Bundesgerichtshof judgment of 15 January 2019, II ZR 392/17 extends scope of Article 112 AktG

The present dispute involved a share purchase and transfer agreement concluded by the applicant, a public limited company (Aktiengesellschaft), on one hand, and two private limited companies (GmbH, one of them being the respondent), on the other, for the purchase of the latter companies’ shares in another private limited company. By virtue of that agreement, sellers’ sole shareholders (being also sellers’ sole management board members) were to take up managerial positions with the applicant by virtue of employment contracts (Vorstandsdienstverträge). Upon completion of the transaction, the applicant was admitted as the shareholder of the target company.

In applicant’s view such an agreement was null and void giving rise to reimbursement of the purchase price. Indeed, Article 112 of the AktG (Aktiengesetz, Public Limited Companies Act)) required that in the legal transaction at issue the company be represented by its supervisory board, whereas the applicant had been represented by its management board’s authorised representative.

Applicant’s claim has been granted throughout the court instances seized, admittedly on different legal grounds, i.e. unjust enrichment under Article 812 of the BGB (Bürgerliches Gesetzbuch, Civil Code). In doing so, the appellate court made clear that Article 112 of the AktG is applicable also in that case in which the company concluded an agreement with one-person company (Ein-Personen-Gesellschaft) of the future management board member. It stated, moreover, that economic identity between a management board and a contracting party, which particularly transpires with one-person companies, amounts to an abstract risk of interference with company’s interest, comparable to a contract having been concluded with a management board member himself. It maintained that since there was also no implied consent on the part of the supervisory board, it needn’t be decided whether the violation of Article 112 of the AktG lead to nullity of the contract pursuant to Article 134 of the BGB or to the application of Article 177 et seq. of the BGB (corresponding to Article 275 of the Croatian Act on Obligations (Zakon o obveznim odnosima)).

The BGH started its reasoning, which in essence upheld appellate court’s view, by noting that heretofore it had left open the underlying issue of whether Article 112 of the AktG was to be interpreted to the effect that a supervisory board represents a company also towards companies in which a management board member exerts significant influence. Yet, even with the judgment at hand, this issue seems to have fallen, though partially, through the cracks again, as will be seen hereinbelow. Be that as it may, the BGH further stated that different views had been advocated both in the doctrine and the high-court case law, ranging from the ones strictly prohibiting the extension of the scope of Article 112 of the AktG to the ones supporting it. It explicitly discarded the former, while asserting that the issue whether the fact that the sole management board member is not the sole shareholder of the company would trigger application of Article 112 of the AktG needs not be decided.

The Court placed accent on the protective purpose of Article 112 of the AktG which was to prevent conflict of interests and to ensure that representation of a company towards management board members be unbiased and free of extraneous considerations. In the interest of legal certainty and legal clarity it suffices that, by virtue of required type-based approach, there normally exists only an abstract risk of a biased company representation in cases regulated in Article 112 first sentence of the AktG.

Building on the premise in the appellate court’s decision pertaining to economic identity, the BGH concluded that a management board member and a company belonging to him are to be equated, the latter constituting, from an organisational point of view, only a self-contained part of his property. In both cases, i.e. the one explicitly covered by Article 112 first sentence of the AktG and the one in which a management board member acts for a company belonging to him, there is a risk of management board’s partiality since it goes without saying that any decision automatically and directly impacts personal economic interests of one of the management board members. Failure to subsume one-person company of a management board member under Article 112 first sentence of the AktG would throw the gates wide open for circumvention of that provision i.e. of the protection of company interests aimed thereby through inclusion of such a company.

The BGH also dismissed the plea against the extension of the scope of Article 112 of the AktG based on a proposition that circumvention of economic identity case may be averted by a respective management board’s contractual commitment to resolve conflict of interests and through the right of consent being generally reserved to supervisory board. It held, namely, that Article 112 of the AktG produces different effect than these two propositions. The former ensures, namely, that a transaction in any case won’t be effective in external relations without supervisory board’s consent.

The Court explicitly stated it wouldn’t delve into the finding, should the subsistence of one-person company be assessed differently, if the management board member had only a significant or a controlling interest in the other company. It also steered clear of the finding as to whether an economic identity subsists, when a management board member has only all property rights, but not all administrative rights, or where there exists only an indirect/fiduciary holding.

On its face, BGH’s finding as to the extension of the scope of Article 112 of the AktG may have been already anticipated by 2015 amendments to the Croatian Companies Act (Zakon o trgovačkim društvima, ZTD) by introduction of Article 248a thereinto, covering seemingly a wider range of constellations, albeit not strictly delimited from pre-existing situations from Article 248 of the ZTD. Still, on a closer inspection, these two appear to differ essentially also in so far as the former requires supervisory board’s consent for the very conclusion of legal transactions, namely as to the subject-matter thereof, whereas the latter stops short of BGH’s more streamlined solution and ordains that this consent be obtained only as regards respective management board member’s participation in decision-making regarding or conclusion of such a transaction. In other words, due to Croatian provision’s failure to shift supervisory board’s consent beyond a potentially mere procedural requirement, as opposed to BGH’s construction, the management board member concerned may eventually wind up with more leeway (Handlungsspielraum) when concluding a legal transaction and thus still give rise to a claim for damages in connection therewith. This will all the more be the case when a supervisory board wouldn’t have given its consent under Article 112 of the AktG as interpreted by the BGH, had it been fully aware of transaction’s subject-matter. Moreover, BGH’s interpretation of Article 112 of the AktG could also overarch some of the cases falling under envisaged Article 111a read in conjunction with Article 111b of the AktG, corresponding respectively to Article 263a and Article 263b of the ZTD.