Entrepreneur’s Diary #73 – The Role of the Supervisory Board in a Small Stock Company

More and more often, medium-sized enterprises, such as InterFace AG, use the legal status of a Small Stock Company  (Aktiengesellschaft AG).

A huge advantage is that, using this legal status, you can organize a large number of stock holders better than in a private limited liability company (GmbH). This is important if, for example, former or active employees hold some of the stock and thus the number of stockholders is bigger.

The disadvantage of a small stock company is that you have more work. For instance, you must follow the extended rules of stock-holder legislation and need a supervisory board. The number of supervisory board members must be three or a multiple unit of three (three, six, nine…).

What are the tasks of a supervisory board in a small stock company?

As I see it, they have three important tasks.

  • They should combine the interests of the stock holders with those of the enterprise. In order to make it a success, it is necessary for them to build a “firewall” between the stock holders and the enterprise. Among other things, the supervisory board has to see to it that the stock holders will not do damage to the enterprise by demanding excess dividends and that the board of directors takes the stockholder’s interest into consideration when acting.
  • Moreover, the supervisory board has to keep the enterprise on the right course. It would be ideal if they were actively involved as early as when the course is decided upon.
  • The supervisory board should be first consulted by the board of directors in all affairs pertaining to the company. They must agree on the contracts with which the directors tie themselves to the enterprise. Naturally, a consequence of this is also that they have to see to it that new persons get a chance to become directors.

It is a good thing for a medium-sized enterprise to have a supervisory board if they are a small stock company. Ideally, said board consists of people who have the competence, the time and the will to work towards the well-being of the enterprise.

(Translated by EG)

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