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Seed producer from Lower Saxony weakens supervisory board participation
KWS Saat in Einbeck has been operating as partnership limited by shares (SE & Co. KGaA) since 2 July 2019. This publicly listed family business had first opted for the European Company (SE) legal form back in September 2015 in order to avoid full-parity codetermination and to freeze one-third employee participation on the supervisory board (see report in EWC News 3/2015). At the same time a pan-European SE works council was established which held its first training in February 2016 (see report in EBR News 1/2016). It represents 3,000 employees in 17 EU Member States and is now to be dissolved. The employee representatives on the SE supervisory board also lose their mandate.
The SE & Co. KGaA legal form is being more and more frequently used to further weaken any codetermination which has already been frozen through a previous SE conversion. In such a construct, the SE supervisory board has no employee representatives. Although they are transferred into the KGaA supervisory board they have nevertheless fewer rights. The construct is also used to safeguard the influence of the SE owners on the company, whereby the KGaA shareholders only have the role of "capital providers".
The Fresenius healthcare group was a pioneer for converting to this construct (see report in EWC News 2/2011). It was followed by the Bertelsmann media group from Gütersloh, the building materials manufacturer Sto, from Stühlingen on the High Rhine, the outdoor advertising provider Ströer from Cologne, the automobile supplier Borgers from Bocholt and KSB, a pump and valve manufacturer from Frankenthal. The family business Ottobock from Duderstadt also used this legal form, when a financial investor took a share in the company (see report in EWC News 2/2018).
The conversion to a SE & Co. KGaA is usually implemented according to the EU Mergers Directive, which was also used by the merger of RHI and Magnesita (see report in EWC News 4/2017). However this Directive only regulates codetermination on the supervisory board and fails to address the topic of European or SE works councils. Unlike an SE conversion, central management can proceed without establishing a special negotiating body (SNB) and may immediately resort to the legal default provisions. However for KWS Saat this would have meant the German works councils losing one of their two supervisory board seats to France. In order to avoid this, an SNB meeting was held on 30 January 2019 with only this single item on the agenda. The two German employee representatives, who so far have belonged to the SE supervisory board, were also nominated on the future KGaA supervisory board. A "normal" European works council based on the EWC Directive will now replace the previously existing SE works council.
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