Principles of Liability of the Discretionary Supervisory Board: Relevance in Case of Duty Breaches
In corporate law of the Federal Republic of Germany, the tasks and duties of the bodies of a stock corporation (AG) are comprehensively regulated, extending far beyond mere control activities. Of particular interest is the responsibility of so-called discretionary supervisory boards. These are not established due to a legal obligation – such as when exceeding certain employee numbers – but are set up on a voluntary basis, often with a view to structured corporate governance or at the request of the shareholder structure. The judgment of the Higher Regional Court (OLG) Brandenburg on March 18, 2009, Case No. 6 U 10/07, confirms the duty of care and potential liability of specific members of a discretionary supervisory board, thereby clarifying central dogmatic and risk-oriented questions for the affected actors.
The Legal Position of Discretionary Supervisory Boards within the Structure of a Stock Corporation
Corporate Law Classification and Importance
A discretionary supervisory board is established according to § 30 Para. 1 Sentence 2 MitbestG or on the basis of § 95 AktG, once it is provided for in the respective articles of association and thus legally constituted. The members of a discretionary supervisory board are fundamentally equated in their duties and rights to those of legally required bodies. This also extends to their duties of secrecy, supervision, and care. The voluntary formation of the committee therefore does not detract from its legal relevance; rather, once formed, the discretionary supervisory board attains all the corporate legal functions and responsibilities.
Duties and Control Powers
The central task of the discretionary supervisory board lies – as with obligatory supervisory bodies – in supervising the management and examining fundamental corporate decisions. Here, an independent and conscientious review of board activities is essential. Members are obliged to carefully execute the control, examination, and reporting duties assigned to them by law and statute.
Standard of Liability and Obligation to Compensate in Case of Duty Breaches
Principles of Organ Liability in Corporate Law
The liability of supervisory boards, whether obligatory or discretionary, is governed by § 116 Sentence 1 AktG in conjunction with § 93 AktG. They are obligated to a diligent and loyal performance of supervisory tasks. If there is a breach of duty that causally leads to damage to the company, personal liability for damages may arise. The same applies to omissions that are detrimental to the company’s asset sphere.
Key Aspects of the OLG Brandenburg – Judgment of March 18, 2009
In the case of the OLG Brandenburg, the main issue was that the discretionary supervisory board approved an annual financial statement, although it should have recognized and objected to an obvious violation of the principles of proper accounting. According to the court’s assessment, the supervisory duty applies without restriction even to discretionary supervisory boards. A breach of duty of care – such as an inadequate examination of financial statements – establishes an obligation to compensate if the damaging breach of duty was caused by the organ activity.
The judgment emphasizes that appropriate expectations should be set for the personal competence and training of supervisory board members, and the examination of financial documents should not merely be a formal matter. This rigorous standard of examination is also applicable to discretionary bodies.
Limits and Scope of Responsibility for Discretionary Supervisory Boards
Burden of Proof and Standard of Care
The burden of proof for the lack of fault in a breach of duty lies with the respective supervisory board members. This means that in the event of damage occurring within the committee’s area of responsibility, a credible and provable exoneration must be presented. The law thus requires continuous information gathering and plausibility checks to ensure compliance with corporate and accounting minimum requirements.
Implications for Companies and Corporate Bodies
The judgment has significant implications – not only for individual organ liability but also for the design of internal governance structures in stock corporations. With the voluntary establishment of a supervisory board, the company commits to a risk-conscious selection of capable controllers and to adhering to the trust foundations of their organ members. For supervisory board members, this results in the obligation to diligently perform their control function over all relevant decision-making processes and accountability reports.
Concluding Remarks
Clarification of the liability conditions and scope of duties for discretionary supervisory boards has a practice-relevant guiding function for all of corporate law. Companies, investors, and organ members should continuously monitor the differentiated legal situation and seek legal compliance in complex issues. Our team provides further in-depth information under the keyword Legal Advice in Corporate Law.
