In today’s corporate practice, dealing with potential liability claims against directors and officers is a sensitive area. Legally complex, economically consequential and often reputationally damaging. If allegations of breaches of duty are made, there is not only the threat of a lengthy and costly process, but also the loss of trust within and outside the company. But before things escalate to court, there is an alternative that is becoming increasingly important: mediation.
Why mediation?
Compared to public proceedings, mediation offers considerable advantages. Instead of months of court proceedings with an uncertain outcome, it relies on confidentiality, speed and consensus. Particularly with regard to internal company information, which inevitably becomes public in public proceedings, mediation can protect the company from both financial and image-damaging consequences.
Unlike a court, however, the mediator does not pass judgment. He supports the parties involved – typically the supervisory board or shareholders of a corporation or partnership as well as the affected management member – in a structured dialog in order to find a solution that works for both sides. This methodical approach is often more effective than a purely legal dispute, particularly in complex situations.
Legal stumbling blocks at the AG – and how to avoid them
In the case of a stock corporation, Section 93 para. 4 sentence 3 AktG sets strict limits for settlements regarding compensation claims against members of the Management Board. A settlement may only be concluded three years after the claim arises at the earliest and only with the approval of the Annual General Meeting. This also applies to mediation agreements that amount to a settlement. However, this does not mean that mediation is generally inadmissible. It can begin earlier as long as the actual settlement is not concluded until after the deadline has expired. This means that the procedure remains legally permissible without undermining the scope of the general meeting.
There are no such restrictions for limited liability companies and partnerships. Mediation can be initiated and concluded at any time, provided it is authorized by the shareholders’ meeting (GmbH).
Designing mediation strategically
It is important for companies to draft contracts wisely in advance. Mediation can already be anchored in the articles of association or employment contract with a corresponding mediation clause. This is a step that saves time, money and nerves in the long term. It is particularly effective if D&O insurance is also included. Because in the end, any agreement will only last if all parties involved, including the insurance company, pull together.
Future-oriented instead of backward-looking
Court proceedings focus on guilt and retribution. Mediation, on the other hand, focuses on the future. It makes it possible to reduce personal tensions, clarify misunderstandings and work out viable solutions without losing face and with the aim of maintaining business relationships. In an increasingly volatile economic environment, this is an invaluable advantage.
Mediation as a smart and sustainable alternative
In cases of potential director liability, mediation is not a sign of weakness, but an expression of professional and future-oriented corporate management. It allows conflicts to be dealt with before they escalate and does so efficiently, confidentially and with an eye on the big picture. Companies that consider this option at an early stage are not only acting in a legally prudent manner, but also in an economically wise way.
