Local Confidentiality of Overseer Bodies
In Germany, municipal supervisory board members are required to strike a delicate balance between corporate confidentiality obligations and the principle of municipal transparency. This legal tension arises from the need to protect sensitive business information while ensuring democratic accountability in the management of municipally linked companies.
Members of supervisory boards, or Aufsichtsräte, are bound by corporate law, including strict confidentiality rules designed to protect business secrets. These rules, such as those outlined in § 116 of the German Stock Corporation Act and related regulations, are essential for safeguarding commercial interests and maintaining commercial secrecy.
However, as representatives of municipalities, supervisory board members also have a duty to respect public law obligations that demand transparency, particularly in instances where the monitored corporation holds municipal ownership or public service responsibilities. German municipal law and transparency regulations, like the Public Information Acts of the federal states, grant citizens access to municipal governance information to promote democratic accountability.
In the absence of an absolute legal rule resolving this conflict, supervisory board members must apply a case-by-case balancing test. Confidential business information should be protected where disclosure would harm corporate interests. Transparency and information access should prevail where there is an overriding public interest in disclosure, especially concerning municipal governance, use of public funds, or compliance with laws. Board members must rely on legal advice, internal rules, and sometimes court decisions to navigate this balance.
Best practices often involve the use of non-disclosure agreements, restricted circulation of sensitive information within municipal administration, and clear internal guidelines to regulate what information can be shared externally or in municipal meetings without violating corporate secrecy or transparency duties.
The conflict between confidentiality and transparency was recently highlighted in the case of the Mayor of Mönchengladbach, who is a member of the supervisory board of a listed company. Several factions in the city council of Mönchengladbach requested access to documents related to a supervisory board meeting. The information request was based on Paragraph 55, Paragraph 4, Sentence 1 of the North Rhine-Westphalia Municipal Code and subsequent legal dispute, which reached the Federal Administrative Court.
The mayor refused access, citing his corporate obligation to confidentiality as a supervisory board member. However, the court found that there is no additional unwritten requirement for the municipal supervisory board member to ensure a high degree of confidentiality for the recipient of the report. The court's interpretation of the law was systemically consistent with the constitutional principle of democracy.
The Leipzig Judgment, which partially criticized for shifting corporate confidentiality in favor of disclosure to the municipal main body, is relevant for municipal supervisory boards in Baden-Württemberg, as reporting obligations can be based on law, statute, or legal transaction.
Christian Bischoff, a lawyer at Menold Bezler, made a statement regarding the case, emphasizing the need for careful consideration and legal advice in navigating the complex interplay between corporate confidentiality and municipal transparency.
- Christian Bischoff, a lawyer at Menold Bezler, highlighted the necessity of careful consideration and legal advice for municipal supervisory board members when navigating the delicate balance between corporate confidentiality and the transparency requirements in policy-and-legislation relevant to municipal governance, such as the Public Information Acts of the federal states.
- In light of recent legal proceedings, like the case of the Mayor of Mönchengladbach and the Leipzig Judgment, it is evident that municipal supervisory board members must be mindful of the shifting landscape in policy-and-legislation while upholding corporate confidentiality obligations, all while ensuring democratic accountability in the management of municipally linked companies through general-news transparency.
