Corporation with general partners (Kommanditgesellschaft auf Aktien)
The corporation with general partners is a company which constitutes a separate legal entity, in which at least one partner has unlimited liability with regard to the creditors of the company (general partner) and the other shareholders are not personally liable for the obligations of the company (limited shareholders) (section 278 (1) of the German Stock Corporation Act – AktG). It is therefore a hybrid of an Aktiengesellschaft (German stock corporation) and a Kommanditgesellschaft with a focus on German stock corporation law. Distinctive differences to the Aktiengesellschaft include the presence of general partners, who essentially also manage the company’s business activities, the absence of a management board, and the restriction of rights and obligations of the supervisory board (see pages 86 to 89 for a description of the supervisory board procedures). This legal form also involves special features with regard to the Annual General Meeting. For example, many of the resolutions made require the consent of the general partners (section 285 (2) AktG), including the adoption of the annual financial statements (section 286 (1) AktG). A large number of the conduct recommendations contained in the Code, which is geared toward Aktiengesellschaften, can therefore only be applied to a KGaA as appropriate.
Merck KGaA
The general partner E. Merck KG holds around 70% of the total capital of Merck KGaA (equity interest); the shareholders hold the remainder, which is divided into shares (share capital). E. Merck KG is excluded from the management of business activities. The general partners with no equity interest (Executive Board), on the other hand, manage business activities. Nevertheless, due to its substantial capital investment and unlimited personal liability, E. Merck KG has a strong interest in the businesses of Merck KGaA operating efficiently and in compliance with procedures, and exercises its influence accordingly. Merck KGaA’s participation in the profit/loss of E. Merck KG in accordance with articles 26 et seq. of the Articles of Association further harmonizes the interests of the shareholders and of E. Merck KG.
E. Merck KG appoints and dismisses the Executive Board. In addition, E. Merck KG has created bodies – complementing the expertise and activities of the Supervisory Board – to monitor and advise the Executive Board. This task applies primarily to the Board of Partners of E. Merck KG. Based on the provisions of the German Stock Corporation Act, the Articles of Association of Merck KGaA and the rules of procedure of the various committees, Merck KGaA has a set of rules for the Executive Board and its supervision that meet the requirements of the Code. The investors, who bear the entrepreneurial risk, are protected as provided for by the Code.
This is illustrated by the following chart:
Deviations from the Corporate Governance Code:
1. Contrary to section 3.8 (2), the Directors & Officers (“D&O”) liability insurance policy, which Merck KGaA maintains for its Supervisory Board members, currently does not include a deductible. The company dispensed with a deductible in the past because D&O insurance policies with the required deductible were not actively offered by the insurance sector and the individual agreement on a deductible is not countered by a substantial reduction in the premium. On July 1, 2010, Merck KGaA will introduce a deductible in accordance with section 3.8 (2) of the Code.
2. Contrary to section 5.4.1 sentence 2, no age limit is taken into account when proposing candidates for election to the Supervisory Board. The age of Supervisory Board members is not a criterion for their qualifications and competence. Moreover, the many years of experience of Supervisory Board members should not be dispensed with.
3. Contrary to section 5.4.6 (3), the compensation of the Supervisory Board members is not reported individually. The amount of compensation received by the Supervisory Board members can be calculated in accordance with the Articles of Association of Merck KGaA, making a separate disclosure of the individual compensation unnecessary.
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