Facts of the case decided
In the case decided by the BGH, the plaintiff concluded a management contract with the subsequent debtor (a stock corporation (AG)). Shortly afterwards, but before he took up his position, insolvency proceedings were opened over the debtor's assets as standard proceedings. The insolvency administrator terminated the employment contract and significantly reduced the plaintiff's remuneration. The plaintiff considered the reduction to be unjustified and demanded payment of a higher sum.
Assignment of the right of reduction to the insolvency administrator
The BGH clarified that the right to reduce the remuneration of the Management Board pursuant to Section 87 (2) AktG is exercised by the insolvency administrator in the event of insolvency and not by the supervisory board. The BGH states that this is due to the fact that the right to reduce remuneration directly affects the insolvency estate and not the internal company area, which remains with the management board. It is in addition to the right of termination pursuant to Section 113 InsO.
Standards of reduction
A reduction requires, firstly, a deterioration in the company's situation after the remuneration was set and, secondly, the continued granting of the originally set remuneration being unreasonable or imbalanced.
All circumstances of the individual case must be taken into account and weighed against each other when assessing inequity. The extent of the deterioration in the situation plays a role here. In the opinion of the BGH, the insolvency of the AG can often lead to an inadequate relation between the tasks remaining for management and the remuneration granted.
According to the ruling of the BGH, whether the extent to which the deterioration in the situation was caused by the company’s management in breach of duty or is at least attributable to it is only a circumstance in the context of weighing up the individual case. Previously, it was disputed whether causing the deterioration was a mandatory requirement for the reduction – which would not have been the case in this instance if the situation had deteriorated before taking up the management post. At the same time, in the specific case decided by the BGH, it must be assumed that the amount of remuneration was set with knowledge of the economic crisis of the AG. In the necessary overall assessment, this could, according to the BGH, even lead to the exclusion of unfairness and thus the possibility of a reduction. The BGH referred the case back to the Court of Appeal for a further decision, which must now make a new decision taking the ruling into account.
Practical consequences
The ruling creates legal certainty in practice not only with regard to the exercise of the right to reduce the remuneration by the administrator, but also with regard to the question of whether or not the deterioration must be attributable to management. If the latter is doubtful, there is an increased litigation risk for all parties involved if this is a mandatory requirement of the claim.
For insolvency administrators, it emphasizes the need for an early review and exercise of the right of reduction in order to prevent avoidable liabilities of the estate. If the administrator fails to do so, they may be liable for damages. A retroactive reduction of the standard remuneration is not possible.
In the event of the insolvency of "their" AG, management must now actually expect a reduction in remuneration. In self-administration proceedings, it is not possible to draw the conclusion from a reduced scope of duties to a reduction in remuneration, as management retains the power of administration. On the contrary, its area of responsibility will be many times greater during the proceedings while business operations continue. If, in addition, management cannot be blamed for the deterioration of the situation, the conditions for a reduction do not appear to be met. However, as this is an overall assessment of all circumstances, it depends on the individual case.
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