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Corporate Criminal Law in Germany: Supervisory Board Liability

Supervisory Board Liability: The liability of supervisory board members is a multifaceted topic affecting both companies and their governing bodies. A deep understanding of the legal framework and practical consequences is essential for both management and the supervisory board.

In the following, I would like to briefly address the tasks of the supervisory board, the legal framework, and various aspects of liability arising from work within a supervisory board. My experience defending supervisory board members—particularly in municipal corporations—has shown that this is often where deficiencies lie.

What is a Supervisory Board?

The supervisory board is a control body legally required in corporations, such as joint-stock companies (Aktiengesellschaft, AG). According to § 95 AktG, it consists of at least three members, with the exact number determined by the company’s articles of association or by law. Its primary task is to monitor the executive board (§ 111 AktG), thereby safeguarding the interests of the company and its shareholders.

However, the supervisory board is not merely a control body; it is also involved in strategic decisions. Its competencies include:

  • Appointment and dismissal of the executive board,
  • Review of the annual financial statement,
  • Approval of specific transactions that the executive board cannot carry out alone.

Legal Basis for the Supervisory Board’s Activities

The supervisory board’s work is governed by the Stock Corporation Act (Aktiengesetz, AktG), with key provisions including:

  • § 111 AktG: Duties and responsibilities,
  • § 93 AktG: Duty of care for the executive board (applied analogously to the supervisory board),
  • § 116 AktG: Liability of supervisory board members.

The German Corporate Governance Code (DCGK) also provides recommendations and guidelines for good corporate governance, emphasizing the self-responsibility of supervisory board members, particularly regarding ongoing training.

Supervisory Board Liability

Principles of Liability

Supervisory board members are liable under § 116 AktG, analogously to executive board members under § 93 AktG, for breaches of duty. Liability includes intent and gross negligence. A crucial aspect is the causal damage to the company resulting from a breach of duty.

Typical Breaches of Duty

Frequent causes of supervisory board liability include:

  • Inadequate control or supervision of the executive board,
  • Insufficient preparation for or participation in meetings,
  • Approval of unlawful transactions,
  • Failure to respond to identifiable risks.

A well-known example is the Wirecard scandal, where the supervisory board was criticized for failing to exercise adequate oversight despite clear warning signals. However, in practice, liability often fails due to the difficulty of proving causation between the breach of duty and the damage.

Burden of Proof

The burden of proof lies with the company asserting the breach of duty. The supervisory board member must demonstrate that they fulfilled their duty of care. This reversal of the burden of proof highlights the importance of proper documentation.

Compliance Obligations

Supervisory board members are also responsible for the company’s compliance. They must ensure the implementation of an adequate compliance management system. Breaches in this area can lead to liability risks, particularly if non-compliance results in significant legal or financial consequences.

Consequences of Duty Violations

The legal consequences for supervisory board members are varied:

  • Compensation claims: The company may demand compensation for damages incurred.
  • Recourse claims: Insurers, such as D&O insurers, may seek recourse if they have paid out on behalf of the company.
  • Fines and penalties: Violations of supervisory regulations, such as EU sanctions or data protection laws, may result in fines.
German Lawyer Jens Ferner (Criminal Defense & IT-Law)
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