The Limited Liability Company under German Law (the GmbH). Dr Alexander Schröder-Frerkes
a few of the mandatory provisions of the Act on Limited Liability Companies, or for a strong position in the shareholders’ favour, requiring prior consent from the shareholders for each (significant) action the managing directors take on behalf of the company. The flexibility of the Act on Limited Liability Companies has contributed to the GmbH being the most successful legal entity within Germany and, in its comparable legal forms, also in other European countries.
A. Statutory rights and obligations; transferral of rights and powers
72. Statutory rights and obligations of the shareholders’ meeting
The Act on Limited Liability Companies sets out an optional list of powers on the part of the shareholders in the event that the articles of association do not provide otherwise by either limiting this list, adding powers thereto, or transferring certain powers listed herein (to the extent legally permitted) to another corporate body. The powers in question are:
•approval of the annual financial statement and the allocation of the surplus;1
•resolution on the publication of an individual annual financial statement according to international accounting standards and on the approval of the annual statement prepared by the managing directors;2
•approval of the group annual financial statement prepared by the managing directors;3
•calling in unpaid capital contributions;4
•repayment of supplementary contributions;5
•splitting, grouping and redemption of shares;6
•the appointment and removal of managing directors and the discharging thereof (Entlastung);7
•determining the guidelines for assessing and supervising the managing directors;8
•appointment of proxies and authorised signatories (Handlungsbevollmächtigte) for the whole business;9 and
•the enforcement of damage claims to which the company is entitled against the managing directors or the shareholders and relating to the establishment or the management of the company, and the representation of the company in court proceedings which the company conducts against the managing directors.10
In addition, the shareholders’ meeting has the competence to decide upon amendments to the articles of association, including amendments pertaining to the stated share capital,11 and upon the liquidation of the GmbH.12
73. Transferring powers to other corporate bodies
As outlined above, the GmbH is very flexible where the distribution of powers amongst the respective corporate bodies is concerned. This means for instance that it is possible to transfer powers from the shareholders to an optional supervisory board, or that certain shareholders may be granted additional rights compared to other shareholders (subject to the consent of the affected shareholders). If, however, the articles of association transfer certain powers from the shareholders’ meeting to another corporate body (eg, the supervisory board), but this other corporate body is unable to act for whichever reason, the shareholders’ meeting is again responsible for taking the respective measures. In other words, the shareholders’ meeting, as the supreme corporate body, has unwritten subsidiary competence.
The shifting of responsibilities from one corporate body to another is, nevertheless, subject to certain limits. Transferring responsibilities from the shareholders’ meeting to another corporate body cannot result in a complete reversal of the position of the shareholders as the supreme corporate body. The law requires that the shareholders must retain certain core powers. These core powers generally relate to all measures which constitute a substantial intervention with regard to the economic or legal basis of the GmbH, such as for instance the sale of an essential portion of the assets of the company or a substantial change in the business activities of the company. These measures require the consent of the shareholders.13 Aside from this general principle, the Act on Limited Liability Companies mandatorily stipulates that a shareholders’ resolution is required in specific circumstances, these being, inter alia, amendments to the articles of association, including measures to increase or decrease the stated share capital;14 the calling in of additional contributions;15 the liquidation of the company and the appointment and removal of the liquidators;16 and changes in the corporate form (Umwandlung) based on the German Law Regulating the Transformation of Companies (Umwandlungsgesetz – UmwG). In all of these cases, a transferral of competence to another corporate body is not possible, or only under very limited circumstances.
B. Calling of shareholders’ meetings
73a. Passing of resolutions at a shareholders’ meeting
Shareholder resolutions may be passed during formally called shareholders’ meetings or outside of shareholders’ meetings (see Section 88a for details). The following sections outline the formalities which must be observed for a shareholders’ resolution to be passed during a (physical) meeting of the shareholders and when a shareholders’ meeting has to be called.
74. Responsibility for convening the shareholders’ meeting
The managing directors are responsible for convening the shareholders’ meeting.17 If the company has several managing directors, each managing director is individually entitled to call a shareholders’ meeting. In companies which are subject to one of the Co-Determination Acts,18 or which have an optional supervisory board according to the statutory regulations contained in the Act on Limited Liability Companies,19 a shareholders’ meeting may also be called by the supervisory board if the shareholders’ meeting is deemed necessary for the benefit of the company.20 Shareholders holding at least 10% of the stated share capital may request the managing directors to call a shareholders’ meeting.21 If the managing directors refuse to call a shareholders’ meeting upon such a request, the (minority) shareholders may call the shareholders’ meeting themselves by stating the purpose and the agenda of the meeting.22
The right to call a meeting of the shareholders may also be transferred to another corporate body by the articles of association. Typically, the right to call a shareholders’ meeting is assigned to the supervisory board or another advisory board. It may, however, also be transferred to a single shareholder or even a third person. However, according to the prevailing opinion, the right of shareholders holding at least 10% of the share capital to call a shareholders’ meeting in the event that the managing directors refuse to do so may not be excluded by the articles of association.
75. Reasons for convening a shareholders’ meeting
A shareholders’ meeting may be convened by the persons named in Section 74 for any reasonable cause which necessitates consultation between the shareholders or a subsequent resolution. It is not a prerequisite that the calling of the shareholders’ meeting is absolutely necessary or in the best interests of the GmbH. There must, however, be grounds of some kind for a meeting. As regards how often the meetings are convened, the number of shareholders and the distance from the place where the meeting is to take place must be taken into consideration. The meetings usually take place at the place of business of the GmbH. However, the articles or the shareholders may provide for convening at any other place they deem appropriate.
76. Reasons for convening the shareholders’ meeting: explicitly defined cases
The Act on Limited Liability Companies stipulates that a shareholders’ meeting must be convened in the cases explicitly defined therein.23 Explicitly defined cases are those stipulated in the articles of association or those which apply when it is necessary to pass a resolution in connection with any of the powers accorded as per the optional