As recently as March 2020, Delia Lachance was forced to resign from her position as a member of the board of a public company because her maternity leave was incompatible with her role as a member of the board of a public company. After this case became known, the "Stay-on-Board" initiative was founded. The initiative sought to amend the law to give female board members in particular the option of suspending their mandate for a limited period.
This initiative has now become law. Since the Second Management Positions Act (abbreviated to "FüPoG II") came into force on August 12, 2021, members of management boards of stock corporations, SE directors and managing directors in a limited liability company (GmbH) have been entitled for the first time to family-related and, in particular, liability-free time off. This entitlement exists in each of the aforementioned corporations irrespective of stock exchange listing and company size and therefore also irrespective of whether the employee side needs to be represented on the company’s supervisory board (on a third or parity basis) under corporate co-determination law or not. The only requirement is that the executive board or management must consist of more than one person.
Members of the management board are not employees
According to German law, board members of stock corporations and managing directors of GmbHs are not employees, so that the classic employee protection regulations do not apply to board members. Only pregnant GmbH managing directors were able to invoke the broader European concept of employee and claim statutory maternity protection, for example, following the ECJ's "Danosa" ruling of November 11, 2010 (C-232/09). Members of the executive board were not covered by this case law and were therefore previously unable to claim either maternity protection or parental leave.
Of course, executive board members could and still can agree with the supervisory board on an individual "time out" from their official duties. In this case, however, they were dependent on the goodwill of the supervisory board and, in particular, the statutory "full responsibility" and the associated liability risk remained in full force. In turn, if executive board members decided to resign unilaterally, there was no guaranteed entitlement to reappointment for the period after their return.
Brief overview of the new regulations
Under the new provisions in force since August 12, 2021, members of the executive boards of stock corporations have the right under Sec. 84 (3) AktG to request the supervisory board to revoke their appointment if they are temporarily unable to fulfill the duties associated with their appointment due to maternity leave, parental leave, care of a family member or illness. In the case of parental leave, care of a family member or illness, Section 84 (3) no. 2 AktG provides for a right to revocation of the appointment and assurance of reappointment for a period of up to three months. In the event of maternity protection, there is a right to reappointment at the end of the statutory maternity protection period pursuant to the German Maternity Protection Act (MuSchG).
Except in cases of maternity leave, the supervisory board may counter the member's request by stating that there is an important reason entitling it to refrain from revoking the appointment in accordance with Section 84 (3) no. 2 AktG. Such an important reason could, for example, be that the request is made untimely, which can be assumed, among other things, if a large number of important decisions are pending in the department concerned, so that damage to the company is to be feared in the event of revocation.
Pursuant to Sec. 38 (3) GmbHG, managing directors of a GmbH may also be revoked if they are assured of reappointment. However, in cases of parental leave, care of a family member or illness, the the managing director’s request may be rejected for good cause. The same time limits apply here as for members of the management board of an AG.
What do companies need to prepare for now?
The new stay-on-board rules will strengthen the compatibility of management position and family. It is to be expected that female board members in particular will make use of these new rights in the future and in particular claim maternity leave and 3-month parental leave including the right to reappointment.
It remains to be seen whether these new regulations will promote the much-needed increase in the attractiveness of board and management positions for women. In our view, the new regulations are a first step in the right direction but fall short of expectations in important aspects: In particular, the reduction of the "parental leave entitlement" to just three months is clearly insuffficient in our opinion, and the lack of a return option to part-time work in particular merits the verdict "too short-sighted". We would have wished the legislator more courage for a truly modern governance structure in corporations that takes account of the realities of life.