Rz. 18
The legal admissibility of D&O insurance has been questioned in the past based essentially on two arguments: on the one hand, reference was made to the loss of the “behaviour-controlling effect” resulting from the conclusion of financial loss liability insurance, and on the other hand, it was sometimes stated that the company-financed D&O -Insurance would not be in accordance with the basic idea of Section 93 Paragraph 4 Sentence 3 AktG.
Today, the admissibility of D&O insurance can no longer be questioned, since the legislature itself has already expressly referred to D&O insurance in its justification for Section 100 VVG and the VorstAG has replaced Section 93 (2) AktG with a p. 3 has been supplemented, which presupposes that a member of the board of directors must be insured against risks arising from their professional activities and makes it mandatory to agree on a deductible. The German Corporate Governance Code (DCGK), first passed on February 26, 2002 by the government commission appointed by the then Minister of Justice, always assumed legal admissibility and simply required a deductible.
Because of its importance, Section 93 AktG, which regulates the duty of care and responsibility of the board members of a stock corporation, is printed in its current version in excerpts:
Quote
(1) The members of the board of directors must exercise the care of a prudent and conscientious manager in their management. A breach of duty does not occur if the board member, when making a business decision, could reasonably assume that he was acting for the good of the company on the basis of appropriate information. They must maintain secrecy about confidential information and secrets of the company, namely company or business secrets, which the members of the Board of Directors have become aware of through their work on the Board of Directors.
(2) Board members who violate their duties are jointly and severally obliged to compensate the company for the resulting damage. If there is a dispute as to whether they exercised the care of a prudent and conscientious business manager, the burden of proof falls on them. If the company takes out insurance to protect a board member against risks arising from his or her professional activities for the company, a deductible of at least 10 percent of the damage must be provided up to at least one and a half times the fixed annual remuneration of the board member.
(3) …
(4) The company is not liable to pay compensation if the act is based on a legal resolution of the general meeting. The fact that the Supervisory Board has approved the action does not exclude the obligation to pay compensation. The company can only waive or settle claims for compensation three years after the claim arises and only if the general meeting agrees and no minority, whose shares together amount to a tenth of the share capital, lodges an objection in the minutes. The time limit does not apply if the person liable to pay compensation is insolvent and settles with his creditors to avoid insolvency proceedings or if the obligation to pay compensation is regulated in an insolvency plan.
(5) …
(6) Claims arising from these regulations expire in ten years for companies that are listed on the stock exchange at the time of the breach of duty, and in five years for other companies.
Rz. 19
Taking out D&O insurance cannot be interpreted as “an advance waiver” of later claims for damages, because the creditor – conversely – “acquires an additional debtor”; Even more so, simply taking out insurance does not provide any release from liability. This is neither the case in other liability insurance areas nor within the framework of D&O insurance. Furthermore, the mere assumption that board members are actually more lax in their duty of care if they are insured is likely to be incorrect. Board members – even if they are insured – remain personally liable for all damages that exceed the insured amount – which is limited. In addition, she is always hit by the sword of Damocles of criminal law; and the insurance conditions also contain a large number of liability exclusions that can help to keep the entrepreneurial risk where it arises.
Furthermore, the general meeting can refuse to discharge the person (Section 120 AktG) or even revoke the appointment as a board member if there is good cause (Section 84 Para. 3 AktG). In this respect, certain protective mechanisms are also made available as a preventive measure. The admissibility of D&O insurance is thus established once and for all…
