Liabillity of Management Germany/US 2249

  • Hello everybody.
    Company Headquarters are locatet in the US.
    Another branch is locatet in Germany.
    One registered Manager from Germany, another one from the US.
    So my question is:
    If the german company doesn’t meet SOX regulations, which of these 2 managers is liable?
    I don’t think that it is possible to make the german manager liable because of SOX in german law, maybe there is liabillity of the german Manager under US law?
    Im pretty new to these SOX matters.
    Can you help me?
    Thanks in advance.

  • Is the company publicly-traded in the USA? How does the size of the German operations compare to the consolidated company operations? Is the German manager the CEO or CFO of the parent company? In general, the CEO and CFO (or Chief Accounting Officer, if different) have the most liability under SOX.

  • Sorry,my description was very unclear.
    The german company is a sister company of the US parent.
    The US company is publicly-traded, yes.
    The German Company has an entity of german law, so there is no CEO, CFO etc.
    The german and the US Manager are the legal managers of this german company.

  • I guess that I don’t fully understand the legal relationship between the German and US companies. If the German company is not part of a consolidated group that is required to file regular reports with the SEC in the USA, then I would venture a guess that it is not subject to SOX laws.

  • The US company has sister companies in many countries in Europe.
    Everyone of these companys has its own national entity like XY inc. , XY ltd. …
    I have the information that sister companies in Europe are also affected by SOX if their parent company is publicly-traded in the US.
    I am no jurist and so it’s pretty confusing for me :?

  • The Company listed in the US is the one that is liable for compliance.
    For clarification when you say sister company do you actually mean daughter (or subsidiary)? If not where is the ultimate parent of both companies listed?

  • Well if the parent company of the German subsidiary has securities listed on a stock exchange in the U.S., has equity securities that are traded over-the-counter in the U.S. (i.e. ausserbrslich gehandelt) or has publicly offered securities in the U.S. (ffentliches Angebot), then the issuer of the securities is subject to the Sarbanes-Oxley Act and to the Securities Exchange Act.
    Only the CEO (Vorstandsvorsitzender) and the CFO (Finanzvorstand) of the issuer (i.e. the parent, des Emittenten, der Konzernmutter) have to sign the certifications under section 302 (civil sanctions = Verwaltungsstrafen der Brsenaufsichtsbehrde) and section 906 (Strafrechtliche Sanktionen inklusive Gengnis) of the Sarbanes-Oxley Act that the consolidated financial statements (Konzernabschluss) are correct. The directors or officers of a subsidiary are not required by the SOA to sign a certification that the individual financial statements of the subsidiary are correct. Also management’s report on the assessment of the effectiveness of internal control over financial reporting is made by the CEO and CFO of the parent and is based on the consolidated financial statements.
    What many people don’t know is that the Foreign Corrupt Practices Act already inserted an obligation in the Securities Exchange Act in 1977 that issuers have to maintain a system of internal control over financial reporting (internal accounting control, IKS) and to maintain proper accounting books. The U.S. Securities and Exchange Commission and the U.S. Department of Justice also enforce this obligation at subsidiaries outside the U.S. (for example at Siemens, at ABB, etc.).
    The liabilitiy of directors (Aufsichtsratsmitglieder) and officers (Vorstandsmitglieder und sonstige hhere Fhrungskrfte) at non-U.S. companies and subsidiaries outside the U.S. depends on which individual section of the Sarbanes-Oxley Act you ask about. The whistleblower protection rules do not apply to employees of non-U.S. parents or subsidiaries.

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