Appointment and Dismissal of the AG Supervisory Board in Germany
The Departure of Supervisory Board Members from the Stock Corporation in Germany
The supervisory board of a german stock corporation has a fiduciary function, since it - not the owner (shareholder) - appoints, supervises and controls the management board as the managing body and asserts any claims for damages.
Against this background, the appointment and dismissal of the person who acts in a fiduciary capacity for the shareholders as a member of the supervisory board is of particular importance.
Legal Expertise for the Appointment and Dismissal of Supervisory Board Members in Germany
Our highly qualified and specialized team of lawyers and specialists in german corporate law will advise you quickly and competently on all issues relating to the appointment, composition and dismissal of the supervisory board. The range of advice provided by our stock corporation lawyers can be described as follows:
- Advice concerning the appointment and dismissal of members of the supervisory board, both on the part of the company and on the part of supervisory board members
- Out-of-court and in-court assertion of defects in resolutions of the shareholders' meeting concerning the appointment and dismissal of members of the supervisory board
- Extrajudicial and judicial assertion of claims for damages and recourse against members of the supervisory board, including accompanying strategic advice
- Extrajudicial and judicial defense of claims for damages and recourse against members of the supervisory board, including accompanying strategic advice
- Advice on the composition of the supervisory board on the part of the shareholder, management board, supervisory board and employee representatives
- Judicial review of the composition of the supervisory board
For a non-binding inquiry, please contact one of our experts directly by phone or e-mail or use the contact form at the bottom of this page.
Composition of the Supervisory Board in Germany
The composition of the supervisory board of a german joint stock company, including the number of members of the supervisory board, depends on the amount of the share capital of the joint stock company concerned and the number of employees working for the company.
Based on employee co-determination, the german law provides for three basic models for the composition of the supervisory board:
- Supervisory Board without participation of employees / employee representatives
- Supervisory Board with one third employee / employee representatives in accordance with DrittelbG
- Supervisory board with one half employee / employee representatives in accordance with the MitbestG
In the following, the focus is on the appointment and dismissal of the members of the supervisory board to be appointed / dismissed by the shareholders (shareholders) or the german stock corporation without co-determination.
Number of Members of the Supervisory Board in Germany
The number of members of the supervisory board in Germany is determined on the basis of Art. 95 of the German Stock Corporation Act (AktG). According to this, the supervisory board generally consists of at least three members.
The articles of association may stipulate a higher number, but this must be specifically stated in the articles of association (otherwise the provision in the articles of association is invalid).
In order to ensure that the supervisory board is able to function and work effectively, the AktG specifies a maximum number of supervisory board members depending on the amount of share capital. For german stock corporations
- with a capital stock of up to 1,500,000 euros, the maximum number is nine,
- with a capital stock of more than 1,500,000 euros, the maximum number is fifteen,
- with a share capital of more than 10,000,000 euros, the maximum number is twenty-one.
Appointment of Members of the Supervisory Board in Germany
The appointment of members of the supervisory board may in principle be effected by
- election by the Annual General Meeting,
- appointment of persons to the supervisory board,
- appointment by the court.
Election by the Annual General Meeting
The election of members of the supervisory board in Germany, which is referred to as appointment by the AktG, is carried out according to the german law by the free decision of the general meeting of shareholders.
In accordance with the usual regulations, the election of members of the supervisory board must be announced as an item on the agenda in the invitation to the general meeting. In addition, a non-binding election proposal by the supervisory board for filling the vacant supervisory board seats is to be announced with the agenda. The supervisory board in Germany may also submit several alternative proposals. The management board is not entitled to make an election proposal because it is not supposed to have any influence on the selection of the persons who will supervise the management board.
In the case of listed stock corporations, the supervisory board's election proposal must also include the supervisory board candidate's seats on other supervisory boards required by german law. Unless the articles of association provide for a higher majority of votes, a simple majority of the votes cast is required and sufficient for the election of each individual member of the supervisory board. The election may also take the form of a so-called list election. In this case, all vacant places on the supervisory board are voted on together / uniformly.
The supervisory board member in question may (but is not obliged to) accept the election; until acceptance, the election is provisionally suspended. In german practice, a declaration by the member concerned to accept a possible election is usually already available at the time of the annual general meeting.
In accordance with the general provisions, the resolution of the general shareholders' meeting to appoint a member of the supervisory board in Germany may be challenged / contested on the grounds of any defects.
Appointment of Persons to the Supervisory Board
Under Art. 101 (2) AktG, a specific shareholder or the holder of specific shares may be granted the right to appoint persons to the supervisory board based on a provision in the articles of association. This right is a so-called special right (Art. 35 of the German Civil Code) which cannot be withdrawn by amending the articles of association without the consent of the person entitled to delegate.
Rights of appointment are a typical phenomenon in owner-managed and family-managed companies. By this means, the shareholders concerned wish to secure influence over the management board as the executive body. Shareholder rights alone give shareholders only very limited opportunities for influence and also information.
What is significant for german practice is that, according to the law, the rights of appointment may be granted in total for a maximum of one third of the number of shareholder supervisory board members resulting from the law or the articles of association. Consequently, in the case of a three-member Supervisory Board, only one member may be delegated. The other members must be appointed by resolution of the annual general meeting.
Judicial Appointment of Supervisory Board Members in Germany
Art. 104 of the AktG stipulates three circumstances under which a court must appoint missing members of the supervisory board in Germany:
- Supplementation of the supervisory board due to the inability of the supervisory board to pass a resolution (Section 104 (1) AktG)
- Completion of the supervisory board due to incomplete composition of the supervisory board for more than three months (Section 104 (2) AktG)
- Supplementation of a supervisory board with equal representation due to incomplete composition (Section 104 (3) AktG).
The german court decides on the supplementation of the supervisory board on application. The management board, the supervisory board and shareholders of the company are entitled to file an application.
Removal of Supervisory Board Members by the Annual General Meeting
The annual general meeting in Germany may in principle dismiss the members of the supervisory board appointed by it at any time at its own discretion. However, the corresponding resolution of the general meeting requires a majority of at least three quarters of the votes cast.
The articles of association may stipulate a different majority and further requirements. The general view is that lower or stricter voting quotas may be provided for. It is said to be inadmissible to tighten the requirements for dismissal by providing for an important reason.
It is disputed whether the end of the term of office of the dismissed supervisory board member ends with the resolution of the shareholders' meeting or only with its non-appealability in Germany.
Dismissal of seconded Supervisory Board Members in Germany
Supervisory board members in Germany who have been delegated to the supervisory board on the basis of the articles of association can in principle only be dismissed by the person entitled to delegate them. The latter may at any time, at its own discretion, revoke the recall and appoint another member to the supervisory board.
An exception to the above principle exists if the articles of association attach certain conditions to the right to appoint and that right to appoint no longer applies. The annual general meeting can then dismiss the delegated member by a simple majority of votes.
Dismissal of Supervisory Board Members by the german Court
At the request of the supervisory board, the court shall dismiss a member of the supervisory board on serious grounds.
Either the supervisory board or - but only in the case of the dismissal of delegated members - a minority of shareholders holding 10% of the capital stock or the pro rata amount of 1 million EUR are entitled to file a motion in Germany.
It is usually difficult to say when good cause exists. The decisive factor is whether the continued service of the member in question on the supervisory board would have a not inconsiderable impact on the supervisory board's ability to function or would otherwise be detrimental to the company, i.e. whether it would be unreasonable to expect the company to continue to accept him or her as a member of the supervisory board.