The organisational structure of companies serves as one of the central pillars of corporate law. The distribution of leadership and supervisory roles, the allocation of responsibilities, and the institutionalisation of control mechanisms are all dependent on it. While German corporate law follows a two-tier system, which establishes a strict personal and functional separation between management and supervision, Spanish corporate law is predominately based on a two-tier system, in which said roles are concentrated in a single administrative body. This structural difference takes on particular practical relevance, especially in the context of major corporate crises.
The two-tier system is characterised by the existence of separate bodies for the administration and supervision of a company. Management is the responsibility of either the Executive Board of Directors (Vorstand), as in the case of a public limited company (Aktiengesellschaft, hereinafter “AG”), or the management (Geschäftsführung), as in the case of a limited liability company (Gesellschaft mit beschränkter Haftung, hereinafter GmbH). Supervision is assigned to an independent body, the Supervisory Board (Aufsichtsrat). The purpose of this systematic separation is to ensure that management bodies do not control their own actions, but are subject to external and independent oversight. In this context, the Supervisory Board acts as a control and mediation body, often described as “the man in the middle,” operating between the management body and the partners or shareholders.
The setup of this system is particularly evident in the case of the GmbH. In general, the GmbH is represented by its managers, while supervision is normally exercised through the Board of Partners. The establishment of an Advisory Board is not compulsory in a GmbH, except in two cases: on one hand, when the provisions of the One-Third Participation Act (Drittelbeteiligungsgesetz, DrittelbG) or the Co-Determination Act (Mitbestimmungsgesetz, MitbestG) make its creation mandatory; on the other hand, when the statutes of the GmbH provide for the voluntary establishment of a Supervisory Board, referred to as an Optional Supervisory Board. The creation of the latter requires an excess statutory provision, known as an opening clause, which allows the partners to put together a Supervisory Board by simple agreement of the Board of Partners.
According to article 1 (hereinafter: §), section 1, no.4 of the DrittelbG, the German employment and corporate law that regulates the representation and role of employees on the Supervisory Board, a Supervisory Board must be established in a limited company that typically employs more than 500 employees. In this case, the make-up of the Supervisory Board depends on the number of workers employed in the company. The DrittelbG stipulates that a third of the members on the Supervisory Board are appointed by the employees, while the other members are named by the partners. The Supervisory Board must have a minimum of three members. If the threshold of 500 employees is not reached and an Optional Supervisory Board as foreseen in the statutes does not exist, the control of managers belongs exclusively to the Board of Partners.
When the GmbH has more than 2,000 employees, the Co-Determination Act (MitbestG) applies. GmbHs are then obliged to establish a Supervisory Board with joint composition. Half of the members of the Supervisory Board are appointed by the employees, and the other half by the partners. The size of the Supervisory Board is determined according to the number of employees: twelve members in companies with less than 10,000 employees, sixteen members in companies with less than 20,000 employees, and twenty members in companies with more than 20,000 workers.
In principle, the roles and duties of the Supervisory Board in a GmbH correspond to those of a Supervisory Board governed by the German Stock Corporation Act (Aktiengesetz, hereinafter AktG). This depends on: § 1, section 1, n.3 of the DrittelbG; on § 25, section 1, n.3 of the MitbestG; and on § 25, section 1 of the GmbH Act (GmbHG), which declare the essential provisions of the AktG to be applicable.
Its main roles include:
i. The oversight of managers, which involves both retrospective control aimed at detecting errors and prospective control aimed at preventing harmful deviations. §§ 90 and 111 of the AktG are particularly relevant in this regard.
ii. Likewise, the Supervisory Board has the power to bring actions for damages against managers, to establish consent reserves in accordance with § 111, section 4 of the AktG, to approve internal regulations, and to appoint a Chair of the Supervisory Board from among its members.
iii. The members of the Supervisory Board must perform their roles with the diligence of a loyal and sensible administrator. They are subject to a confidentiality agreement, a broad duty of loyalty, and they must always act in the company’s best interests.
iv. Conflicts of interest must be disclosed and managed appropriately. For example, through abstention in discussions and votes related to the concerned matters.
The two-tier system is even more pronounced in public limited companies (AG). Together with the Executive Board of Directors (Vorstand) and the General Meeting, the Supervisory Board constitutes the third central body of the limited company. While the legislator grants the Executive Board of Directors a very wide margin of business discretion in accordance with § 76 of the AktG, the influence of shareholders is deliberately limited. They do not elect the Executive Board of Directors nor can they disband it directly.
In order to protect the financial interests of shareholders, the AktG makes it mandatory to establish a Supervisory Board. This is relevant for the appointment and removal of members of the Executive Board of Directors and oversees its activity through regular meetings, that must take place at least once every six months and, for listed companies, at least twice every six months. The Supervisory Board’s reservation of consent constitutes a preventative instrument for supervision in accordance with § 111 of the AktG.
At its own discretion, the Supervisory Board decides on the exercise of liability actions against members of the Executive Board of Directors, supervises business risks, accompanies the strategic development of the company, and participates in defining corporate governance principles, paying particular attention to sustainable business development.
An illustrative and practically relevant example of this system is a major industrial incident, like the so-called Volkswagen diesel scandal (Dieselgate) of 2015. In this case, it became public that Volkswagen had installed illegal deactivation devices in millions of vehicles in order to manipulate emissions tests and comply with legal limits only in testing conditions, but not in real driving.
In this case, the Executive Board of Directors was responsible for the operational execution of technical decisions, whilst the Supervisory Board was in charge of overseeing the technical decisions and identifying risks early on. The question over whether reservations of consent were appropriately configured, whether the oversight of the managers had been carried out correctly, and whether it was appropriate to bring liability actions about against members of the Executive Board of Directors, all highlight the role of the Supervisory Board as a body of both retrospective and prospective control.
From a legal standpoint, the case ended up being particularly relevant because it brought a real example of how the two-tier system functions in a listed company to the fore:
- Operational responsibility lay with the Executive Board of Directors of Volkswagen AG (§ 76 AktG)
- The Supervisory Board of Volkswagen AG was responsible for oversight, risk management, strategic support, as well as reviewing and, where appropriate, taking action against members of the Executive Board of Directors (§ 111 AktG)
As a result, intense debate arose regarding the shortcomings in oversight, reservations of consent, corporate governance structures, and the civil liability of the members of the Executive Board of Directors and the Supervisory Board.
Additionally, co-operatives (Genossenschaften) follow the two-tier system in principle. They must have an Executive Board of Directors and a Supervisory Board. Only in co-operatives with no more than 20 members may the Supervisory Board be foregone by statutory provision. In this case, the General Meeting assumes the rights and duties of the Supervisory Board, unless otherwise provided for by law.
The two-tier German system sits opposite the Spanish single-tier system. Spain has a corporate governance model where there is no strict personal separation between a management body and an independent supervisory body. The administration and representation of Spanish capital companies, in particular the Public Limited Company (PLC) (Sociedad Anónima), comparable to the German AG, and the Private Limited Company (Ltd) (Sociedad Limitada), comparable to the GmbH, correspond either to a single administrative body, the Board of Directors, or one of the various administrators. Members of the Board of Directors focus on both management and control functions, without any institutionally independent oversight.
To address demanding administrative tasks, Spanish law provides for the position of Board Secretary. In accordance with article 529g of the Spanish Companies Act (hereinafter LSC), the Board of Directors appoints a secretary and, in this case, one or more deputy secretaries. However, a distinction must be made between the general provisions of company law and the special framework for listed companies. The fundamental regulations relating to administrative bodies are found in the LSC, and are applicable to non-listed Public Limited Companies (Sociedades Anónimas no cotizadas) and Private Limited Companies (Sociedades de Responsibilidad Limitada). The provisions of article 529g of the LSC are applied exclusively to listed Public Companies (Sociedades Anónimas) and contains specific corporate governance requirements concerning the make-up, functioning, and internal organisation of the Board of Directors. Although these provisions do not make for a structural separation of management and oversight in the same sense as the two-tier system, they represent a functional reinforcement of control mechanisms within a single body. The secretary may be a member of the Board of Directors and in which case, has, as well as their specific roles, the same corporate liability to third parties as any other board member. However, in practice, this role tends to fall to lawyers or people that are not members of the Board, due to the specialist nature of corporate housekeeping,
From the perspective of Spanish law, the single-tier system offers the advantage of better organisational flexibility and a clearer allocation of responsibilities. Decision-making processes can be streamlined by not requiring mandatory coordination between separate bodies. At the same time, internal control is guaranteed less through institutional separation and more through board members’ accountability obligations, external audits, and capital market transparency requirements, particularly for listed companies. Therefore, the efficiency of control depends more on integrity, qualifications and independence of individual board members than on a structural separation of bodies.
In the context of modern recommendations for corporate governance, even in the Spanish single-tier system, separation between the position of CEO (consejero delegado) and Chairman (presidente del Consejo) is increasingly promoted or practiced, in order to reinforce control. However, the structural unity of the administrative body is maintained. An exception is the European Company (Sociedad Europea, hereinafter “SE”), which is a form of business aimed at facilitating cross-border activities within the European Union and the European Economic Area, particularly the transfers of registered offices between member states. SEs set up in Spain can opt for either the two-tier or single-tier administrative system. If they choose the two-tier system, the Supervisory Board essentially corresponds to that of a public limited company, supplemented by European rules on participation and co-management.
From this comparative analysis, it follows that, when setting up companies in Germany, the choice of legal form and management system is of fundamental importance. In particular, the number of employees determines the application of mandatory co-management rules and the obligation to establish a Supervisory Board. The two-tier system offers a high level of transparency, control and legal security, although it involves greater organisational demands. Anybody who wishes to set up a company in Germany must bear these structures in mind from the get-go to avoid both liability risks and weaknesses in corporate governance.
Regardless of the formal structure of corporate bodies, their respective statutes shape stakeholders’ expectations regarding the relationship between the company and its employees. In the German context, the formal involvement of employee representatives at an oversight level ensures that communication between management and employees is not only timely, but also non-confrontational. Its goal is to foster a permanent relationship characterised by regular information sharing, mutual understanding of the financial situation of the company, and better foresight of company decisions.
In the Spanish setting, the relationship between companies and employees is characterised more by situational interactions. Given that employees participate in neither corporate decision making nor oversight processes, exchanges between management and staff usually only arise in relation to specific labour law measures or economic adjustments. Therefore, the relationship is characterised less by continued coordination and more by concrete negotiations. This structure influences mutual perception: corporate decisions are more often perceived as externally imposed, while employees’ reactions are principally underpinned by employment law or collective agreements.
The analysis reveals that the differences between both systems are less evident in individual legal norms than in the long-term configuration of the relationship between companies and their employees. While the German model ensures stability through a formalised proximity based on regular interaction, the relationship in the Spanish system tends to be more functional to events. These logical differences influence communication, trust, and the dynamic of conflicts, without necessarily favouring the superiority of one model over the other. Rather, the comparison demonstrated that corporate constitutions invariably create social orders, the effects of which extend further than the immediate proximity of the organisational structure.
The comparison reveals that the single and two-tier systems each adopt different structural approaches for corporate governance. While German law institutionally enshrines the separation of management and oversight, Spanish law combines these roles in a single administrative body. Both models depend on their own mechanisms to guarantee suitable corporate governance, each one adapting to different legal, economic, and cultural contexts. For companies and investors engaged in international activity, understanding these differences is crucial because they influence the organisational structure, decision-making processes, and the allocation of responsibilities.
Greta Wessel
Vilá Abogados
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11th of February 2026
