Merck 2010 Annual Report Download - page 112

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The Statement on Corporate Governance contains the Statement of Compliance,
relevant information on practices within the company, the compensation
report as well as a description of the procedures of the corporate bodies.
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The German Corporate Governance Code is geared exclusively toward the conditions at a German
stock corporation (Aktiengesellschaft). Merck KGaA has resolved to apply the Code correspond-
ingly to a corporation with general partners (Kommanditgesellschaft auf Aktien) to serve the
interests of shareholders. In order to enable shareholders to compare the situation at other
companies more easily, we base corporate governance on the conduct recommendations made
by the Code Commission relating to management and supervision (governance) and forego
having our own, equally permissible, code. With a few exceptions, the recommendations of the
Code, the intent and meaning of which are applied, were complied with in the past and will
continue to be complied with in the future.
For a clearer understanding, the following gives a general explanation of the Kommanditgesell-
schaft auf Aktien (KGaA) company form followed by the specific situation at Merck with additional
references to the General Meeting and shareholder rights.
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“The corporation with general partners is a company which constitutes a separate legal entity,
in which at least one partner has unlimited liability with regard to the creditors of the company
(general partner) and the other shareholders are not personally liable for the obligations of
the company (limited shareholders) (section 278 (1) of the German Stock Corporation Act –
hereinafter referred to as ”AktG”). It is therefore a hybrid of an Aktiengesellschaft (German
stock corporation) and a Kommanditgesellschaft (limited partnership) with a focus on German
stock corporation law. Distinctive differences to the Aktiengesellschaft include the presence of
general partners, who essentially also manage the company’s business activities, the absence
of a management board, and the restriction of rights and obligations of the supervisory board
(see page 125 for a description of the supervisory board procedures). This legal form also
involves special features with regard to the General Meeting. For example, many of the resolu-
tions made require the consent of the general partners (section 285 (2) AktG), including the
adoption of the annual financial statements (section 286 (1) AktG). A large number of the
conduct recommendations contained in the Code, which is geared toward Aktiengesellschaften,
can therefore only be applied to a KGaA as appropriate.
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