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How German companies have to fulfil their legal duties regarding commitment on gender quota

  • Germany

    02-11-2015

    Overview

    • Legal duty to resolve upon target quota in order to improve representation of women

    • Among the managing directors

    • At the two top tier management levels below the managing directors

    • Among the members of the supervisory board

    • Applies to stock corporations (Aktiengesellschaften), limited liability companies (GmbHs) and others: approx. 3,500 German companies

    • Qualification: Applicability of employee representation at board level, i.e. German One-Third Participation Act (more than 500 employees) or German Workers’ Co-Determination Act (more than 2,000 employees)

    • Decisive question: Does the company have to establish a supervisory board with employee representatives?

    • Usually the case if the company has more than 500 employees

    • In case of stock corporation: listing on stock exchange already triggers duty

    • Not necessary that supervisory board has in fact already been established, cf. Sec. 52 para. 2 German Limited Liability Companies Act (GmbHG) (however, disputed)

    Necessary resolutions by corporate bodies

    • Stock corporation: Supervisory board has to determine commitment on gender quota to improve representation of women among the members of the supervisory board and for the management board

    • Stock corporation: Management board has to determine commitment on gender quota for two top tier management levels below the management board

    • GmbH: Shareholders’ meeting has to determine gender quota for supervisory board and among managing directors

    • In case of co-determined GmbH (more than 2,000 employees): respective obligation for supervisory board instead of shareholders’ meeting

    • GmbH: Managing directors have to determine gender quota for two top tier management levels below the management board

    • This requires that the companies examine the status quo of women’s representation at the different hierarchy levels

    • Resolution of the respective corporate bodies required

    How to define the individual quota

    • No minimum quota, i.e. companies can take into account particularities of respective company

    • Each company shall find a suitable and appropriate solution

    • But: In case current quota of women’s representation at the respective hierarchy level is below 30%, the goals must not be below the current status

    • In case the current quota of women’s representation at the respective hierarchy level is above 30%, the goals may also fall under 30% again

    • Target quota of 0% possible

    Two top tier management levels below managing directors

    • Two top tier management levels below the managing directors: Companies have wide discretion how to define two management levels

    • Decisive are the actual two hierarchy levels below managing directors

    • Definition of hierarchy level: Organisational units that are equal to each other, but reporting to the common next level

    • In case only one management level below the managing directors exists, the quota has to be determined for such management level only

    • In case a holding company does not have any management levels below the managing directors, no quota have to be determined; but: this fact has to be published

    • No group-wide definition of management levels: Decisive is the respective company that has the reporting obligation

    Deadlines

    • First-time determination of target quota: until 30 September 2015 at the latest

    • Self-determined deadlines to achieve target quota:

    • Companies have to set themselves deadlines by which date they want to achieve their respective target quota for women’ representation

    • The first deadline cannot be after 30 June 2017

    • Future further deadlines: Future deadlines by which the companies want to achieve their respective target quota for women’s representation can be at maximum 5 years

    Reporting duties

    • Companies have to report as part of their annual reporting duties in their annual accounts (as part of the financial report, Lagebericht)

    • Also applies to small companies within the meaning of Sec. 267 German Commercial Code (HGB)

    • In case a company does not achieve its own target quota in the future, it has to report about the reasons for non-achievement (comply or explain)

    • First-time reporting obligation for financial years with accounts date after 30 September 2015: Most companies have to report for the first time for financial year 2015

    • Annual reporting obligation regarding target quota

    • But no interim reporting obligation regarding the question to which extent the target quota have already been achieved (or not)

    Possible penalties

    • No penalty if respective company does not meet its own target quota in the future

    • But: Management has to report in annual accounts why targets were not met

    • In case a company does not comply with its obligation to determine target quota for women at all: Administrative penalty (Sec. 334 German Commercial Code)

    • Maximum penalty: EUR 50,000

    • Statutory auditors of company can report within auditor’s report (Prüfungsbericht) on non-compliance of the respective company with its obligation to determine target quota for women’s representation (which, however, is not being published)

    • Statutory auditors cannot limit auditor’s certificate

    Disclaimer

    This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

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