stefan lammel gesellschaftsrecht p.jpgjulia schwab gesellschaftsrecht.jpg

Repayment Claims against Members of the Supervisory Board

In case a stock corporation (AG) concludes a service contract (that is not subject to labor law) with one of its supervisory board members, the approval of the supervisory board by resolution is required. In the absence of such a resolution (and if the contract is not subsequently approved by a resolution of the supervisory board) the supervisory board member needs to repay the remuneration received.

Background

The defendant was chairman of the plaintiff's management board until June 2006. In June 2006, the plaintiff and the defendant agreed that the defendant would resign from his position as chairman of the management board as of June 30, 2006 and would simultaneously join the supervisory board as chairman. The contract also provided that the defendant was to receive for the period from July 1, 2006 to September 30, 2007, a monthly remuneration of EUR 16,665.00 for his activity as general agent, a company car and a lump sum payment of EUR 100,000.00.

In addition, the defendant provided consulting services to the plaintiff via the company N AG, of which the defendant was chairman of the management board. N AG billed the plaintiff for these services in the total amount of EUR 61,399.23.

The plaintiff now demanded from the defendant the repayment of the monthly remuneration and the lump sum payment, the reimbursement of the monetary advantage for the company car and the repayment of the consulting fees paid to N AG.

The judgment of the Higher Regional Court of Hamm of 04.03.2020, file no. 8 U 32/19

The Higher Regional Court (OLG) of Hamm has granted the action and based its decision on the fact that the contract dated June 8, 2006 is invalid according to Sections 113, 114 (1) of the German Stock Corporation Act (AktG). This is because the conclusion of a service contract with a member of the supervisory board requires a resolution of the supervisory board and this case the resolution is missing. This also applies even though the defendant was not yet a member of the supervisory board at the time the contract was concluded. The defendant was also obliged to reimburse the payments made to N AG for consulting services, as the defendant was chairman of the management board of N AG at that time. Section 114 AktG is also applicable if the contract is not concluded with the supervisory board member but another company whose legal representative is a member of the supervisory board.

Note

The German stock corporation law contains special representation regulations for contracts concluded with executive bodies. Therefore, service contracts (that are not subject to labor law) with a member of the supervisory board require the approval of the supervisory board by resolution. This is also the case if the person was not yet a member of the supervisory board at the time the contract was concluded. In this case, upon joining the supervisory board, the approval of the entire supervisory board must be obtained. This can be done both in advance and subsequently, so that a contract that is initially pending invalid becomes valid subsequently. However, if no supervisory board resolution is obtained, the contract remains invalid for the duration of the office term as member of the supervisory board. As the provision serves the purpose of transparency and is intended to prevent the management board from exerting influence on single members of the supervisory board by favouring them.

In order to achieve this purpose and to avoid circumvention, the provision also applies if the service contract is not concluded directly with the supervisory board member but with another company that is either controlled by the supervisory board member or whose legal representative is the supervisory board member.

Therefore, in the absence of such a supervisory board resolution, the supervisory board member must repay the payments received to the AG, regardless of whether the supervisory board member received the payments himself or not.

As a member of the supervisory board one should therefore insist on obtaining the consent of the entire supervisory board when entering into service contracts with the AG. In addition to complying with the formal requirements for the passing of resolutions, it is also important to ensure that the resolution is sufficiently concrete. The general consent to the conclusion of framework agreements is e.g. for the conclusion of concrete orders and their remuneration, not sufficient; here further approval resolutions are required.

1:1. This is how we work together. You decide upon a competent partner; he/she will then remain your point of contact. > more