Kündigung eines Vorstandsvertrages aus wichtigem Grund

In a current decision dated December 4th, 2019 (ref.: 7U 2464/18) in connection with the extraordinary termination of a management board contract, we dealt with some special legal questions that have considerable practical importance.

facts

The proceedings on which the decision was based essentially concerned the question of whether the extraordinary and immediate termination of his employment on the board of directors by the defendant stock corporation to its board member (plaintiff) was effective. The plaintiff was appointed as a member of the defendant's board of directors on the basis of a fixed-term board service contract, which still had a remaining term of approximately one year at the time of the extraordinary termination. In addition, the plaintiff was a board member of a wholly owned subsidiary of the defendant. The defendant accused the plaintiff of numerous events in the proceedings, some of which affected its subsidiary and some of which were only added by the defendant in the course of the proceedings after the actual end of the fixed term.

As a result, the Munich Higher Regional Court found that there was no important reason within the meaning of Section 626 Paragraph 1 of the German Civil Code (BGB) for an extraordinary termination of the employment relationship that would make it unreasonable for the company, taking into account the interests of both parties, to terminate the employment relationship of the board member until To continue expiry of the time limit. The Munich Higher Regional Court made some fundamental statements that could be extremely relevant in other organ disputes beyond the case in question.

Breach of duty in the case of multiple employment relationships

In its decision, the Munich Higher Regional Court first addressed the question of whether, if a member of a board has several employment relationships, breaches of duty that were committed within the framework of one of these board/service relationships “pass through” to the other employment relationships.

In this regard, the Munich Higher Regional Court has determined that, at least when it comes to employment relationships between a board of directors and a parent company and a wholly-owned subsidiary, breaches of duty towards one company can also constitute grounds for termination of the employment relationship towards the other. The trust of the responsible body (here supervisory board) of one company in the employee is also shaken by breaches of duty towards the other, especially when the parent and subsidiary companies are linked (not only legally, but also economically) through their respective financial interests.

Deliberate misvaluation of assets on the balance sheet

Like the court at first instance, the Munich Higher Regional Court came to the conclusion when examining the reasons for termination presented by the company at first instance that they could not justify the plaintiff's extraordinary termination. However, since the company had made further allegations against the board member as part of the appeal process, the Munich Higher Regional Court now had to take a closer look at these allegations. In particular, the company had made the accusation that various investments had been deliberately valued too high in the company's annual financial statements for 2015 for the purpose of deceiving investors.
In its decision, the Munich Higher Regional Court found that the deliberate misvaluation of assets in the balance sheet is a significant breach of duty on the part of the board of directors, which fundamentally constitutes a reason for the plaintiff's employment to be terminated without notice. In this respect, the Munich Higher Regional Court also made it clear that it does not matter whether the terminated board member was internally responsible for the valuation of investments or not. If the board member has signed the annual financial statements, the board member is also responsible for them due to the board's overall responsibility.

Adding reasons for termination

The Munich Higher Regional Court subsequently addressed the question of whether these allegations, which only subsequently became known to the company, could justify termination.

With reference to the established case law of the highest courts, the Munich Higher Regional Court first made it clear that reasons for termination that arose before the date of termination but only become known to the company after the date of termination are generally used to justify the termination, regardless of the deadline set out in Section 626 (1). 2 BGB can be added later.

In its decision, the Munich Higher Regional Court then sets out new principles for adding reasons for termination by differentiating whether it is a permanent employment relationship or a fixed-term employment relationship and when the company became aware of the reasons for termination in the case of a fixed-term employment relationship. According to the Munich Higher Regional Court, an important reason for an extraordinary termination only exists if the person terminating the contract cannot reasonably be expected to stick to the contract until the employment relationship is properly terminated, in particular because the necessary trust in the person being terminated has been destroyed. This justifies, in the case of a permanent employment contract, adding reasons for termination that were unknown at the time of termination. In this case, even if knowledge is subsequently gained, the terminator's trust could be destroyed for the future. However, according to the Munich Higher Regional Court, the situation is different in the case of fixed-term employment relationships if the deferred reasons for termination only become known to the person terminating after the period for the regular termination of the contract (in the present case, the end of the fixed-term contract) has occurred. In the opinion of the Munich Higher Regional Court, if the reasons for termination became known, no trust in further cooperation could be destroyed.

Recommendation: In the case of a fixed-term employment relationship, companies are therefore well advised to process all processes that could result in further breaches of duty by the board member after an extraordinary termination has been given, at the latest by the regular expiry of the employment relationship as a result of the fixed-term contract. This is the only way they can ensure that the principles laid down by the Munich Higher Regional Court cannot be used against them.

It should also be noted in this context that the Munich Higher Regional Court also rejected the company's submission in the appeal proceedings for procedural reasons in accordance with Section 531 ZPO. According to the findings of the Munich Higher Regional Court, the then chairman of the supervisory board was already aware of these events at the time of the first instance. This means that the company's failure to present these allegations in the first instance was based on negligence and should therefore no longer be taken into account in the appeal proceedings.

These statements from the Munich Higher Regional Court once again clearly show how important it is not only to clarify the allegations made against a board member or managing director comprehensively and promptly, but also to conclusively present these events at the first instance of a possible legal dispute.

Organizational deficiencies/different treatment of board members

How important a functioning organization and monitoring of the acting bodies can be for a later termination dispute can also be clearly seen in the decision of the Munich Higher Regional Court. When weighing up the overall circumstances, it was an important consideration for the Senate that the entire material in the case gave the impression that the defendant "There was consistent mismanagement by all those responsible for the organs“.

In addition, the Munich Higher Regional Court reproached the defendant company in its decision for not taking the events cited as grounds for termination as an opportunity to issue an extraordinary termination to the other members of the board of directors who were also affected by the allegations. According to the Munich Higher Regional Court, this shows that it would have been reasonable for the defendant to continue to employ the plaintiff until his employment contract became fixed. The Munich Higher Regional Court hereby does not want to establish that the plaintiff is unjustly entitled to equal treatment, but rather infers from the fact that the other board members continued to be employed that it is reasonable for the plaintiff to continue to be employed.