Corporate advisory board

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A company advisory board is a body that supports the management and / or shareholders of a company. Advisory boards in various forms and designs can be found in sole proprietorships as well as partnerships and limited liability companies . In contrast to the statutory supervisory bodies, there is no legal standardization for the corporate advisory board. There are two main legal forms of the advisory board: the advisory board and the corporate board. The advisory board has no co-decision-making powers such as B. Reservations of Consent . It should only be available to the management and the shareholders as a guide. In addition to providing advice, the advisory board generally has the following tasks: It monitors the management and makes decisions on (important) business of the company, which may only be carried out with its consent . Often the advisory board is not called that, but z. B. Shareholders' Committee, Supervisory Board or Board of Directors. Legally it makes no difference.

Establishment

Organizational advisory board

In accordance with the articles of association, the H. in association be anchored and be equipped with appropriate skills; In this case, one speaks of an organizational legitimation . In this case, the articles of association regulate, in particular, the essential provisions and principles governing the composition of the advisory board, the appointment and dismissal of the advisory board members and their tasks and decision-making powers. In addition to these corporate contractual arrangements more detailed questions can also in a rules of procedure are regulated the advisory board.

In contrast to the advisory board agreed under the law of obligations, the advisory board anchored in the articles of association is an organ of the company.

Insofar as the establishment of a corporate advisory board is not already regulated in the articles of association at the time of establishment, the establishment can only be carried out by amending the articles of association.

Advisory board

A (purely) advisory advisory board (also known as an "advisory board under the law of obligations") can also be agreed on a legal basis, comparable to the conclusion of a consultancy contract. An advisory board set up on the basis of the law of obligations may only have an advisory function and / or representative character.

Areas of responsibility

consultation

The advisory board serves as a discussion and discussion partner for the management and the shareholders. Questions of daily company practice as well as special topics are discussed. The so-called advisory corporate advisory board has no decision-making authority. Its discussions are presented to the company's decision-makers (management, shareholders' meeting) as a decision-making aid.

The advice given by the Advisory Board can relate to all areas of the company. It encompasses both the operational area (such as investments , personnel issues, marketing ) and the strategic area (such as succession planning, long-term company orientation, new product / service areas).

monitoring

If the shareholders cannot or do not want to exercise their shareholder rights in whole or in part due to time or qualification reasons, or if the group of shareholders is unmanageably large, the advisory board can take on a monitoring role. In this respect, it corresponds to the supervisory board of an AG and must then be a so-called corporate advisory board.

The results of its monitoring are used by the shareholders' meeting for voting and decision-making. The advisory board has no management authority and therefore differs significantly from the management.

Compensation function

An advisory board made up exclusively of non-shareholders can make a significant contribution to objectifying the dialogue between management and shareholders. It is conceivable to use an advisory board to arbitrate or decide in the event of disagreements. A company advisory board can also mediate in the conflict between generations.

Representation of stockholders

In this function, the Advisory Board exercises some of the shareholders' rights. Since these powers have to be transferred to the company advisory board in the articles of association, only an advisory board that is legitimized by organs can act as a representative of the shareholders.

This makes the most sense when the number of shareholders is very large.

The advisory board can decide on:

  • Preparation of the annual plan
  • Redefinition of the management
  • Use of the annual surplus
  • Recognition of potential buyers of company shares and advice on the purchase price of the shares

Image impact

Appointing prominent people to a company advisory board is intended to enhance the company's image. The advisory board members also bring their own network of contacts and relationships into the company, which can be of use to the company.

Conditional establishment

A conditional or temporary establishment of a company advisory board is possible, for example as part of securing company succession.

details

Number of advisory board members

The number of advisory board members can be freely determined. The definition should be based on the size of the company and the tasks of the advisory board. To avoid stalemate situations, we recommend an uneven number of advisory board members. The selection of the advisory board members is made by the body provided for this in the articles of association, e.g. B. the shareholders' meeting.

Qualification of advisory board members

With regard to the tasks of the advisory board, the selection should be based on the entrepreneurial qualifications of the possible advisory boards.

What speaks in favor of external advisory boards that do not belong to the group of shareholders is that they bring additional knowledge to the company.

Active or former shareholders as advisory boards are useful when it comes to the representation of shareholders, possibly in the course of succession arrangements. They form an intermediate stage between the shareholders' meeting and the advisory board.

After their active work, managing directors can switch to the advisory board in order to contribute their knowledge and make it easier for their successors to get started. Under no circumstances should active managing directors be on the advisory board, as there is a conflict of interest here.

In an advisory board, which mainly serves to cultivate the image, the prominence of the members and their public image is an important selection feature.

Appointment and dismissal of advisory board members

Details on the appointment and dismissal of members of the advisory board can usually be found in the articles of association. Advisory board members are often appointed by the shareholders' meeting. However, it is also possible that members of the advisory board are elected by the management. In so far as the corporate advisory board is a control body, however, when electing the advisory board members, attention must be paid to the independence of the corporate advisory board from the corporate body to be controlled. In practice, there are often models in which an existing corporate advisory board complements itself in the event of changes (leaving) through co-option (election).

Term of office of the advisory board

The advisory board's term of office is regularly specified in the articles of association. In addition to an appointment for an indefinite period, an appointment for a specific term of office is also conceivable.

Dismissal of the advisory board

Here, too, the procedure is based on the provisions of the articles of association regarding dismissal by third parties (shareholders' meeting, management) as well as for the question of a possible resignation by the advisory board itself. To ensure the advisory board's ability to act, a specific regulation in advance is highly recommended.

Organization of the advisory board

In principle, it must be determined which sub-areas of the advisory board organization are anchored in the articles of association. Any provisions not contained therein should be regulated by separate rules of procedure. Changes to the articles of association, however, require a form, which regularly (positive and negative) means a higher hurdle for changes.

Advisory Board Liability

See main article: Advisory Board Liability

There are very different views on the liability of the Advisory Board. In addition to liability based on a service contract, the basis of liability is also general liability (e.g. in the event of unjust enrichment). In many cases, liability is limited to intent, gross negligence or a limit in terms of amount.

Special liability rules apply to advisory boards of limited partnerships (KG) or apartment owners' associations .

Advisory board remuneration

There is no legal basis for the remuneration of the Advisory Board. In addition to the time required by the individual advisory board member, it should also take into account the degree of difficulty of the tasks to be taken on by the advisory board and the size of the company. A decision must be made as to whether the remuneration of the advisory board is agreed as a total of fixed or at least partially performance-related.

In the case of partnerships, the advisory board remuneration is fully deductible as a tax operating expense, unless the advisory board member is also a partner. Then there is a special remuneration according to Section 15 Paragraph 1 Sentence 1 No. 2 EStG.

In the case of corporations, the remuneration of the advisory board is generally only 50% tax-deductible (Section 10 No. 4 KStG) if the advisory board supervises the management or provides advice.

literature

  • Herwart Huber: The advisory board. Practical guide for companies, advisory boards and their advisors. Publishing house Dr. Otto Schmidt, Cologne 2004, ISBN 3-504-65702-2 .
  • Hermut Kormann: Advisory boards are responsible: supervision and advice in family businesses. Springer Verlag, Berlin 2008, ISBN 978-3-540-85149-3 .