‘Leave to stay’ or baby leave, sick leave and care leave for business executives (m/f/x)
Introduction of quotas for men and women in management and executive boards
If the management or the executive board of a GmbH [a German limited company], Aktiengesellschaft or SE [German or European stock corporations] consists of more than three people then at least one woman and at least one man have to be appointed to the representative body. Failure to achieve this quota will render the appointments null and void. However, this mandatory quota will only be applicable to companies that are either stock listed or subject to parity co-determination rules in accordance the German Co-determination Act.
Other reforms in respect of maternity leave, parental leave or care leave
However, in the wake of the quota described above, another amendment was introduced - via a quick resolution recommendation with a large majority - whose implications are no less spectacular - a business executive’s mandatory right to maternity leave, parental leave or care leave and, in particular, regardless of whether the respective executive is an employee under social security law or a controlling shareholding managing director.
Please note: It is worth recalling the German Maternity Protection Act that already applies to external female managing directors if they are subject to social insurance.
The new rules will be implemented through the right for business executives to have their mandates suspended. In this respect, a new paragraph 3 that will be added to Section 38 of the German Limited Liability Companies Act will state that: “If business executives are temporarily unable to comply with the obligations associated with their appointments in office because of maternity leave, parental leave, having to care for a family member or because of illness and if at least one other business executive has been appointed then the business executives shall have the right to request that their appointments in office be revoked. If business executives make use of this right then the appointment in office of these business executives has to be revoked and, in such cases, reappointment has to be guaranteed after the end of the period specified as the term of protection in Section 3(1) and (2) of the German Maternity Protection Act (…).“
For the other legal forms of the Aktiengesellschaft or SE appropriate amendments are planned for Section 84 of the German Stock Corporation Act and Section 40 of the European Stock Corporation Act.
Please note: The new rules apply to all GmbHs and also the small general partner GmbH of a tradesperson’s GmbH & Co. KG. (a German limited partnership with a limited liability company as a general partner)
Practical significance
Consequently, business executives (m/f/x) may request revocation of their appointments in office and subsequent reappointment for their desired period of time off work. The intention is that during the period of personal leave the executive’s functional obligations lapse. During this period, they do not have any obligations, for example, in respect of filing a petition for bankruptcy and neither any liability risks ensuing from a breach of any obligations. In cases of maternity leave, the shareholders’ meeting or the supervisory board are not allowed to reject the request of the executive board; in cases of parental leave, sickness or care the appointing body may nonetheless object to the request for good cause.
Conclusion
In the event that the legislation is finally passed it will enable new strategies, for example, in a company crisis; in future, business executives could thus effectively pull themselves out of their official duties for 14 weeks (maternity leave) or up to three months (in the event of sickness or because of paternal leave or care leave) and saddle the potential sole remaining business executive with these responsibilities.