In the case decided by the Federal Court of Justice (BGH), one of three members of the supervisory board had permanently failed to participate in the passing of resolutions by the supervisory board, with the result that resolutions were not passed. The management board and the two active supervisory board members of the company attempted to solve the problem by applying to the local court for the supervisory board to be supplemented in accordance with Section 104 (1) of the German Stock Corporation Act (AktG) by appointing a new member. The local court rejected the application because the supervisory board was not understaffed. The boycotting member was in office, even if he was inactive. The Superior Court dismissed the appeal against the decision of the local court. The appeal against this decision to the BGH was also unsuccessful. However, the BGH has shown a way forward:
Pursuant to Section 103 (3) AktG, the supervisory board may decide to request that the local court dismiss the boycotting member for good cause. The BGH has ruled that demonstrable boycott behavior by a supervisory board member constitutes good cause for his dismissal.
In principle, three members must also participate in the resolution on the application to the court to dismiss the boycotting member and the member concerned must abstain from voting. However, if the member in question fails to attend the meeting without excuse despite the meeting being convened in good time and the subject matter of the resolution being stated in order to prevent the resolution from being passed, the application to the court for dismissal is exceptionally admissible according to the decision of the Federal Court of Justice even if only two members of the three-member supervisory board participated in the resolution.
As soon as the boycotting member has been removed by the court, the supervisory board is understaffed and therefore unable to pass resolutions. Only then can any member of the supervisory board, the management board and any shareholder apply for the supervisory board to be supplemented by the court to the number of members required to form a quorum in accordance with Section 104 (1) of the German Stock Corporation Act (AktG).
The decision of the BGH is an important aid in practice to break the blockade of the work of three-member supervisory boards by a boycotting member.
Summary of the key facts
- Demonstrable boycott behavior by a member of the Supervisory Board constitutes good cause for his dismissal.
- If the supervisory board wishes to dismiss the boycotting member, the latter must participate in the resolution on the application to the court and abstain from voting.
- If the member concerned fails to attend the meeting without excuse despite the meeting having been convened in good time and the subject matter of the resolution having been stated, the application to the court for dismissal shall be admissible by way of exception even if only two members of the three-member supervisory board participated in the resolution.
- After the boycotting member has been dismissed by the court, the way is immediately open for an application to the local court to supplement the supervisory board to the number required for a quorum of the Supervisory Board in accordance with Section 104 (1) AktG.
