The Limited Liability Company under German Law (the GmbH). Dr Alexander Schröder-Frerkes
shareholders may always exercise their voting rights when the shareholders’ meeting votes on a ‘social act’ (Sozialakt). Social acts are measures which relate to internal company relations between the shareholders and the legal transactions relating thereto. Social acts are, in particular, the appointment and removal of managing directors (unless removed for cause, see previous paragraph) and members of the supervisory board, the forfeiture of a share, resolutions on the liquidation of the company, amendments to the articles of association, entering into control or profit and loss pooling agreements, transformation agreements, approval of the transfer of shares etc. This means, in particular, that a shareholder may vote in his or her own favour to become a managing director of the GmbH.
The statutory regulations on the exclusion of the voting right may be freely amended in the articles of association if the reasons for an exclusion are specified in detail. On the other hand, a limitation or even exclusion is only possible to a very limited extent. The details in this regard remain an issue of great contention in jurisprudence and amongst scholars. It is, however, recognised that in the case of discharge, of exemption from a liability and with regard to all measures taken for cause against a shareholder, the exclusion of the voting right is mandatory law which may not be amended by the articles of association.
87. Majority requirements
Unless otherwise stipulated by law or the articles of association, the resolutions in a shareholders’ meeting are passed with a simple majority of the votes cast.48 Votes are given with either a ‘yes’ or a ‘no’. Abstentions from voting are not taken into account. Each one euro of the nominal amount of a share grants one vote.49
A qualified majority of three quarters of the votes cast is required for the passing of important resolutions such as, for example, amendments to the articles of association (including capital increase or decrease),50 the liquidation of the company,51 measures under the Law Regulating the Transformation of Companies (Umwandlungsgesetz), the conclusion of domination or profit and loss transfer agreements, the exclusion of a shareholder, etc.
The articles of association may stipulate other majority requirements. In cases where mandatory law requires (at least) three quarters of the votes cast, the articles may increase, but not decrease, the percentage of the votes required for a resolution to be passed. In all other cases, where a simple majority is sufficient, the articles of association may provide for an increase of the votes cast for the passing of resolutions. It is, however, recognised that it is not possible to reduce the threshold for the passing of resolutions to a level below the minimum requirement for a simple majority.
88. Formal declaration and announcement of resolutions
Under German stock corporation law, a resolution passed by the shareholders’ meeting only becomes valid if it has been formerly declared (Feststellung) and announced (Verkündung).52 The Act on Limited Liability Companies does not require this kind of formal declaration and announcement in order for shareholders’ resolutions to become valid. The articles of association may, however, provide otherwise. If a formal declaration of a resolution is announced at a shareholders’ meeting and accordingly recorded in the minutes, the resolution passed with the content as described in the minutes is binding on the shareholders even if the content of such a declaration deviates from what has actually been resolved. If the declaration deviates from the resolution passed, the resolution must be challenged or reversed by a corresponding reverse resolution in order to render null and void the shareholders’ resolution underlying the declaration.
88a. Passing of resolutions outside of shareholders’ meetings
Shareholders’ resolutions may also be passed outside of a shareholders’ meeting. In this regard, the Act on Limited Liability Companies requires that all shareholders either agree in writing upon the content of the resolution to be passed or agree in writing to a resolution being passed outside the shareholders’ meeting.53 The written form requirement is also deemed satisfied if a vote is cast by way of facsimile or if a circular has been signed by all shareholders.
Typically, the articles of association further define whether and how a shareholders’ resolution may be passed outside of a shareholders’ meeting which takes place in person. In this context, other means of communication for the passing of resolutions are permitted and stipulated, for example, telephone, email or video-conference. A resolution may also be passed by way of circular resolution (Umlaufbeschluss). In some cases, however, the passing of a resolution outside of a shareholders’ meeting is not allowed and a physical meeting of all shareholders or their proxies is required. In particular, this is the case with resolutions to be passed under the Law Regulating the Transformation of Companies or otherwise requiring the participation of a notary public (ie, amendments to the articles of association). Resolutions passed outside of a shareholders’ meeting should subsequently be recorded in the minutes of the meeting.
D. Defective shareholders’ resolutions
89. General
The Act on Limited Liability Companies does not contain any particular provisions regarding defective shareholders’ resolutions and their consequences. It also does not contain regulations on how to challenge such resolutions. In the jurisprudence and amongst scholars this gap has been filled by applying the regulations contained in the Stock Corporation Act54 accordingly and adapting them to suit the particular characteristics of the GmbH where necessary.
Both in a GmbH and in a stock corporation, a distinction can usually be drawn between four different types of resolution: non resolutions or mock resolutions (Nichtbeschlüsse and Scheinbeschlüsse), invalid resolutions, void resolutions and contestable resolutions.
90. Defective shareholder resolutions: non or mock resolutions
These kinds of ‘resolutions’ only appear to be shareholders’ resolutions. In fact they are so obviously defective that they are not even considered resolutions and no one must be bound by them. In other words, ‘resolutions’ of this nature are immediately recognisably invalid. By way of example, the courts have qualified the following situations as constituting resolutions which only have the appearance of being shareholders’ resolutions: the calling of a shareholders’ meeting by a person who has no power to do so (eg, a third party which does not hold any share in the GmbH) and the passing of resolutions by non-shareholders or by shareholders involving the participation of several non-shareholders. If such a non-resolution is passed, it does not have any legal effect and anyone affected by the resolution (ie, also third parties) is entitled to claim that it is invalid without having to file a motion in court.
91. Defective shareholder resolutions: invalid resolutions
Invalid resolutions are resolutions which fail to satisfy one or several conditions which must be fulfilled in order for the resolution to become valid. A condition of this nature could for instance be the necessary consent of certain shareholders or of third parties. Another example in this regard would be when an agent without proper authorisation participates in the resolution and the consent of the represented shareholder has not yet been given. Until this consent is granted, the resolution remains provisionally invalid (schwebend unwirksam). As soon as the requisite condition for the resolution has been satisfied, the resolution becomes valid. If, on the other hand, the unsatisfied condition is not going to be satisfied any more, the resolution becomes ultimately invalid and void.
92. Defective shareholder resolutions: void resolutions
The German stock corporation law sets out certain serious errors which may occur in connection with a shareholders’ resolution, making the resolution null and void.55 It is recognised that a shareholders’ resolution of a GmbH may be null and void under the same circumstances. The grounds set out in the Stock Corporation Act leading to a shareholders’ resolution becoming null and void are mandatory law and may neither be extended nor limited by the articles of association.
First, a shareholders’ resolution is considered void if it has been passed in a meeting which has not been properly