Sources of corporate governance rules and practices
Primary sources of law, regulation and practice
What are the primary sources of law, regulation and practice relating to corporate governance? Is it mandatory for listed companies to comply with listing rules or do they apply on a ‘comply or explain’ basis?
The primary sources for capital companies in Germany (GmbH, AG, KGaA, SE) are the German Limited Liability Companies Act (GmbHG), the German Stock Corporation Act (AktG), the European and German acts on European stock corporations (Societas Europaea, SE), the German Commercial Code (HGB), the Reorganisation of Companies Act (UmwG), the Takeover Act (WpÜG), the Securities Trade Act (WpHG), the Anti-Money Laundering Act (GwG), the applicable listing rules and the German Corporate Governance Code (DCGK), which differentiates between recommendations, which must either be complied with or deviations from which must be explained (comply or explain), and proposals, from which deviations are allowed without disclosure.
What are the primary government agencies or other entities responsible for making such rules and enforcing them? Are there any well-known shareholder groups or proxy advisory firms whose views are often considered?
The primary government agencies are the federal parliament and, to a growing extent, the EU legislators. The German Corporate Governance Code and its annual amendments are prepared and issued by the Government Commission for the German Corporate Governance Code. The listing rules are usually set by the stock exchanges or other listing entities.
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This article was first published in: Law Business Research, Getting the deal through, Corporate Governance 2018, July 2018