The Limited Liability Company under German Law (the GmbH). Dr Alexander Schröder-Frerkes
see Section 72). In larger GmbHs with more than one shareholder, at least one shareholders’ meeting per year is good practice, as is the case in a stock corporation.
77. Reasons for convening a shareholders’ meeting: interests of the company
A shareholders’ meeting must be convened by the competent corporate body if such a meeting appears necessary in terms of the interests of the company.24 Such a necessity is deemed present if the GmbH is in danger of suffering significant damage without the shareholders’ meeting or if the managing directors must reasonably assume that the shareholders of the company wish to pass a resolution prior to the managing directors entering into a risky or costly transaction. Generally, a shareholders’ meeting appears to be in the interest of a company if the managing directors or the competent corporate body must have reasonable grounds to believe that the shareholders would not allow the implementation of the respective matter without their prior consent. Whether this is the case depends on various factors such as the size of the company compared with the risk associated with the business in question, and the personal relationship between the managing directors and the shareholders.
78. Reasons for convening a shareholders’ meeting: loss of half of the stated share capital
A shareholders’ meeting must be convened mandatorily if the annual balance sheet or a balance sheet drawn up during the course of the business year shows that half of the stated share capital of the GmbH has been lost.25 An obligation to call a shareholders’ meeting also arises if, based on their reasonable judgement, the managing directors have grounds to believe that half of the share capital has been lost. If the managing directors assume that this is the case, they may be obliged to draw up a balance sheet to evaluate whether or not their assumption is correct, unless it is obvious that this is the case.
79. Reasons for convening a shareholders’ meeting: request submitted by minority shareholders
Minority shareholders holding at least 10% of the stated share capital may also call a shareholders’ meeting if the managing directors refuse to do so upon their prior request.26 When convening the shareholders’ meeting, the minority shareholders must state the facts which entitle them to call the shareholders’ meeting and communicate the topics of such a meeting.
80. Formal requirements for calling a shareholders’ meeting
According to the applicable law in this regard, shareholders’ meetings must be convened by way of registered letter to all shareholders. The invitation must be issued at least one week prior to the date on which the meeting is due to take place.27 The invitation must be sent to all shareholders at their last known address.
The invitation must set forth the place and date, including the exact hour, where and when the shareholders’ meeting is to take place. The meeting date and time and the venue must be commensurate to and customary for the type and size of the company, wherein the interests of the shareholders must be taken into account, in particular the distance of the shareholders from the venue of the shareholders’ meeting and conflicting appointments. Usually, the articles stipulate the place where meetings are held (eg, the place of business of the GmbH). Additionally, the invitation must set forth the purpose of the shareholders’ meeting, in particular the issues to be discussed among the shareholders.28 The shareholders must be given sufficient time to prepare themselves for the discussion and to make up their mind as to how they wish to vote on the respective topics. The topics may be amended and additional topics may be set forth on the agenda of the shareholders’ meeting at the latest three days prior to it taking place.29
These formal requirements may be freely amended in the articles of association. The articles may stipulate more or less stringent requirements as regards the convening of the shareholders’ meeting. In practice, notice may not only be given by registered letter but also via facsimile or other means of communication (eg, email). The notice period is usually more than one week (typically two weeks) for ordinary meetings and a shorter notice period applies in the case of extraordinary meetings.
In the event of a violation of the provisions prescribed by statutory law or set forth in the articles of association regarding the convening of a shareholders’ meeting, the resulting shareholders’ resolution may either be contestable or void. However, if all the shareholders of the company are present at the shareholders’ meeting, either personally or by means of sending an agent (Universalversammlung), if none of the shareholders issues an objection regarding the mistakes relating to the invitation, and if the shareholders pass resolutions on the topics of the agenda, the corresponding shareholders’ resolutions are considered valid.30 In other words, if claims are not asserted regarding the formal mistakes associated with the invitation and if all shareholders participate in the voting, the errors in connection with the invitation are considered remedied.
81. Formal requirements for a shareholders’ meeting
The Act on Limited Liability Companies does not establish many formal requirements with regard to the process of obtaining a shareholders’ resolution, which means that most issues must be addressed in the articles.
Each shareholder has an inalienable right to actively and passively participate in the shareholders’ meeting. This also applies in the event that a shareholder is excluded from voting on a particular topic.31 Additionally, a shareholder may be represented by a proxy based on a written power of attorney.32 Third parties are only entitled to participate in the shareholders’ meeting if the shareholders explicitly consent to this. Managing directors themselves have no intrinsic right to participate in a shareholders’ meeting. They are, however, obliged to appear at the shareholders’ meeting upon the request of the shareholders, which is usually the case. If a mandatory supervisory board exists, the members of the supervisory board are entitled to participate in the shareholders’ meeting.33 In the case of an optional supervisory board, the participation right of the respective members must be established by the articles of association.
Even though not required by law, it is recommended that the articles of association of a multi-shareholder GmbH determine that each shareholders’ meeting has a chairperson and define how the chairperson is to be nominated (either by way of resolution, by way of function (eg, chair of supervisory board) or by way of other criteria (eg, age, participation in the GmbH or another way)). The chairperson is responsible for directing the shareholders’ meeting. In particular, he or she needs to ensure that all of the issues on the agenda are properly discussed and that resolutions are passed in accordance with the applicable laws.
Unlike the Stock Corporation Act, the Act on Limited Liability Companies does not generally require that minutes are taken at shareholders’ meetings unless this is mandatorily prescribed by law. In particular, this is the case when the articles of association are amended or when resolutions are passed regarding the transformation of the company’s corporate structure.34 Apart from these cases, where a notarial deed must be issued, the taking of minutes at a shareholders’ meeting is nevertheless usual and standard practice. The appropriate content of these minutes is often specified in the articles of association, and usually comprises the place, time and date of the meeting, when it begins and ends, confirmation that the meeting has been properly convened, the persons present, the petitions put forward by the shareholders, the topics to be resolved, the manner and results of the voting on the respective topics and the signature of the chairperson. The articles may, however, also stipulate other formal details which must be recorded.
If one shareholder holds all the shares in the company, mandatory law requires that he or she must approve and sign the minutes immediately after passing a resolution.35
82. Classes of voting rights
According to statutory law, each euro of the nominal amount of a share grants one vote at the shareholders’ meeting.36 The articles of association may provide for a different distribution of voting rights amongst the shareholders. It is possible to exclude or reduce