Dismissal of Board Members and Managing Directors in Germany: Payroll Considerations

When dismissing board members (Vorstandsmitglieder) of an Aktiengesellschaft (AG) or managing directors (Geschäftsführer) of a Gesellschaft mit beschränkter Haftung (GmbH) in Germany, it is crucial for international companies to fully understand and comply with German legal and payroll regulations. The process involves strict adherence to both corporate governance laws and employment contract provisions, particularly concerning notice periods, severance payments, and ongoing remuneration during any period of release from duties (Freistellung).

Key Considerations:

1. Legal Framework for AGs (Aktiengesellschaften):

  • The dismissal of board members in an AG is governed by § 84 of the German Stock Corporation Act (Aktiengesetz, AktG).
  • The supervisory board (Aufsichtsrat) has the authority to appoint and dismiss board members. Dismissal without cause is possible but typically requires a three-quarters majority vote by the supervisory board, unless the company’s articles of association (Satzung) dictate otherwise. Dismissal for cause (wichtiger Grund), such as gross misconduct, is also an option.

2. Legal Framework for GmbHs (Gesellschaft mit beschränkter Haftung):

  • The dismissal of managing directors in a GmbH is covered by § 38 of the German Limited Liability Company Act (GmbHG).
  • Shareholders (Gesellschafter) can remove a managing director with or without cause through a simple majority vote, unless the articles of association specify a higher threshold. If the managing director’s service contract stipulates, dismissal may require adherence to specific notice periods or other contractual terms.

3. Compliance with Employment Law and Contractual Provisions:

  • Employment contracts often include specific terms regarding notice periods (Kündigungsfristen) and severance payments (Abfindungszahlungen), which must be honored. It is essential that these terms are correctly reflected in payroll operations to avoid legal disputes.
  • During a period of release from duties (Freistellung), the company is generally required to continue paying the full salary as per § 615 of the German Civil Code (Bürgerliches Gesetzbuch, BGB). This must be accurately managed within the payroll system.

4. Non-Compete Clauses and Their Impact on Payroll:

  • If a non-compete clause (Wettbewerbsverbot) is in place, the company must consider the implications for both dismissal and subsequent severance payments. § 74 of the German Commercial Code (Handelsgesetzbuch, HGB) requires that a non-compete clause be compensated, typically through continued payments for the duration of the non-compete period.

5. Expert Legal and Payroll Support:

  • Given the complexity of these processes, it is essential to seek specialized legal and payroll advice. At WW+KN, a Baker Tilly Company, we offer comprehensive payroll services and work closely with Baker Tilly’s legal experts to ensure compliance with all relevant laws and contract terms, including the precise calculation and management of payments related to dismissals.

For further assistance in managing payroll and legal compliance regarding the dismissal of high-level executives, please contact us at Info@payrollgermany.de.