Compliance Management in Germany

Until a few years ago, compliance was primarily an issue for banks and financial services providers and the term itself was associated with financial oversight. Now, compliance encompasses a wide range of obligations relating to everything from the U.S. Sarbanes Oxley Act to trade sanctions and anti-money laundering regulations. This thicket of rules and regulations imposes complex reporting requirements, internal training obligations and increased potential for liability.

Gone are the days when only large publicly traded German companies had to concern themselves with compliance matters. Now, even small and medium-sized German businesses must ensure that their business activities (or even the activities of business partners) do not trigger a reporting requirement or violate a trade sanction or an anti-slavery statute.

Compliance management and compliance systems are essential for four key reasons.

First, the relevant laws are more complex than ever and are constantly undergoing changes.

Second, there is a trend towards holding directors and managers personally liable when a company fails to satisfy compliance requirements.

Third, the financial pressures on directors and officers to meet short term financial goals makes it more tempting than ever to willingly ignore or “turn a blind eye” to business activities that are questionable or outright illegal. As a result, well-drafted, clear and easy-to-follow internal policies and procedures are essential.

Fourth, it is good business practice – putting aside the legal obligations and the potential for fines, any alleged or actual violation of a trade sanction or an anti-slavery law can result in an enormous loss of good will and significant reputational damage. 

Key compliance issues related to German Employment Law include the scope of an employer's right to issue

• directives,
• whistleblowing systems,
• co-determination of the works council,
• agreements between works council and management,
• assertion of claims for damages against employees or executive bodies.

Complicating matters further, German labor and social insurance law establishes numerous additional guidelines and compliance regulations regarding, for example,

• anti-discrimination measures,
• employee assignments, 
• posting of employees,
• working hours,
• remuneration,
• social security law,
• employee data protection,
• occupational safety,
• operational co-determination,
• work permits and
• company pension schemes.

Failure to follow these laws and regulations can result in substantial liability and sanction risks for the company, the executive board and managing directors.

Other areas of law that have established important German compliance rules  include:

• Corporate law (Executive liability and corporate mergers and acquisitions),
• Banking and Finance as well as Capital Market Law,
• Intellectual Property Law,
• Tax Law, Prevention of corruption,
• Insurance Law and
• Insolvency Law.

We can assist with all aspects of compliance management including risk assessment, the drafting and  introduction of compliance systems and ongoing training of key employees. With every step we will work closely with your company to ensure that the liability risks remain manageable.

Our compliance systems include written manuals, checklists and guidelines for keeping your compliance systems up-to-date. We can also provide tailored advice and counsel to compliance management officers and can help your company establish whistleblowing contacts and mechanisms to ensure that your compliance management system is not undermined by rogue employees.

If you have general questions regarding compliance management in Germany or would like to receive an offer for a tailor-made compliance management system, please get in touch so that we can discuss our services in more detail.