In a decision of 18 September 2018 the German Federal Supreme Court (Bundesgerichtshof/ BGH, Az: II ZR 152/17) confirmed a legacy decision (ARAG/Garmenbeck) of 1997 and tightened the liability of supervisory board members. Clients need to be aware of the increased liability for Supervisory Board members („Aufsichtsräte“).
Unlike in other jurisdictions (in the UK for example) Germany has a Two-Tier corporate management structure. Thus, in addition to the management board (i.e. Vorstand at AG or Geschäftsführung at GmbH) corporations may have a so-called Aufsichtsrat, a supervisory board. The supervisory board monitors the managing directors and has – as one of its key authorities – the right to appoint and withdraw members of the management board. The supervisory board is strictly separate from the management board of a company. Depending on the total headcount of the company, the supervisory board consists of representatives elected by the shareholders AND employee representatives elected