The corporate governance of German stock corporations (“Aktiengesellschaft”), the legal form most common among listed companies in Germany, is determined by both statutory law and non-binding best practice rules.
The statutory laws most relevant for the corporate governance of German stock corporations are:
- the Stock Corporation Act (“Aktiengesetz”, “AktG”), which sets out the – largely mandatory – framework for the organisation of a stock corporation as well as the rights and duties of the corporate bodies, the management board, the supervisory board and shareholders’ meeting, as well as the shareholders;
- the EU Market Abuse Regulation (MAR), which entered into force on 3 July 2016 and replaces the existing Market Abuse Directive (MAD) and the national laws implementing the MAD, including large parts of the Securities Trading Act. The MAR, inter alia, governs market abuse and market manipulation, disclosure of non-public information and directors’ dealings;
- the Securities Trading Act, which still contains provisions on the enforcement of violations of the MAR under German law;
- the Securities Acquisition and Takeover Act, which contains rules on mandatory and voluntary takeover offers and defensive measures;
- the Commercial Code, which, inter alia, sets out the accounting rules applicable to German companies; and
- the Co-Determination Act and the One-Third Participation Act, granting employees co-determination rights on a supervisory board level.
In addition, the German Corporate Governance Code, a collection of best practice rules and non-binding recommendations for the corporate governance of stock corporations, has a growing influence over how corporate governance is practised in Germany. The Corporate Governance Code was first adopted on 26 February 2002 by an expert commission appointed by the German federal government. It has since been revised several times, most recently on 7 February 2017. The latest amendments aim to further improve transparency enhance transparency as the basis for stakeholders to assess corporate governance, and to comply with international best practices in the German code for listed companies. In addition, the German Corporate Governance Commission amended two passages of the Preamble of the Code. These amendments underline the importance of not only legal, but also ethical and self-responsible conduct for good corporate governance as well as the particular responsibility of institutional investors as regards exercising their ownership rights. Further changes were included for the sake of Code maintenance.
Although the rules and recommendations set out in the Corporate Governance Code are not legally binding, the management board and the supervisory board must declare annually whether and to what extent their company complies with the Corporate Governance Code and in cases where it does not, explain the reasons for the non-compliance (comply or explain). A deviation from a recommendation may be justified, for example, as being in the interests of good corporate governance.
The Commission, Regierungskommission Deutscher Corporate Governance Kodex, is a commission introduced by the German Federal Minister of Justice in September 2001. It consists of managing and supervisory board representatives of German listed companies and their stakeholders, i.e. institutional and retail investors, academics (economics, jurisprudence), auditors and a trade union federation. The members of the Commission are appointed by the German Federal Minister of Justice and for Consumer Protection. The Commission can submit recommendations for new members.
The Chairman of the Commission is appointed by the German Federal Minister of Justice and for Consumer Protection, too. He represents the Commission externally and coordinates the work internally.
The Commission shapes standards of good corporate governance in the Code, which it reviews on an annual basis. The Commission develops the standards not only by internal discussions, but in dialogue with economy, politics and the general public.
Note: The German Code is under review and the new version is expected to come into force towards the end of 2019 or in early 2020.
More detailed information regarding corporate governance rules applicable to listed companies in German is available at https://uk.practicallaw.thomsonreuters.com/8-502-1574?transitionType=Def...(sc.Default)&firstPage=true&bhcp=1
For developments from the Commission, Regierungskommission Deutscher Corporate Governance Kodex: https://www.dcgk.de/en/home.html
Regierungskommission Deutscher Corporate Governance Kodex
c/o Deutsches Aktieninstitut e.V.
60325 Frankfurt am Main
T + 49 69 92915-0