What happens in the Supervisory Board stays in the Supervisory Board
The German Supreme Court has recently ruled that information received by a board member of a supervisory board of a German “AKTIENGESELLSCHAFT” (joint stock corporation) are strictly confidential. The disclosure of any non-public information which is shared within the supervisory board constitutes a criminal offence (§ 404 AktG). This strict confidentiality in particular applies in a scenario where a member of a supervisory board is an authorized officer (“PROKURIST”) of another company at the same time. In reverse and following this principle the German Supreme Court ruled that a company (in which the relevant individual is an authorized officer) cannot be accountable for information the same individual has only gained in his/her function as a supervisory board member of another company. In the present case a bank (the defendant party) sold a financial product to the plaintiff. The deal was commissioned by a services provider for financial services. Erroneous negligent advice was given by the financial services provider to the plaintiff. He suffered a financial damage. The plaintiff sought to recover the damage suffered from the bank. The bank’s/ defendant’s authorized officer was also member of the supervisory board of the financial services provider and through such function gained positive knowledge about the erroneous negligent advice provided. The plaintiff argued that the bank is even accountable for knowledge of its board member irrespective of the fact that he only gained such knowledge in his function as a supervisory board member of the financial services partner. The German Supreme Court disagreed.
CONCLUSION: The verdict increases legal certainty especially for members of supervisory boards working in top positions for other companies. Such companies are not accountable for any information those executives gained in his/her function as a member of a supervisory board.
Dr. Thilo Schülke
Company Law And Commercial Law, Insolvency Law, Professional Law / Professional Liability Of Tax Accountants, Auditors And Attorneys – At Law And Insolvency Administrators, Restructuring Consulting, Mergers And Acquisitions (M & A) / Corporate Restructuring
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