Labor effects of corporate groups in Germany

AutorChristine Windbichler
CargoProf. of Commercial Law, Labor and Employment Law, and Comparative Law a.D., Humboldt-Universität zu Berlin, Germany
Páginas37-49
IUSLabor 3/2017
37
LABOR EFFECTS OF CORPORATE GROUPS IN GERMANY
Dr. Christine Windbichler, LL.M. (Berkeley)
Prof. of Commercial Law, Labor and Employment Law,
and Comparative Law a.D.,
Humboldt-Universität zu Berlin, Germany
Introduction
The corporate group is the normal way to conduct larger businesses. There are no
official statistics but published annual reports are a strong indicator. It is even hard to
find the annual accounts of an individual company (the parent) in annual financial
reports; due to capital market information needs the consolidated accounts feature much
more prominently. Consolidation requirements according to commercial law, Directive
2013/34/EU, and IFRS 10 - 12, however, do not involve necessarily common
management with an impact on actual operations. Divisions of a consolidated group
may be run like separate businesses; highly integrated groups may be run like a single
enterprise. Since the group is not a legal entity only the individual members of the
group can be a party to contracts or a target of legal action. German law follows an
entity approach with some exceptions, especially in organizational law.
German law treats risks associated with the group structure, especially endangerment of
subsidiaries, their minority shareholders, and creditors including workers, only in
exceptional cases (fraud, piercing the corporate veil) with joint liability. The specific
fact of belonging to a group is reflected by attribution of facts or legal consequences,
mandated by law or jurisprudence. First and foremost, the law protects the subsidiary
itself and therewith provides indirect protection for its creditors and minority
shareholders. A particular type of contract at the level of the articles of incorporation,
the Domination and Profit-and-Loss Transfer Agreement, allows the dominating
company to give binding instructions to the management of the controlled company; the
“price” for that privilege is the obligation to off-set all balance sheet losses of the
controlled company. Without such a contract disadvantageous measures of a controlling
company entail claims of the subsidiary for compensation (for stock corporations: §§
311, 317 Aktiengesetz, AktG).73 Often enough group law questions boil down to Second
Directive issues (capital maintenance). In case of bankruptcy, chiefly in smaller and
closely held companies, the liquidator can hold shareholders (i.e. the parent company)
liable in tort if they exerted inappropriate influence that resulted in insolvency. In cases
73 http://www.gesetze-im-internet.de/aktg/index.html; convenience translation e.g. at
http://www.nortonrosefulbright.com/files/german-stock-corporation-act-147035.pdf [accessed Dec. 7,
2017].

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