Professor, tax consultant or lawyer as a supervisory board member? – Legal prohibitions and void consultancy or mandate agreements

*by Dr. Johannes Fiala, Lawyer (Munich), Mediator (Univ.), MBA Financial Services (Univ.Wales), MM (Univ.), Certified Financial and Investment Advisor (A.F.A.), EC Expert (C.I.F.E.), Lecturer in Civil and Insurance Law (Univ. of Cooperative Education), Banker (
For the intermediary or financial service provider, the question of the plausibility of the concepts as well as the seriousness of the acting persons arises again and again. Information media, like reported repeatedly on initiators, with which professors, tax counsels or attorneys sit in the supervisory board. These professional groups are often used to gain trust – even in the function of a supervisory board. Therefore, the question arises whether this is really an aspect worthy of special trust.
Some supervisory board members have resigned from office in the past because several rulings (e.g. Federal Court of Justice ruling of 03.07.2006, Ref. II ZR 151/04) have ruled that the simultaneous provision of consultancy services in return for additional remuneration with an activity on the supervisory board violates § 113 of the German Stock Corporation Act (AktG) “due to a lack of demarcation from the activities of the supervisory board as a governing body”. Thus, such contracts are null and void. Supervisory board members receive remuneration for their office anyway, and must therefore also advise the company in this function.
Suspicion can always arise if the supervisory board members with “additional remuneration” also act as tax advisors to the company for investors, for example, or conduct legal proceedings for the company as lawyers, or advise the companies or prepare expert opinions as professors. This may give rise to suspicions of illegal additional remuneration.
Activities as a supervisory board member and additional consulting contracts According to the aforementioned BGH decision, a consulting contract, for example, “in business management and tax matters” violates Section 113 AktG due to the lack of a demarcation from actual board activities. It can be observed that some tax consultants, professors, lawyers, etc. have had themselves appointed to supervisory boards. Sometimes even with different companies at the same time.
According to the BGH decision, consulting contracts in addition to a supervisory board mandate are generally void, §§ 113 f. AktG: This is because a supervisory board owes its company consulting services anyway – thus additionally agreed “business consulting” cannot be delimited and certainly not remunerated separately.
The purpose of the provision is that remuneration of the supervisory board must either be regulated in the articles of association or resolved by the general meeting: “self-service” by the members of the supervisory board (e.g. by decisions of any other supervisory board members) or a decision by the management board in this regard is not possible.
The legal consequence is that the supervisory board must return its consultant’s remuneration, §§ 114 II AktG, 812 BGB. The Stuttgart Regional Court (ZIP 1998, 1275 ff.) ruled similarly: a supervisory board had received DM 1.0 million in fees for legal advice to a public limited company – later the liquidator of the public limited company successfully reclaimed the remuneration from the supervisory board/lawyer.
Activity as a supervisory board member and simultaneous activity as a lawyer If “activity as a lawyer and activity as a member of a corporate body” essentially relate to the same matter of life, then the lawyer is prohibited from acting. This is because, according to § in RAO, attorney and non-attorney activities may not be performed “simultaneously” in the same matter. Since the supervisory board has to supervise the management board “as a whole”, it is practically impossible for it to also act as a lawyer in matters concerning the company, for example by representing the company in court. The prohibition of activity also applies to the partners/associates of the law firm with whom the lawyer is recognisably associated, in particular on the letterhead. Corresponding consulting or attorney contracts are then null and void, § 134 BGB.
Fees are to be paid back to the Company. As in the case of a breach of Section 113 of the German Stock Corporation Act (AktG), the honorary professional is then regularly not insured against pecuniary loss; more precisely, there is no insurance coverage. This often applies analogously to professors and tax consultants.
Collision in the case of the tax adviser The tax adviser will also have to act accordingly, because there is also a prohibition of collision according to his professional code of conduct, cf. e.g. § 6 BOStB, § 45 BRAO.
Rarely is it not known at all by the professional chambers that the honorary professional has taken up a secondary activity as a supervisory board member. The intermediary can protect himself by having proof presented that the professional chamber considers everything to be in order.
In the case of professors, the situation is somewhat different: In his case, it will be a question of the permission for secondary employment and whether the violation of legal prohibitions (e.g. § 113 AktG) justifies disciplinary measures under civil service law by the employer.
Personal liability of the management board In accordance with the KonTraG and § 91 II AktG, the management board of an AG, as well as the management of a GmbH (limited liability company), must operate a risk management system, at least for medium-sized companies. Part of this is legal risk management, for example to avoid void contracts. The personal liability of the management board in the event of violations is also linked to this, § 93 II AktG.
In addition, the management board may also be personally liable for such remuneration which was unlawfully paid pursuant to § 113 AktG or § 45 BRAO, § 93 III No. 7 AktG.
Criminal law risks – questions of the investor It must not be overlooked that with payments in the responsibility of a management board on void contracts with supervisory boards and advisors, also a suspicion of the embezzlement stands in the area: Whether the supervisory board/advisor sits then because of instigation also equal in the boat?
From the point of view of an investor or his intermediary, it seems advisable to question what additional assignments/remuneration the supervisory board receives or should receive? Shareholder meetings also open up an opportunity for fine questions on the subject.
No circumvention of Sections 113 et seq. AktG through the interposition of an “own” company: In a very recent decision (Case No. II ZR 279/95) of 20 November 2006, the Federal Court of Justice made it clear that remuneration may also have to be paid back to the company if a supervisory board member concludes a consultancy agreement with the “own” stock corporation. For this purpose, the supervisory board member must have a shareholding – not necessarily a controlling one.
In the case decided, the defendant was chairman of the supervisory board of an AG. He was also a shareholder in “his” defendant GmbH, which had provided management consulting services for the AG. For the consulting services, the defendant GmbH received fees from the AG in the total amount of 126,000 Euro.
According to its wording, the provision of Section 114 II AktG only covers contracts between the stock corporation and its supervisory board members. However, in accordance with the purpose of the provision, which is to prevent hidden special benefits, Section 114 AktG is also applicable if the consultancy agreement is not concluded with the Supervisory Board member himself, but with a company controlled by him.
It follows from a violation of Section 113 AktG that consulting agreements with members of the Supervisory Board pursuant to Section 114 para.1 AktG are not eligible for approval: Services are only permissible as separately remunerable outside the activities of the corporate body, as otherwise there is a risk of circumvention of Section 113 AktG. In order to be able to make a corresponding distinction, the consultancy agreement must allow clear determinations as to whether the service owed relates to the duties of the supervisory board member. A typical example are consultancy contracts in which the tasks are not exhaustively described but only listed by way of example. This means that it can neither be examined whether the contractually agreed consulting services are already covered by the Supervisory Board member’s activities as a member of the executive body, nor whether the remuneration promised for these services is within the bounds of what is appropriate.
( on 09.03.2007)

Our office in Munich

You will find our office at Fasolt-Strasse 7 in Munich, very close to Schloss Nymphenburg. Our team consists of highly motivated attorneys who are available for all the needs of our clients. In special cases, our law firm cooperates with selected experts to represent your interests in the best possible way.

About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
»More about Dr. Johannes Fiala

On these pages, Dr. Fiala provides information on current legal and economic topics as well as on current political changes that are of social and/or corporate relevance.

Arrange your personal appointment with us.

Make an appointment / call back service

You are already receiving legal advice and would like a second opinion? In this case please contact Dr. Fiala directly via the following link.

Obtain a second legal opinion

(The first phone call is a free get-to-know-you conversation; without consulting. You will learn what we can do for you & what we need from you in terms of information, documents for a qualified consultation.)