection and has it recorded in the minutes. The limitation in time shall not apply where the party obligated to provide compensation is unable to pay his debts as they become due and concludes a compromise with his creditors in order to avert insolvency proceedings or if the compensation obligation is provided for in an insolvency plan.
(5) The company’s claim to compensation may also be asserted by its creditors insofar as they cannot obtain satisfaction from the company. However, this shall apply in cases other than those governed by subsection (3) only in those instances in which members of the management board have grossly violated their duty to exercise the due care of a prudent manager faithfully complying with his duties; subsection (2), second sentence, shall apply mutatis mutandis. The obligation to provide compensation shall not be cancelled vis-à-vis the creditors by a waiver by the company or by its concluding a compromise, nor shall the fact that the action is based on a resolution adopted by the general meeting cancel this obligation. Where insolvency proceedings have been opened for the company’s assets, the insolvency administrator or the insolvency monitor shall exercise the right of the company’s creditors against the members of the management board for the duration of said proceedings.
(6) The claims governed by the present regulations shall become statute-barred, in the case of companies that were listed on a stock exchange at the time at which the dereliction of duties occurred, after ten (10) years; in the case of other companies after five (5) years.
Section 94
Deputy members of the management board
The regulations applying to the members of the management board shall also apply to their deputies.
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