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Rechtsanwälte GRP Rainer

Criteria for Assessing Whether GmbH Managing Directors are Subject to Mandatory Social Security Contributions

According to a decision of the Bundessozialgericht, Germany’s federal court of appeals for social security matters, GmbH managing directors are ordinarily deemed to be employees of the company and hence subject to mandatory social security contributions.

It is not uncommon for disputes to arise over whether GmbH managing directors are subject to mandatory social security contributions. We at the commercial law firm GRP Rainer Rechtsanwälte note that it can prove to be a costly affair for the company if it is determined that the managing director is subject to mandatary social security contributions but no payments have been made to this end and therefore supplementary contributions become payable.

In rulings from 14 March 2018, the Bundessozialgericht set out clear criteria for assessing whether GmbH managing directors are subject to mandatory social security contributions (Az.: B 12 KR 13/17 R and B 12 R 5/16 R). According to these judgments, the managing director of a GmbH is ordinarily deemed to be an employee of the company. The Court held that they are only considered not to be employees if they own more than 50 per cent of the company’s share capital and are thus majority shareholders. The Court went on to state that if they have a 50 per cent stake in the share capital, a presumption in favour of self-employed status is then only possible if the articles of association clearly confer a full blocking minority on the managing director and this enables him or her to prevent instructions from being issued by the general meeting of the shareholders. The Court therefore concluded that the decisive factor for the managing director’s status as self-employed is whether he or she has the legal power to determine the fate of the company by influencing the general meeting of the shareholders.

In doing so, the Bundessozialgericht has set high standards for recognizing managing directors as self-employed. It also made clear that the crucial factor in assessing whether the managing director is an employee and thus subject to mandatory social security contributions is not how he or she acts in relation to third parties. Even if he or she is granted broad powers and freedoms, this alone does not indicate that they are self-employed. Instead, it is the extent to which the managing director has recourse to legally enforceable measures for the purposes of influencing resolutions of the general meeting of the shareholders that is the key factor.

Companies should keep in mind the issue of mandatory social security contributions for managing directors as early as when agreements are being drafted in order to avoid unpleasant surprises at a later date. Lawyers who are experienced in the field of company law can provide companies as well as shareholders with expert advice on matters that go beyond mandatory social security contributions.

If you would like to find out more, please visit https://www.grprainer.com/en/legal-advice/company-law.html

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EMMANUEL EKPENYONG FCIArb. (UK) 18/03/2019

The essence of civil proceedings is for the judgment creditor to enjoy the fruits of his Judgment. This may be achieved by the judgment creditor executing the Judgment by the attachment and sale of the moveable or immovable property of the judgment debtor, attachment of funds belonging to the judgment debtor in the possession of a third party under the garnishee proceedings or committal of the judgment debtor to prison for refusal to settle the judgment debt under the judgment summons proceedings. However the following are the grounds upon which a Nigerian Court will set aside execution of a Judgment;

(i) If the judgment creditor executed the Judgment against a person other than the judgment debtor;

There are instances where a judgment creditor who is desperate to obtain payment of the judgment debt, attaches the movable property of a third party in the premises of the judgment debtor. Upon the application of the third party with proof that the property belongs to him and not the judgment debtor, the Court would set aside the execution of the Judgment.

(ii) If the person against whom the Judgment was executed, was never a party to the suit.

A judgment creditor cannot legally execute a Judgment against a person who was not a party to the suit upon which he obtained Judgment. This is so even if the person against whom the Judgment was executed is the judgment debtor’s successor-in-title. For instance, if a defendant dies before Judgment is delivered, the judgment creditor ought to bring an application to substitute the defendant’s name with that of his successor-in-title and serve the successor-in-title with all the processes in the suit.

If the judgment creditor fails do so and the Judgment is delivered against the defendant, the judgment creditor cannot sustain an execution against the defendant’s successor in title. This is because the successor-in-title was not a party to the suit. In law, the defendant and his successor-in-title are distinct and different persons.

(iii) Lack of service of the processes on the judgment debtor

If the judgment creditor failed to effect service of the processes in the suit on the judgment debtor in line with the provisions of the relevant statutes on service of processes, the Court would set aside the execution of the Judgment against the judgment debtor. This is because service of processes on the judgment debtor goes to the root of the suit and affects the jurisdiction of the Court to validly enter Judgment against the judgment debtor. Lack of service is a clear breach of the judgment debtor’s fundamental right to fair hearing and makes the proceedings conducted a nullity and of no legal effect whatsoever.

(iv) Lack of jurisdiction of the Court who delivered the Judgment

Jurisdiction of Court is a threshold issue. If the Court who delivered the Judgment which the judgment creditor executed against the judgment debtor had no jurisdiction in the first place over the subject matter of the suit or exceeded its statutory jurisdiction, the judgment debtor may apply to set aside the execution of the Judgment.

(v) Execution of a Judgment outside the stipulated statutory period

Order IV Rules 8 (1) and (2) of the Judgment Enforcement Rules provides that a Judgment shall be executed against the property of a judgment debtor within 6 (six) years and against the person of the judgment debtor within 2 (two) years from the date in which the Judgment was delivered, failing which the judgment creditor must file an exparte application for leave of Court to execute the Judgment outside the stipulated statutory period.

If a judgment creditor, without leave of court, execute a Judgment outside the stipulated statutory period, the judgment debtor may apply to the Court to set aside the execution of the Judgment.

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Jerôme Kerviel trader’s case: 19 December 2018

On 19 December 2018, the French Court of Appeal of Paris (RG 16/09186) stated that the dismissal of Jerôme Kerviel, French trader from SGCIB (Société Générale Corporate and Investment Banking), the investment bank of Société Générale is fair (on the basis of a gross negligence – faute grave).

This overrules the decision (jugement) of the Conseil de Prud’hommes (French jurisdiction dedicated to labour law) dated 7 June 2016, whereby the dismissal was considered unfair (i.e. without a material and true reason) (cause réelle et sérieuse). In this first instance, Jerôme Kerviel obtained not only €100,000 because of the unfair dismissal but also (i) €20,000 due to the vexatious nature of the dismissal, (ii) €18,083.32 as regards to compensation in lieu of notice (indemnité compensatrice de préavis), (iii) €1,808.33 in relation to unpaid vacation pay (congés payés), (iv) €13,609.23 in connection with conventional severance pay (indemnité conventionnelle de licenciement) and (v) €300,000 as to the unpaid bonus for 2007 (plus €2,000 in relation to article 700 of the French Code de procédure civile).

The ratio decidendi of the Court of Appeal of Paris is based on the characterization of the conduct of Jérôme Kerviel during his contract. The blames in the letter of dismissal are considered grounded by the Court of Appeal of Paris (even if previously been ruled purged due to the knowledge of them by the employer). In particular, the blame considered crucial by the Court is the taking of directional positions (i.e. at a highest analyzed value), while at the same time going over authorization (€50 billion for an authorization of €125 million for the whole desk only).

The Court of Appeal of Paris states however that the wilful misconduct (faute intentionnelle) is not characterized: Jérôme Kerviel did not mean to cause the loss of the estimated circa €5 billion. The position of the Court is in line with the statements of Jérôme Kerviel who considered himself as being part of a spur gear (as mentioned in his book “L’engrenage, mémoire d’un trader”). This decision gives a warning to the traders: taking inconsiderate risks could lead to a dismissal (with maybe prison), and at the same time a balance: a bank which loosens internal regulations (or admits implicitly / explicitly / or maybe intentionally some inappropriate derogations) cannot fully blame a trader.

The ratio decidendi of the Court of Appeal of Paris is also grounded on the force of res judicata (for res judicata pro veritate habetur – autorité de la chose jugée). This means that, once the decision is final, such a decision is considered as representing the judicial truth. Jérôme Kerviel was indeed convicted with offences (délits pénaux) by a distinct decision of the French Cour de cassation dated 19 March 2014 (Ch. Crim., pourvoi n°12-87416). In this respect, the Court of Appeal of Paris qualifies the force res judicata principle, as absolute. As a consequence, other civil French pending decisions are to be linked (and bound) by the decision of the French Cour de cassation. In this perspective, the conviction of the trader by the French Cour de cassation influes on, and binds the decision of the Court of Appeal of Paris, ruling the labor decision.

It should however be considered that the absolute feature of the force res judicata, as stated in the ruling of the Court of Appeal of Paris, should be subject to challenge. As such, since any legal concept, even considered as absolute, are, in a democratic country, subject to other legal concepts tempering (within the meaning of qualifying) such absolute rights.

It should also be considered that this characterization by the Court of Appeal of Paris is more in line with what would be acceptable in a context where the bank is considered as being itself in default, since being itself convicted by the French banking regulator – Commission Bancaire for the lack of control and monitoring of the trading systems.

In light of this, the Court of Appeal of Versailles ruled on 23 September 2016 (room 9 – RG: 14/01570) (ruling by a review of the case decided by the French Cour de Cassation dated 19 March 2014 (Ch. Crim., pourvoi n°12-87416)) that Jérôme Kerviel is only partially responsible for the prejudice caused to the Société Générale and convicts him to pay €1 million only (instead of circa €5 billion).

Up to date 19 December 2018

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UAE Legal Update: Regulatory Alert (Healthcare)

Federal Law No.2 of 2019 – Using IT and Telecommunications in the Healthcare Sector

The United Arab Emirates Government Promulgate Federal Law No.2 of 2019 – Using IT and Telecommunications in the Healthcare Sector (“the Law”), which for the first time regulates healthcare data processed, controlled, transferred and stored electronically.

The Law contains 22 Articles, which includes, but is not limited to the creation of a central data base system, obligations in respect of data privacy and use of IT and telecommunication technology when processing, transferring and storing data. In addition, obligations are placed on media licensing, training and violations for breach of the Law.

The Law is unique insofar that it is the first federal privacy law relating to healthcare data and protection of personal and sensitive data in the UAE.

Healthcare providers, insurers, insurance intermediaries, third party medical claims administrators, technology companies in the healthcare space and others dealing with healthcare will need review an audit their current practices and comply with the Law.

The Law is expected to be gazetted in the coming weeks and will be implemented three months from that date.

BSA will provide a follow up detailed analysis of the law in due course.

About BSA Ahmad Bin Hezeem & Associates LLP

BSA is a law firm originally founded in Dubai with the primary mission of delivering top-tier legal services based on our comprehensive knowledge of local, national, and international law.

Since our inception in 2001, we have rapidly expanded to a leading full-service law firm, with offices throughout the Middle East and France. Our lawyers are internationally educated, bi-lingual in languages such as English, Arabic, and French, and dual-qualified in both regional and international jurisdictions, having rights of audience in every country within which we operate.

BSA is a law firm that truly reflects the energy and ambition of the Middle East.

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Irwin Mitchell Charities of the Year 2019

The 12 month annual programme sees employees in each of our 13 UK offices vote for a good cause in the local vicinity to support through a range of fundraising events and voluntary work.

The initiative is part of the work of the Irwin Mitchell Charities Foundation (IMCF) an independent charity founded in 1997 which has since raised over £1.8 million for charities in the UK and abroad.

About Irwin Mitchell Solicitors:

Irwin Mitchell is unlike any other law firm. Nationally acclaimed, with a strong international capability, we offer a broad range of legal services to national and international organisations and institutions, small and medium-sized businesses and private individuals.

The firm was founded in 1912 by Walter Irwin Mitchell. With a concentration on criminal law, he aimed to provide the highest quality legal services to the general public from his small legal practice in Sheffield.

Today, Irwin Mitchell is the 11th largest law firm in the UK with one of the five largest Private Wealth teams in the country, operating out of 14 UK offices including a consulting office in Middlesbrough.

We currently employ over 2,500 members of staff, including over 1,000 legally trained personnel and have helped over one million clients in our 100 year history.

The Business Legal Services division is also the fastest-growing area of the firm, with an increasing number of global, national and regional companies choosing to work with us.

In 2012, we became one of the first companies to be approved as an Alternative Business Structure (ABS), allowing us to plan for growth and take advantage of the opportunities created by the changing legal landscape.

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Bankers bounce back to beat lawyers in Annual Charity Cricket Match

The bankers won the Duane Morris & Selvam Capital Markets Cup with a resounding win over the lawyers in this year’s charity cricket match held on 19 January 2019 at the Sachivalaya Ground in Oval Maidan, Mumbai. The lawyers were aiming for four wins in a row, but the bankers bounced back to crush the lawyers in this year’s match, scoring 191 for 7 off their 20 overs and bowling the lawyers out for a paltry 85. The bankers have now won three times, but they still trail the lawyers, who have won five times. This year’s match raised over Rs. 200,000 for Bal Asha Trust, which provides quality childcare to abandoned and destitute children from all over Maharashtra.

Jamie Benson (Duane Morris & Selvam) won the toss and sent the bankers into bat. The left- and right-handed batting combination of Bedabrata Das (JM Financial) and Ronak Shah (Yes Securities) proved a challenge for the lawyers’ opening bowlers Sayantan Dutta (Shardul Amarchand Mangaldas) and Siddhartha Desai (Shardul Amarchand Mangaldas), and the bankers got off to a quick start. Rabindra Jhunjhunwala (Khaitan & Co) and Vijay Parthasarathi (Cyril Amarchand Mangaldas) were brought into the attack and Parthasarathi had Shah caught by the wicket keeper, Laban Das (Cyril Amarchand Mangaldas), for 9 runs. Satyam Singhal (Morgan Stanley) was next in, but unfortunately for him, he was run out by Jhunjhunwala after facing only one ball. This brought Javeed Siddiqui (ICICI Securities), the captain of the bankers, to the crease. Siddiqui and Das batted very well and the scoreboard ticked over at a fast rate until Siddiqui top-edged an attempted sweep from the bowling of Sanjay Israni (Desai Diwanji) and he was very well caught by Laban Das for 30 runs off only 18 balls. Amit Nayyar (Arpwood Capital) hit two sixes before falling LBW to Murtaza Zoomkawala (Shardul Amarchand Mangaldas) for 21 runs off 10 balls. Bedabrata Das continued to bat well until retiring on 51 runs. The last few overs saw the bankers lose a few more wickets, but they ended up with an imposing 191 runs for 7 wickets off 20 overs.

Vijay Parthasarathi and Rabindra Jhunjhunwala (Khaitan & Co) got the lawyers off to a very good start, despite some good bowling from Harshit Talesara (IIFLCAP) and Arjun Mehotra (ICICI Securities). The lawyers were on track with the required run rate after 5 overs but a change in the bowling brought a big change to the complexion of the match. Nayyar was brought on to bowl and Jhunjhunwala tried to hit him out of the ground, only to be caught at long off by Siddiqui for 11 runs. Parthasarathi continued to bat well but when he was out for 41 runs caught by Nayyar off the bowling of Shubham Mehta (Edelweiss) the match was as good as over. A combination of very good bowling from Nayyar (3 wickets), Gaurav Sood (ICICI Securities) (3 wickets) and Mehta (2 wickets), poor shot selection and good catching saw the lawyers crumble from 50 runs for no wicket to all out for 85 runs in 14 overs. Apart from Parthasarathi and Jhunjhunwala, no lawyer got into double figures.

The match raised more than Rs. 200,000 for Bal Asha Trust, with Duane Morris & Selvam donating Rs. 100,000, Khaitan & Co Rs. 75,000 and numerous individuals making generous donations.

The match was the initiative of Jamie Benson of Duane Morris & Selvam. Benson is based in Singapore and is head of Duane Morris & Selvam’s India practice and U.S. securities law practice. Commenting on the match, Benson, who captained the lawyers’ team, said, “Congratulations to the bankers. They played very well. It would have been nice to win, but the main thing was for everyone to have an enjoyable time and to raise money for a very good cause. I am already looking forward to next year’s match.”

This year marked the 10th anniversary of the match. The first match was held to raise money for the families of the staff of the Trident Hotel killed in the 2008 terrorist attacks. Jamie Benson was holed up in the Trident Hotel for 38 hours during the attacks and was lucky enough to walk out alive. Gratifyingly, so much money was raised from various sources that no more was needed to be raised for these families. Subsequent matches have benefited the Red Cross, Oxfam and Bal Asha Trust.

Bankers: 191 runs for 7 off 20 overs (Bedabrata Das 51 retired, Siddiqui 30 and Nayyar 21) beat Lawyers: 85 runs for 10 off 14 overs (Parthasarathi 41, Jhunjhunwala 11; Nayyar 3 wickets for 10 runs off 3 overs, Sood 3 wickets for 8 runs off 2 overs and Mehta 2 wickets for 16 runs off 3 overs).

Amit Nayyar was named Man of the Match for his 3 wickets, 21 runs and 3 catches.

About Duane Morris & Selvam LLP

Duane Morris & Selvam LLP is the joint law venture consisting of international law firm Duane Morris LLP and Singapore-based Selvam LLC, with headquarters in Singapore. It serves clients throughout Asia, as well as companies based in the Americas and Europe that are conducting business in Asia and Asian entities and individuals doing business in the Americas and the United Kingdom. Duane Morris LLP, a global law firm with more than 800 attorneys in 29 offices across the United States and around the world, is asked by a broad array of clients to provide innovative solutions to today’s legal and business challenges. Throughout its more than 100-year history, Duane Morris has fostered a collegial culture, where lawyers work with each other to best serve their clients.