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Supervisory board – employees of foreign daughter companies are counted

Germany: When setting the composition of a supervisory board, employees of foreign daughter companies must be taken into account.

Under German law, employees must send representatives to the supervisory board if a company has a certain number of employees. If the number of regular employees is more than 500, then one-third of the supervisory board must consist of employees’ representatives. If the company has more than 2 000 employees, then half of the supervisory board must be employees’ representatives.

Until now, when setting the composition of the supervisory board only the number of employees in the German mother company was decisive.

The District Court of Frankfurt am Main has now decided that in addition the number of employees in foreign daughter companies must be taken into account. According to the judges this is due to the common understanding of the term “corporate group” to which the relevant laws (Drittelbeteiligungsgesetz and Mitbestimmungsgesetz) refer.

If this opinion is upheld by higher courts, then numerous supervisory bodies most likely will turn out to be incorrectly composed.

Indeed, the decision has been challenged. The decision of the higher court is expected during 2015/2016.

Source: LG Frankfurt, 16.02.2015, AZ: 3-16 O 1/14