Notes to the Consolidated Financial Statements of the Covestro Group – Other Information

28. Related Companies and Persons

28.1 Related Companies

Related entities as defined in IAS 24 (Related Party Disclosures) are those legal entities that are able to exert at least significant influence on Covestro AG and its subsidiaries or over which Covestro AG or its subsidiaries exercise control or have at least a significant influence, or which are controlled by a related person or a close family member of such a person. These include nonconsolidated subsidiaries, joint ventures and associated companies, post-employment benefit plans, and other related parties.

Receivables from pension plans as of December 31, 2023, amounting to €63 million (previous year: €101 million) resulted from initial funding loans granted. Covestro AG has agreed to provide Bayer-Pensionskasse VVaG, Leverkusen (Germany), with an interest-bearing initial funding loan of up to €208 million and Rheinische Pensionskasse VVaG, Leverkusen (Germany), with an interest-bearing initial funding loan of up to €11 million, both at their request. The pension funds are entitled to draw down amounts necessary to meet their regulatory solvency requirements at any time up to the amounts disclosed. The outstanding receivables are subject to a five-year interest rate adjustment mechanism. In April 2023, Bayer-Pensionskasse VVaG notified Covestro of the partial repayment in the amount of €39 million of the initial funding loan drawn down in December 2022. Following the repayment, the loan commitments to the pension funds increased by €39 million to €156 million as of December 31, 2023 (previous year: €117 million). The loan commitments to the pension funds are recognized as other financial obligations.

• See note 25 “Contingent Liabilities and Other Financial Commitments.”

The goods and services received from associated companies accounted for using the equity method mainly resulted from the ongoing business operations with PO JV, LP, Houston, Texas (United States). Covestro benefits from fixed long-term supply quotas/volumes of propylene oxide (PO) from this company’s production.

• See note 14 “Investments Accounted for Using the Equity Method.”

Receivables from and payables to related companies mainly relate to leases and financing arrangements, supply and service relationships, and other transactions. No impairment losses were recognized on receivables from related companies in the reporting year or in the previous year.

No services were purchased from other related parties in the form of consulting services for Supervisory Board and Works Council elections in the 2023 reporting year (previous year: €147 thousand). As in the previous year, there were no liabilities in relation to these services as of December 31.

28.2  Related Persons

Related persons as defined in IAS 24 include the corporate officers of Covestro AG, who are the members of the Board of Management and Supervisory Board.

Compensation of the Corporate Officers

The compensation for corporate officers of Covestro AG in fiscal 2023 amounted to €13,944 thousand (previous year: €8,447 thousand), including the compensation of the Supervisory Board amounting to €2,515 thousand (previous year: €2,454 thousand).

This compensation is shown below:

Aggregate compensation of the members of the Board of Management according to the German Commercial Code (HGB) amounted to €8,430 thousand (previous year: €7,115 thousand).

Since 2016, the members of the Board of Management have been entitled to participate in the Prisma long-term share-based compensation program, as long as they are employed by the Covestro Group, and acquire for their own account and hold an individually defined number of Covestro shares as specified by the guidelines. The fair value of the long-term share-based compensation (Prisma) granted to the Board of Management in fiscal 2023 was €3,280 thousand (previous year: €3,743 thousand).

Provisions of €11,706 thousand (previous year only for long-term variable cash compensation: €5,626 thousand) were recognized for short-term and long-term variable cash compensation for the members of the Board of Management serving during fiscal 2023. At the end of the year, the present value of the defined benefit pension obligations for the current members of the Board of Management was €6,499 thousand (previous year: €9,180 thousand). As in the previous year, no provisions were recognized for long-term share-based cash compensation for former members of the Board of Management. The present value of the defined benefit pension obligations for former members of the Board of Management was €12,060 thousand (previous year: €5,447 thousand).

Supervisory Board compensation is exclusively non-performance-related. In addition to their compensation as members of the Supervisory Board, those employee representatives who are employees of Covestro Group companies receive compensation unrelated to their service on the Supervisory Board. The total amount of such compensation was €555 thousand (previous year: €1,253 thousand). Pension obligations for employee representatives on the Supervisory Board amounted to €2,229 thousand (previous year: €1,984 thousand). Pension obligations for employee representatives who had left the Supervisory Board and the company totaled €1,137 thousand (previous year: €1,623 thousand).

As in the previous year, the company did not grant any advances or loans to members of the Board of Management or the Supervisory Board in the fiscal year 2023.

• For further information, please refer to the Compensation Report.