The Limited Liability Company under German Law (the GmbH). Dr Alexander Schröder-Frerkes
by the articles of association.
46. Individual rights: the right to withdraw for cause
Even though this right is not explicitly regulated by statutory law, a shareholder may withdraw from the company for cause (wichtiger Grund). The shareholder must issue a declaration vis-à-vis the company that he or she wishes to surrender his or her shareholding. For further details regarding withdrawal, see Section 190.
47. Individual rights: action for the nullity of the company
A shareholder may file an action for the nullity of the company (Nichtigkeitsklage) as a whole with the commercial register if the articles of association do not contain regulations regarding the amount of the share capital and of the purpose of the company.17 The motion must be filed against the company and, in the event of success, the company is declared null and void. It will then be deleted from the commercial register. According to prevailing opinion, the motion is not subject to any time limits with regard to its submission. If, however, the time period between the knowledge of the defect present in the articles and the filing of the motion is too long, the right to file the motion may be forfeited. Aside from the shareholders, managing directors and members of the supervisory board, if applicable, are also entitled to file a motion for nullity.
48. Individual rights: the right to liquidation profits
In the event that a GmbH is liquidated, each shareholder is entitled to proportionately participate in the liquidation profits according to his or her shareholding. The articles of association may, however, set forth other regulations for the distribution of the liquidation profits.18 For further details on the rights of a shareholder in connection with the liquidation process, see Section 263.
49. Minority rights
Minority shareholders also have specific individual rights, such as the right to call a shareholders’ meeting and to initiate other specific actions explained in the following sections.
50. Minority rights: the right to call a shareholders’ meeting
Usually, the shareholders’ meeting is convened by the managing director(s).19 Furthermore, shareholders holding at least 10% of the share capital are entitled to request the calling of a shareholders’ meeting, stating the purpose of and the reasons for the meeting.20 If their request is denied, the shareholders may call the meeting themselves.21 Additionally, shareholders holding at least 10% of the share capital always have the right to demand that certain items be put on the agenda of the shareholders’ meeting.22 For further details see Section 73a et seq.
51. Minority rights: action for the dissolution of the company
A GmbH may be dissolved by court decision if the purpose of the company can no longer be achieved or on other important grounds relating to the situation of the company.23 In the latter case, the shareholders must agree that it is unacceptable for them to continue operating the company. The claim for dissolution may be filed by shareholders who hold at least 10% of the share capital.24 The claim must be filed against the company itself.25 It is the last resort (ultima ratio) as a means of solving problems within the company and may only be filed if all other solutions for solving the problems between the shareholders and within the company (eg, exclusion of a shareholder) prove unsuccessful.
52. Minority rights: the right to nominate and revoke liquidators
Once a resolution to liquidate the company has been passed or a court has issued an order to this effect, the liquidation (or winding up) process begins. The liquidation process is pursued by the liquidators of the company, these being, in the absence of any provisions to the contrary, its managing directors/managing director.26 However, based on a request submitted by shareholders holding at least 10% of the share capital, the court may appoint another person as a liquidator if there is cause for the removal of the designated liquidator and the nomination of a new one.27
A liquidator may be removed by the court in the same way.28 For further details on the liquidation procedure, see Section 263 et seq.
53. Rights to be exercised collectively by the shareholders as a whole
Certain rights require the collective action of the shareholders as a whole, such as rights involving the shareholders’ directives for and relationship with the management, as will be discussed in the following sections.
54. Rights to be exercised collectively by the shareholders as a whole: instructing the managing directors
The shareholders may give instructions to the managing directors regarding how to run the company.29 Such instructions may be of a general nature (guidelines) relating to certain types of business or may be issued specifically in connection with a particular measure. Instructions of a general nature may typically be found in the articles, by-laws or in the service agreement pertaining to the managing directors. Individual instructions for specific operational situations are usually based on a shareholders’ resolution. In practice, the articles often stipulate a range of measures for which the prior consent of the shareholders’ meeting is required. At the shareholders’ meeting, the majority requirements as prescribed by law or within the articles is sufficient in this regard. The shareholders thus maintain control over the activities of the managing directors and the general business decisions of the company. The managing directors must respect these guidelines and instructions when managing and running the company. If, however, the guidelines and instructions constitute a clear violation of applicable law and/or may expose the directors to personal liability, the directors have the right to object to them.
In exception to the foregoing, it is also possible to grant instruction rights to an individual or certain shareholders or a supervisory/advisory board within the articles of association.
55. Rights to be exercised collectively by the shareholders as a whole: the right to supervise the management
The shareholders of a GmbH are entitled to establish rules for the supervision of the managing directors.30 Aside from stipulating a range of operational procedures for which the prior consent of the shareholders is required as outlined in the previous section, the shareholders’ meeting as the supreme corporate body has an all-encompassing right of supervision vis-à-vis the managing directors. In other words, the shareholders may establish any mechanisms which are not disproportionate or contrary to the spirit of the GmbHG in order to supervise the managing directors in fulfilling their tasks. Typical measures in this respect would be the establishment of regular reporting obligations on the part of the managing directors towards the shareholders. In this regard the shareholders can also engage a third-party adviser to examine the books and records of the company. The supervision of the managing directors may also be transferred to another corporate body, such as, for example, the supervisory board or a shareholders’ committee, which may be created for this purpose.