In the following guest post, Burkhard Fassbach, a D&O lawyer in private practice in Germany, discusses the recent interesting development in German Courts with regards to the VW’s Dieselgate settlement with its D&O insurers. As discussed below, the relevant court has held that the settlement is “null and void” because, the court held, the proper processes were not followed in obtaining shareholder approval of the settlement. I would like to thank Burkhard for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Burkhard’s article.
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Kevin LaCroix discussed in a blog post on June 10, 2021 that VW announced that a settlement had been reached in the D&O liability action that had been filed against the company’s executives in connection with the “Dieselgate” scandal. The settlement was approved by VW shareholders in July 2021. In our Guest Post on the D&O Diary on November 24, 2021 Michael Hendricks and myself have reported about the legal action filed by minority shareholders against VW in an effort to oppose the settlement.
In its landmark ruling of September 30, 2025, the German Federal Court of Justice (BGH) decided that VW’s settlements with D&O insurance companies are null and void. The SdK Schutzgemeinschaft der Kapitalanleger e.V., one of the leading German investor associations, with its main focus on representing the interests of investors and protecting minority shareholders, fought for this landmark decision on liability settlements in the Volkswagen AG case and describes the victory as a major success for shareholder protection, corporate governance, and shareholder culture.
The Second Civil Senate of the Federal Court of Justice, which is responsible for corporate law, among other things, has declared the resolution of the Volkswagen AG shareholders’ meeting approving a settlement agreement with D&O insurers in the so-called “diesel scandal” null and void. Insofar as the resolutions of the Annual General Meeting approving liability settlements with former members of the Board of Management were challenged, the Higher Regional Court must rehear and decide the case. In a press release, the press office of the Federal Court of Justice describes the facts of the case, the course of the proceedings to date, and the decision of the Federal Court of Justice. In the following reference is made to the press release.
I. Facts of the case
In June 2021, the defendant Volkswagen AG concluded liability settlements with its former CEO and a former member of the Executive Board, as well as related coverage settlements with D&O insurers to settle and discharge potential claims for damages and related coverage claims against the insurers. On the basis of an investigation report and further audits, it had concluded that the two former board members had negligently breached their duties of care in connection with the so-called “diesel scandal” because they had not taken indications of the use of illegal software functions in diesel engines as an opportunity to immediately investigate the matter. The settlements provided for payments by the former members of the Executive Board, referred to as personal contributions, in the amounts of €11.2 million and €4.1 million, respectively, and payments by the D&O insurers in the amount of approximately €270 million. For its part, Volkswagen AG undertook to indemnify the two former members of the Board of Management against certain claims that third parties could assert against them in connection with the relevant facts. In the coverage settlement, it also undertook to permanently refrain from making any further claims against certain other persons, including all other former or current members of the Board of Management and the Supervisory Board.
The Volkswagen AG Annual General Meeting approved the settlement agreements on July 22, 2021, with majorities of over 99%. The plaintiffs are investor protection associations. As shareholders of Volkswagen AG, they lodged an objection to the approval resolutions for the record.
The plaintiffs object to the approval resolutions, among other things, and believe that they are void or, at any rate, contestable.
II. Course of proceedings
The Regional Court dismissed the action. The Higher Regional Court rejected the appeal lodged by the plaintiffs. With the appeal on points of law admitted by the Higher Regional Court, the plaintiffs and their intervener pursued their claims in full.
III. Decision of the Federal Court of Justice
The plaintiffs’ appeal was successful on key points. However, the approval resolutions are not void due to a violation of the prohibition on the return of contributions (Section 57 (1) AktG) and the resolutions do not violate Section 93 (4) sentence 3 AktG because the three-year blocking period specified therein was not observed.
However, the resolution approving the settlement agreement is contestable due to a violation of the law and must be declared null and void. The agenda specified in the notice convening the Annual General Meeting did not state, in accordance with the requirements of section 121 (3) sentence 2 AktG, that the settlement agreement involved a waiver in respect of all current and former members of the defendant’s executive bodies, which required the approval of the Annual General Meeting pursuant to section 93 (4) sentence 3 AktG and section 117 (4) Section 93 (4) sentence 3 AktG. The relevant information in the Management Board’s report is not sufficient, as it was no longer part of the agenda specified in the notice of the meeting. The average shareholder did not have to expect that the information on a resolution to waive claims against a large number of other members of the executive bodies would be contained in the further information on the relevant agenda items.
Insofar as the Higher Regional Court denied the contestability of the resolutions approving the liability settlements pursuant to Section 243 (1), (4) sentence 1 AktG on the grounds of a violation of the right to ask questions pursuant to Section 1 (2) sentence 1 no. 3 COVMG (old version), this did not stand up to legal scrutiny. Based on the reasoning provided, it could not be assumed that the requested information on the financial circumstances of the former members of the Management Board was not essential for the exercise of shareholder rights in the context of the decision on the approval of the liability settlements. The report of the supervisory board and the management board states, among other things, that one of the main reasons for concluding the settlement agreements was that the financial capacity of the persons against whom the claims were made, even taking into account the sum insured, fell far short of the damages attributable to these persons from the company’s point of view. Information on the financial situation of the former members of the management board who were held liable was necessary for an informed decision on approval, at least insofar as it was necessary to understand this assessment. The information provided, in particular on the income received, is not sufficient for this purpose because it does not reveal the extent to which any liability claims would have been covered by the former management board members’ own assets. On the basis of the findings, the Federal Court of Justice was unable to reliably determine whether the assumption reflected in the report of the Management Board and the Supervisory Board was sufficiently explained, taking into account the information provided at the Annual General Meeting.
IV. Reaction of minority shareholders
The minority shareholders welcome this decision. In the following reference is made to a statement on LinkedIn dated September 30, 2025 by Dr. Marc Liebscher, executive board member of SdK Schutzgemeinschaft der Kapitalanleger e.V.:
Knowledge of the financial circumstances enables shareholders to properly assess the resolution on the liability settlements. This is all the more urgent in the present case, as the so-called personal contributions of the affected board members were to be made, at least in part, by waiving salary components whose existence is likely to be doubtful in view of the violations. Furthermore, the personal contributions represent only a negligible fraction of the damage. Without these investigations, management board liability under German stock corporation law remains a theoretical construct that is a mere farce in practice. The shareholders’ right to information is also not at the disposal of any majority whatsoever.
When comparing D&O insurers (so-called coverage comparison), the Federal Court of Justice criticized the lack of transparency in the invitation to the annual general meeting, as the invitation did not state that the coverage comparison provided for a waiver of claims against a large number – up to 170 persons – of current and former members of executive bodies. With this decision, the Federal Court of Justice strengthens the legal position of shareholders, who should be able to determine whether and how they wish to participate in the annual general meeting based solely on the invitation and, in particular, the agenda.
This clear clarification by the Federal Court of Justice and its stance on transparency are to be welcomed. This prevents information about essential provisions of a very extensive and complex contract from being withheld, which an average shareholder would find difficult or impossible to locate. There must be a reason why VW did not disclose this waiver in the coverage settlement in a sufficiently transparent manner, as required by section 124 (2) sentence 3, alternative 4 of the German Stock Corporation Act (AktG), and thus prominently in the agenda item “D&O coverage settlement.” There can be no doubt (any longer) that the release from liability of a large number of current and former members of executive bodies is an essential part of a coverage settlement, if only because such a far-reaching provision was not to be expected in a coverage settlement. It would have been more transparent to embed such a provision in a separate liability settlement with other current and former members of executive bodies.
V. Conclusion and Outlook
The Federal Court of Justice landmark ruling is highly relevant to D&O claims settlement practice in Germany. The following refers to Dennis Fritz’s first-class and fundamental Ph.D. thesis on the topic of executive and board liability settlements between stock corporation and D&O insurance law, which can be found here.
In practice, most disputes between stock corporations and their board members do not end with a ruling by state courts, but with a settlement. Examples include the publicly known cases of Bilfinger, Conergy, Deutsche Bank, Rheinmetall, and Siemens. However, such agreements do not only involve stock corporations and the members of their executive bodies who are subject to claims, who may be members of both the management board and the supervisory board. D&O insurance companies are also regularly involved. A distinction must be made between liability settlements, coverage settlements, and combined settlements. Liability settlements are agreements concluded between stock corporations and their board members. They enable the parties involved to settle disputes arising from the relationship of liability of board members. In the event of conflicts over the existence of a coverage claim under a D&O insurance contract, a coverage settlement may be reached. The aim of a combined settlement is to settle all disputes arising from both the coverage and liability relationships by mutual agreement. Furthermore, significant practical difficulties arise when a large number of insurance companies are involved in a settlement. Settlements involving directors’ and officers’ liability insurance are particularly complex because insurance programs usually consist of several D&O insurers. These insurers cover losses not only in the sense of co-insurance, but also in succession in the form of so-called excess insurers.