U.S. Corporation Going European? the One-Tier Societas Europaea (SE) in Germany

By Wilk, Cornelius | Suffolk Transnational Law Review, Winter 2012 | Go to article overview

U.S. Corporation Going European? the One-Tier Societas Europaea (SE) in Germany


Wilk, Cornelius, Suffolk Transnational Law Review


ii. Statutory Exculpation Clauses

As a second line of defense, where the director is neither protected by the business judgment rule nor can prove the entire fairness of his action, a U.S. corporation might include an exculpation provision in its articles of incorporation that exempts the directors from monetary liability for breaches of their duty of care. (198) Under the SE-Reg and German corporate law, such an abstract waiver of liability is simply not possible. According to AktG section 93, paragraph 4, sentence 3, the SE may only punctually waive the liability of administrative organ members with regard to a specific unlawful action if at least three years have passed, if the majority of shareholders in a general meeting agrees, and if no minority, representing at least 10% of the SE's capital, objects. Similarly, the shareholders in the general meeting may adopt a resolution authorizing a particular action of the administrative organ that would normally violate AktG section 93, paragraph 1, and thereby ex ante relieve the acting members from personal liability for this conduct. (199)

2. Members, Codetermination

a. Number, Personal Requirements

On both sides of the Atlantic, the number of board seats and the requirements that candidates must fulfill to become eligible for directorships are, for the most part, left to the individual corporation or SE. Both entities, however, are subject to a second layer of regulation: while U.S. corporate law is supplemented by the NYSE and NASDAQ listing rules on committee structure and board independence, the German SE may be codetermined. Because the codetermination rules contained in the SEBG are significantly more complex and more flexible than the aforementioned passages in the NYSE and NASDAQ listing standards, they will be addressed in a separate subchapter.

i. The Board of Directors

Neither the Model Business Corporation Act nor the Delaware Code prescribes a minimum or maximum number of seats on the board of directors. Instead, the matter is entirely left to the individual corporation's articles of incorporation and bylaws. (200) And neither do the codes address personal requirements for board members, such as independence, apart from excluding judicial persons as board members. (201)

Independence criteria, however, are mentioned in the NYSE and NASDAQ listing standards and the non-binding American Law Institute's Principles of Corporate Governance (ALI Principles). Both NYSE and NASDAQ rules require a majority of independent directors on the board (202) and entirely independent audit committees, consisting of at least three members and including at least one director with financial or accounting expertise. (203) Even small boards, therefore, must consist of at least three independent directors, including at least one director with the necessary financial literacy. The NYSE and NASDAQ independence criteria, generally, focus on the absence of ties to the officers and to the auditing firm, (204) whereas an equity stake in the corporation is not regarded as interfering with independence. The recommendation in section 3A.01 of the ALI Principles, on the other hand, also asks for a majority of independent board members, but defines independence only as independence from the officers.

ii. The Administrative Organ

Similarly, in the SE, the statute generally determines how many members serve on the administrative organ. (205) Only if the administrative organ is codetermined or the SE possesses a legal capital of more than 3,000,000 [euro] must the organ consist of at least three members. (206) The maximum number of administrative organ members depends on the SE's legal capital. (207) Nine members are allowed if the legal capital does not exceed 1,500,000 [euro] and fifteen members are permitted with a capital basis between 1,500,001 [euro] and 10,000,000 [euro]. All other Ses may have a maximum of twenty-one directors. …

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