Boycott on the supervisory board: absence as a strategy

Even in larger supervisory boards, there is a risk that the adoption of resolutions will be hindered by members who are permanently or strategically absent - especially if the articles of association or rules of procedure stipulate stricter or more specific requirements for participation or majorities for resolutions than the law provides for.

Stock corporations have to deal with boycotting supervisory board members repeatedly. If a member of a three-member supervisory board refuses to participate in the supervisory board by boycotting the meetings, the board's quorum is prevented. This renders the supervisory board incapable of acting, which may paralyze the entire company.

The German Stock Corporation Act (AktG) provides for the following instruments with regard to the composition of the supervisory board:

The question is which of these instruments is appropriate.

The judicial addition to the supervisory board in accordance with Section 104 (1) AktG is not the appropriate instrument. A court can appoint members to the supervisory board if there are not enough members to pass resolutions. However, this only applies if the supervisory board lacks the required number of members or if a member is permanently legally or actually unable to attend (e.g. due to illness or unavailability). However, a boycott out of self-interest does not constitute permanent incapacity within the meaning of the law, as the member could attend the meetings again at any time. An unintended loophole - and therefore the possibility of analogous application of Section 104 (1) AktG - does not exist. This was recently decided by the Federal Court of Justice in such a case of a permanently boycotting supervisory board member in its decision dated January 9, 2024 - II ZB 20/22.

The German Stock Corporation Act provides for other instruments of taking action against an obstructive supervisory board member. In particular, such a member can be dismissed by the annual general meeting or, at the request of the supervisory board, by a court, but then only if there is good cause - such as demonstrable boycott behavior. In this case, the supervisory board should ensure that there is complete written documentation of the unjustified absence or unprovoked cessation of participation. This request itself cannot be prevented by the boycotting supervisory board member. This also applies to a three-member supervisory board. This is because the supervisory board member who attempts to prevent a quorum through their own absence or boycott behavior cannot invoke this formal legal position in order to block the initiation of dismissal proceedings. In such cases, the supervisory board member concerned is subject to a voting ban, meaning that the remaining members can pass an effective resolution to propose dismissal even without the boycotting member.

The judicial addition of the supervisory board is not the appropriate instrument of restoring the supervisory board's ability to act in the event of a permanent boycott by a supervisory board member. Such behavior - even if it leads to an inability to pass resolutions - is not considered a permanent prevention within the meaning of the law, as the member could attend the meetings again at any time. In such a case, in which absence becomes a strategy, the supervisory board's ability to function must rather be ensured by the dismissal mechanisms provided for in the German Stock Corporation Act, in particular by dismissal by the annual general meeting or by a court at the request of the supervisory board if there is good cause, such as demonstrable boycott behavior.

The company is therefore not left without protection, but can and must take action against obstructive supervisory board members using the available legal means.