Читать книгу The Limited Liability Company under German Law (the GmbH) - Dr Alexander Schröder-Frerkes - Страница 9

IV. Shareholders

A. Shareholder rights

37. General

The rights of the shareholders in a GmbH may be divided into three categories: individual rights, minority rights, and the collective rights of all of the shareholders as a whole. The most important rights represented within these groups shall be briefly described in the following sections.

38. Individual rights

Each shareholder has certain individual rights, ranging from the right to participate in shareholders’ meetings and information rights to rights on profits, to name some of the most important of these here. The following subsections describe specific individual rights.

39. Individual rights: the right to participate in shareholders’ meetings

Every shareholder in a GmbH is entitled to actively and passively participate in each shareholders’ meeting. The active participation right comprises the right to speak and to vote at the shareholders’ meeting (see Section 40). The passive participation rights comprise the right to appear at the shareholders’ meeting and to receive all the information provided at or prior to the shareholders’ meeting. The participation right is generally an irrevocable right. A (partial) exclusion of a shareholder from participation in the shareholders’ meeting is only possible under very rare and exceptional circumstances, that is, when the participation of a shareholder at a shareholders’ meeting is unacceptable to the other shareholders. This may be the case if a participating shareholder might use the information he or she receives in the course of the shareholders’ meeting for his or her own purposes or against the company (for instance a competitor who has managed to become a shareholder of the GmbH).

A shareholder does not necessarily have to appear at a shareholders’ meeting in person. Unless the articles of association stipulate otherwise, shareholders may send a proxy or an agent to represent them at the shareholders’ meeting. In such cases, a written power of attorney is required and deemed sufficient.¹ The articles may, however, set out further requirements regarding the representative and allow only certain persons, for example, other shareholders or persons practising certain professions (lawyers, tax advisers etc) to act as proxies.

40. Individual rights: the right to vote and restrictions upon the right to vote

Generally, all shareholders in a GmbH are entitled to exercise their voting rights during the shareholders’ meeting at their sole discretion. Some restrictions on the right to exercise voting rights, however, apply by virtue of the duty of loyalty towards the company and the other shareholders. This duty may sometimes result in the shareholders being obliged to vote in a certain way in order not to harm the interests of the company or the other shareholders (for details on the duty of loyalty see Section 64).

According to statutory law, each euro of a share grants the right to cast one vote at the shareholders’ meeting.² The articles of association may, however, contain provisions which amend this rule entirely at the discretion of the shareholders. The articles may, for example, stipulate that the voting rights of certain shareholders are excluded, that the voting rights of a shareholder are limited to a certain number of votes (Höchststimmrecht) or may increase the number of votes of a shareholder to a level beyond the nominal amount for his or her share (Mehrfachstimmrecht). Since these regulations affect the voting rights of the other shareholders, they may only be granted with the consent of the affected shareholders.

The right to vote is exercised by the shareholder him- or herself, but may also be exercised by proxies based on a power of attorney. This power of attorney must be submitted in writing. The articles of association may set out further requirements for exercising the right to vote on behalf of a shareholder. These requirements may be of a formal nature (eg, the agent must be nominated sufficiently in advance) or of a material nature (eg, only certain qualified persons are acceptable as agents, like lawyers, tax advisers etc). The right to vote at a shareholders’ meeting cannot be legally separated from the share it relates to. A permanent transfer of the voting rights is only possible if the share itself is transferred. This also applies to any other administrative rights (such as information rights) in the company. Nevertheless, shareholders may enter into agreements either with their fellow shareholders or with third parties which oblige them to exercise their voting rights in a certain way (Stimmbindungsvertrag). Several or more shareholders may agree to exercise their voting rights collectively and in a certain way by creating a voting pool (Stimmrechtskonsortium). The scope of such voting arrangements is prescribed by accepted principles of morality (gute Sitten)³ and statutory prohibitions (gesetzliche Verbote).⁴ Also, the voting rights may of course not be exercised contrary to the fiduciary duties of a shareholder towards the company.

Finally, shareholders are excluded by law from exercising their voting rights if by so doing they end up adjuducating over their own affairs. Cases such as these constitute an evident conflict of interests between the shareholder and the company. Conflicts of this nature would occur if the shareholder were to be disencumbered in some way by the resolution or discharged from an obligation, if the company were to resolve on entering into an agreement with the shareholder, or if the company were to resolve on initiating or settling a legal dispute with a shareholder.⁵

41. Individual rights: information rights

At the request of a shareholder, the managing directors must: (i) provide information on the company’s business affairs; and (ii) allow the shareholder to inspect the books and records of the company, in each case without undue delay.⁶ As opposed to the case where a stock corporation is concerned, such a right to information may be exercised at any time and not only in or in connection with a shareholders’ meeting.⁷ The ‘affairs of the company’ constitute the subject matter of the information rights. This term is to be interpreted broadly. In basic terms, there should not be any secrets between the company and its shareholders. The affairs of the company encompass all facts relating to the assets, the management, the business strategy and the calculation and distribution of profits, as well as all other legal and economic relationships within the company or towards third parties. The right to information also extends to the affairs of subsidiaries and affiliated companies. If necessary, the management of the GmbH must collect the information relating to the subsidiary or affiliated company. The right to information allows the shareholders to be fully informed with regard to their investment and provides them with the factual foundation on which to base the exercising of their voting rights. The shareholder is entitled to commission a qualified professional to review the books and records of the company. It is highly disputed whether or not the articles may stipulate that the right to inspect the books and records may only be exercised by a qualified professional nominated by the shareholder. This position is rather difficult to uphold in a GmbH with just a few shareholders.

The managing directors may, however, refuse to provide information and to agree to the inspection of the books if they suspect that the shareholder will use the information provided for purposes which are not related or detrimental to the company (in particular pursue competition), thereby giving rise to a disadvantage for the company or an affiliated company. The refusal requires a shareholders’ resolution to this effect.⁸ Therefore, if the managing directors are of the opinion that a shareholder is not entitled to access information of the GmbH, they must request that a resolution be passed by the shareholders. If the shareholders’ meeting denies such a right to information, the shareholder requesting the information in question may seek a decision from a competent court as to whether his or her information right exists.⁹ Since the right to information is mandatory by law, the shareholders may not exclude such a right from the articles of association. However, the shareholders are entitled to set out certain formal requirements with regard to the exercising of the right to information (eg, solely by written request, the dates and times when the books may be inspected, such as during normal business hours, etc) as long as the right to information remains unaffected in terms of its essential core.

42. Individual rights: right to profits

According to statutory law, the shareholders are entitled to receive the annual profits plus any profit carried forward minus any losses carried forward, unless the articles of association or a shareholders’ resolution stipulate otherwise.¹⁰ The profits are distributed among the shareholders according to their shareholdings in the company. However, the articles of association may stipulate another arrangement for the distribution of the profits.¹¹ The articles may also stipulate, or the shareholders may resolve, that the company shall not make or distribute any profits at all. This is usually the case in non-profit or profitless companies. Profitless companies are typically those which only provide services for other (group) companies or their member companies and thus are only compensated for their ‘out-of-pocket’ expenses (subject to observance of the arm’s-length principle). In companies which make profit and have minority shareholders, a resolution not to distribute any profits at all but to keep them within the company may stand in conflict with the duty of loyalty of the majority shareholder.

43. Individual rights: subscription right in the event of a capital increase

Although the Act on Limited Liability Companies does not provide an explicit provision in this regard, it is generally recognised that in the event of an increase in the share capital of a GmbH, all shareholders are entitled to receive the newly created shares in relation to their current shareholding in the company. Thus the shareholders may maintain the respective voting and profit share entitlements in the company to which they were entitled prior to the capital increase. These principles have been established by the courts in line with German stock corporation law.¹² In certain circumstances, however, the subscription right of one or even all shareholders may be excluded if there is a predominant interest on the part of the company to the effect that a new shareholder joining the company should receive the new shares. A predominant interest of this kind may for instance exist when a contribution in kind is necessary for the company and neither the company nor the shareholders are able to provide this (eg, a company or business as a whole). An exclusion of shareholders has also been found to be legitimate if the GmbH needs to cooperate with an external partner or if the company is in need of new funds which cannot be raised by the current shareholders.

44. Individual rights: the right to challenge shareholders’ resolutions

Each shareholder is entitled to challenge a shareholders’ resolution before an arbitration court by filing a claim either that the resolution is null and void or that it is contestable. With regard to the right to contest a shareholders’ resolution, it is not necessary that the shareholder claiming the invalidity of the resolution has participated in the shareholders’ meeting. The claim must be directed against the company itself and not the other shareholders.

A shareholders’ resolution may first be challenged by an action for nullity (Nichtigkeitsklage) if the resolution entails a severe violation of applicable law. Potential grounds which may constitute a severe violation of this nature could include the fact that the shareholders’ meeting has not been properly convened, a resolution has not been notarised although this is required by law, a resolution has been passed which does not comply with the nature of a GmbH, a resolution has been passed which violates provisions which exclusively or predominantly aim to protect the debtors of the company or are otherwise in the interests of the general public, or that a shareholders’ resolution is in direct violation of moral standards. In this regard, the conditions as outlined in the Stock Corporation Act under which a resolution of the shareholders is deemed to be rendered void, apply accordingly.¹³ There is no statutory time limit within which an action for nullity regarding a resolution passed within a GmbH must be filed with a court. However, since, if it goes unchallenged, a null and void resolution will become valid three years after its registration in the commercial register or the passing of the resolution respectively, the claim must be filed within this time frame at the latest.¹⁴ Before that point in time, the right to challenge a resolution may, however, also be forfeit according to general principles of law.

Aside from these specific reasons which may lead to a shareholders’ resolution being found null and void, a shareholders’ resolution may generally be challenged on the basis of a violation of applicable statutory law or the articles of association.¹⁵ Since any violation of the law or the articles of association gives rise to a right to challenge the respective shareholders’ resolution in question, a violation will only result in a successful challenge of the resolution if the violation of the law or the articles bore relevance where the passed resolution was concerned. Whether or not a violation was ‘relevant’ depends on the intention of the violated rule to protect the interest of each shareholder in adequately participating in the decision-making process of the company. Each case must be considered individually, taking into account the specific rule in question. A relatively substantial body of case law has been developed by the courts and legal scholars in this regard. The burden of proof as regards this lack of relevance lies with the company, wherein the shareholder filing the claim must specify the violation of the provision in question to the extent reasonably possible. This depends largely upon whether he or she had insight into the reasons for the violation of the provision.

The respective action of opposition (Anfechtungsklage) must be filed with the court within an appropriate period of time after the resolution has been passed. The Federal Supreme Court considers a period of four weeks to be appropriate, but this may also be extended if particular grounds to justify an extension are demonstrated.

The outcome of both actions (for nullity and of opposition) is that the respective shareholders’ resolution is declared null and void. The decision is binding on all shareholders, managing directors, the supervisory board (if applicable) and the company itself.¹⁶

45. Individual rights: actions on behalf of the company

It is the obligation of the managing directors or of the responsible corporate body as stipulated in the articles of association to assert claims against the shareholders based on their (corporate) relationship towards the company. In particular, this includes payment obligations, such as paying in the contribution to the share capital. Under particular conditions, however, a shareholder may be entitled to assert such a claim him- or herself on behalf of the company and request payment or the fulfilment of the obligation of the other shareholder towards the company (actio pro socio). In other words, the shareholder pursuing an actio pro socio may not require that the obligation is fulfilled towards himself, but only towards the company. An actio pro socio is a subsidiary remedy and may only be pursued if all other remedies fail. Prior to pursuing such a claim him- or herself, the shareholder must request the managing directors or any other competent corporate body to assert the claim against the other shareholder(s). If the respective corporate body refuses to pursue such a claim, the shareholder must then try to obtain a shareholders’ resolution instructing the managing director to require that the non-performing shareholder provide payment or fulfil his or her obligation. In the case of a negative shareholders’ resolution, the shareholder must challenge the shareholders’ resolution itself prior to acting on behalf of the company. The right to pursue an actio pro socio is mandatorily prescribed by law and may not be excluded 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.

56. Rights to be exercised collectively by the shareholders as a whole: the right to claim damages

The shareholders of a GmbH are entitled to issue decisions on the enforcement of claims of the company against the managing directors and certain shareholders relating to the formation or the management of the GmbH.³¹ Usually, the managing directors are entitled to pursue and enforce any claims the company may have. In the aforementioned cases, however, there is a danger that internal information of the company may be revealed in a process connected herewith or that the corresponding claims will be detrimental to relations between the shareholders and towards the managing directors. Therefore, since such claims may have these kinds of far-reaching effects on the company as a whole, the shareholders’ meeting, as the superior corporate body, shall reach a resolution as to whether such claims should be enforced or not. Without a resolution to this effect, the enforcement of a claim of the company against the managing director or against a shareholder would be invalid. The defendant may claim in court that a resolution to this effect has not been passed, in which case, the court would dismiss the claim on the merits, solely on the grounds of a failure to satisfy this procedural requirement. Shareholders against whom a claim is to be enforced are not entitled to vote in the shareholders’ resolution regarding the enforcement of the claim.³²

The term ‘claims’ in this context must be interpreted broadly and comprises any and all damage claims on whichever legal grounds due to the violation of duties either on the part of the managing directors or the shareholders.

The enforcement of such a claim not only comprises the initiation of court proceedings (which is the usual case), but also extra-judicial measures such as payment reminders, set-offs or waivers and settlement of the claim.

The aforementioned regulation may, however, be freely amended by the shareholders in the articles of association and may even be entirely excluded.

57. Rights to be exercised collectively by the shareholders as a whole: the right to represent the GmbH against managing directors in court proceedings

The shareholders are not only entitled to decide whether claims shall be enforced against the managing directors but are also responsible for deciding who will represent the company in proceedings against its managing directors.³³ Since the shareholders decide upon the enforcement of the claim per se, it makes sense that the shareholders should also decide who is to represent the company, as it is not always guaranteed that the other managing directors of the company will pursue the interests of the company with the necessary vigour. In addition, a decision to this effect on the part of the shareholders is in any case required if the GmbH only has one managing director. If a managing director is also a shareholder in the company, he or she is excluded from voting on a corresponding resolution in which the shareholders decide who will represent the company in the proceedings.³⁴ Persons entitled to represent the company in proceedings against the managing director may be one or several shareholders, members of the supervisory board, or third parties (typically legal or tax advisers). The person appointed by the shareholders acquires the status of a legal representative of the company (like a managing director) and is bound by the instructions given by the shareholders, just as a managing director would be. Again, this provision is subject to any amendments or specifications in this regard in the articles of association of the company.

A different situation arises in a GmbH which is subject to one of the Co-Determination laws. In this case, the mandatory provisions of the Co-Determination laws replace the regulations of the Act on Limited Liability Companies.³⁵ According to these provisions, in cases where the company is engaged in proceedings against a managing director, the company is mandatorily represented by the supervisory board.³⁶

58. Exclusive rights of individual shareholders

Apart from the rights of the shareholders based on statutory law and case law, a shareholder may also be granted exclusive rights in the articles of association. The shareholders may draft the articles of association according to the particular requirements of their business and thus create a personalised GmbH. The articles may thereby grant a shareholder exclusive administrative or financial rights such as, for example, multiple voting rights, veto or approval rights, the right to appoint or remove managing directors or members of the supervisory board (if applicable), preferred dividends etc. The only restrictions upon the granting of such exclusive rights are those prescribed by the mandatory regulations of the Act on Limited Liability Companies or by general civil law (eg, standards of morality and good faith). These exclusive rights may already be contained in the articles of association at the point in time of the formation of the company or they may be introduced at a later date. Amendments to this effect require the consent of all other shareholders affected by such exclusive rights. If there is a failure to obtain this consent, the resolution is challengeable. The exclusive rights may only be revoked with the respective consent of the privileged shareholder and by way of an amendment of the articles of association. An increasing number of legal scholars are of the opinion that exclusive rights may also be revoked for cause. Cause is in particular given if, upon weighing all of the respective interests, the continued existence of the exclusive right of the shareholder is felt to be unacceptable to the company or the other shareholders.

Additionally, as well as granting such exclusive rights based on the membership of the GmbH, the articles of association may also grant certain rights which are not based on membership, but only confer upon the respective shareholder an ordinary contractual (schuldrechtlich) position. A right based on a contractual obligation on the part of the company, for example the use of certain company facilities or the right for a person to avail themselves of certain other company benefits, may be terminated not by amendment of the articles of association, but by the means of the ordinary applicable contractual and legal rules. The distinction between whether a right granted to a shareholder in the articles is based on his or her membership or is a mere contractual right must be drawn on the basis of the intention of the company and the shareholders.

B. Shareholder obligations

59. Obligation to pay in contributions

The most important obligation of the shareholders in a GmbH is the obligation to make the contribution as set down in the articles of association.³⁷ As outlined above, the obligation to pay in the share capital may either take the form of a contribution in cash or a contribution in kind.³⁸ The contribution must actually be paid in, that is, the stated share capital must really be raised.³⁹

60. Additional contributions

The articles of association may stipulate that the shareholders may resolve to call for additional contributions from the shareholders beyond the contributions they agreed to pay when founding the company.⁴⁰ The additional contributions may either be limited or unlimited in terms of their amount.⁴¹ The purpose of such additional contributions is to enable the company to call for additional funds in case they are needed without the necessity of collecting the money from third parties.

In the event that the amount of the additional contributions is not limited, a shareholder who is not willing or able to pay this additional contribution in whose regard a resolution has been reached by the majority shareholders has the right to free him or herself from such an obligation by placing his or her share at the disposal of the GmbH.⁴² This step must occur within a period of one month after the company has requested the shareholder to pay in his additional contribution. If the shareholder fails to respond to the request of the company (either by paying in the contribution or by placing the share at the disposal of the company), the GmbH may declare towards the shareholders via registered letter that it considers his or her share to be placed at the disposal of the company. Once the share is at the disposal of the company, the GmbH is entitled to sell the share by way of public auction within a period of one month after it was placed at the GmbH’s disposal or, with the consent of the shareholder, in any other way the company deems appropriate. If the company generates a surplus when selling the share, the shareholder abandoning the share is entitled to receive the surplus. If the price achieved when selling the share is not sufficient to cover the outstanding additional contribution, the share falls to the GmbH.⁴³ The other shareholders are not liable for the payment of any outstanding additional contribution if a shareholder fails to pay in the contribution or if the sale of the share does not yield sufficient funds to cover the additional contribution.

If the additional contributions are limited to a certain amount and the shareholder does not pay in his or her contribution in due course, the share may be forfeited and the company may sell it by way of auction to collect the outstanding amount.⁴⁴ Remaining shareholders may not be held liable for any unpaid additional contributions owed by one of the shareholders.

61. Obligation to refrain from competition

The Act on Limited Liability Companies does not contain an explicit provision regarding the prohibition to compete with the company – neither for managing directors nor for shareholders – whereas for instance the stock cooperation law⁴⁵ (members of the board of directors) or the law on general partnerships⁴⁶ (shareholders) do.

In practice, the articles of association or the service agreements of the managing directors often contain wording to this effect. If neither the articles nor the service agreement provide a corresponding regulation, it is generally recognised under German case law that a managing director of a GmbH, whether or not he or she is a shareholder, must refrain from any kind of competition with the company unless explicitly entitled to do so. An entitlement of this kind may be based on a shareholders’ resolution to this effect if the articles of association stipulate that such an exemption may be granted.

Shareholders who are not managing directors are also subject to an obligation to refrain from competition if they hold the majority of the shares in the company or in any other way exercise a dominant influence within the company.⁴⁷

Irrespective of a dominant influence, shareholders are subject to an obligation to refrain from competition if they become aware of certain business opportunities in their capacity as a company shareholder and the business is either important for the company or falls within the scope of its business purpose. The shareholder must then refrain from pursuing the business opportunity and must inform the company of the said opportunity. The shareholder may only pursue the transaction when the company does not seize the opportunity itself.

In its decision of 11 November 2010,⁴⁸ the Munich Court of Appeal (Oberlandesgericht München) had to issue a ruling on a non-compete clause contained in the articles of association of a GmbH. The clause was directed towards the shareholders and towards the managing directors of the company alike. In particular, it prohibited any kind of activities, whether independent or under employment, direct or indirect, in the party’s own name or in the name of a third party, for its own account or for the account of a third party, in an enterprise having a business similar to the business of the GmbH, or any of its subsidiaries or affiliates, which: (i) competed or could compete with these entities, or (ii) entertained a significant business relationship with any of these entities. The shareholders and the managing directors were also not allowed to hold any stakes in such entities. In the event of violation, a contractual penalty in the amount of €50,000 was due for each violation. The shareholders’ meeting could grant an exemption from the non-compete clause by way of a shareholders’ resolution. The Court of Appeal came to the conclusion that the clause was invalid and that it constituted a violation of moral standards⁴⁹ and of the Act against Restraints of Competition.⁵⁰ When considering any non-compete clause, the courts must weigh the valid business interests of the company against the professional aspirations of the shareholder/managing director in continuing to work in the business segment he or she was active in.⁵¹ A non-compete clause may not be used to exclude competition from the market. In this context, a provision prescribing that, irrespective of their business purpose and also encompassing their (currently unknown) future business purposes, any and all subsidiaries constitute a barrier for competitive activities, was considered too broad and unspecific.

Any non-compete clause must be specific, not only with regard to time and territorial scope, but also in terms of its business scope. The fact that an exception to the non-compete clause may be granted by way of a shareholders´ resolution was also not deemed sufficient for the court to hold the clause valid. The articles did not specify in detail when such an exception was to be granted. Further, a shareholder/director pursuing potentially competitive activities cannot be expected to wait for a final court decision on the matter. Finally, the clause may also not be saved by way of the court reducing its scope to an acceptable degree. A reduction to an acceptable degree has in some cases been considered by the courts in connection with temporal scope but not where other situations are concerned. This was confirmed by a decision of the Nuremberg Court of Appeal.⁵² The court ruled that a non-compete clause excluding a managing director of a GmbH from doing business with any customer of the group of the GmbH (which comprised 120 companies) was too excessive and therefore invalid in its entirety. The court refused to accept a reduction of the clause to, for example, customers of the GmbH or to those customers with whom the director had personal contact. Similarly, in the same decision, the court refused to reduce a contractual penalty it considered too high to an acceptable amount in the specific case (€100,000 for each violation).

In the event of a violation of the obligation not to compete, the company may file for injunctive relief or claim damages against the violator.

62. Confidentiality obligation

The shareholders in a GmbH have the right to inform themselves comprehensively regarding the affairs of the company.⁵³ The corresponding obligation in return for being granted full inspection rights regarding the business affairs of the company is the shareholder’s duty to keep confidential all information received from the company or obtained while inspecting its books and records. Moreover, a shareholder must refrain from disclosing any confidential information about the company, irrespective of its source. The obligation to keep the information confidential derives from the duty of loyalty of each shareholder.

62a. Obligations during insolvency

Regarding the obligations of the shareholders of a GmbH during the insolvency of the company, see Section 109.

63. Auxiliary and additional obligations

Within the articles of association, the shareholders may assume any and all kinds of additional and auxiliary obligations towards the company or towards other shareholders. Such additional obligations are not unusual and may typically be found in personalised companies. Additional obligations may only be established for several or all shareholders. These may be of a financial nature, but may also comprise the provision of services to supply goods or intellectual property rights or to acquire goods from the company.

64. Duty of loyalty

Aside from any particular obligations based on statutory law and the articles, the shareholders of a GmbH (and any other corporation or partnership) are subject to a general duty of loyalty. This duty of loyalty requires the shareholders to act loyally towards the company, meaning that they must actively support its purpose and prevent it from being exposed to harm. The duty serves to resolve conflicts within the company which cannot be resolved by statutory or case law, or by the articles of association. It applies in the first place to the relationship between the shareholders and the company, and secondly to the relationship between the shareholders themselves. The duty of loyalty requires a shareholder to duly take into account the interests of the other shareholders and of the company when exercising a membership right. The duty does not prevent shareholders from exercising their rights in a manner most favourable to them. Its aim is merely to avoid unacceptable outcomes when the justified interests of other shareholders or of the GmbH are not sufficiently taken into account and shareholders pursue their own interests in an inappropriate way. The duty of loyalty provides the courts with an instrument to balance the contradicting interests of the shareholders and the company in order to find appropriate solutions on a case-by-case basis.

However, a duty of loyalty does not exist in a single shareholder company. In such a company, there are no conflicts of interest between the company and the shareholder.⁵⁴

C. Liability of shareholders towards third parties (piercing the corporate veil)

65. General

According to statutory law, a GmbH’s liability vis-à-vis its creditors is solely limited to its assets, that is, the shareholders of the GmbH are not personally liable towards third parties.⁵⁵ Nevertheless, aside from the establishment of a personal liability of a shareholder in a GmbH by way of an individual agreement with a creditor of the company (eg, guarantee, suretyship, lien, pledge, etc), German case law recognises that, under certain circumstances, the shareholders in a GmbH may be held personally liable for the liabilities of the GmbH. These cases are, however, highly exceptional and shall be outlined in the following.

66. Confusion of goods (Vermögensvermischung)

A confusion of goods typically arises in single shareholder companies, but can also occur within a multi-shareholder GmbH. In the event of a confusion of goods, the assets of the GmbH and the private assets of the shareholders are not, or not sufficiently, separated from each other. The confusion of goods must be so extreme that it is no longer possible to separate the two types of assets, making it in turn impossible for the creditors to distinguish which assets are available to satisfy their claims. Separation usually becomes impossible as a result of a non-transparent, or incomprehensive accounting system or a substantial lack of such a system, resulting in the situation that it cannot be determined whether or not the stipulations regarding the maintenance of the share capital have been observed (a so-called Waschkorblage – ‘laundry basket situation’).⁵⁶ Such a situation gives rise to the personal liability of the shareholders, who are responsible for this kind of negligence in connection with the accounting and bookkeeping of the company, vis-à-vis the creditors of the GmbH. Typically, this would be the majority shareholder in the company, but it may also be any other shareholder who has sufficient influence on the company to be able to control or manipulate the way in which the books and records are kept.

67. Confusion of spheres (Sphärenvermischung)

The situation of a confusion of spheres is very closely related to the situation of the confusion of goods. A confusion of spheres occurs when, in dealings with third parties, shareholders fail to sufficiently distinguish whether they are representing themselves or the company. It thus becomes difficult for the third party to distinguish who is the actual contract partner. In cases such as these, many legal scholars argue that if the corporation assumes responsibility for all liabilities the shareholder gives rise to, this would constitute an unacceptable misuse of the said corporation. The shareholder must therefore be personally liable for the liabilities he or she gives rise to on behalf of the company.

68. Undercapitalisation

One highly disputed situation in connection with which a piercing of the corporate veil is discussed is the undercapitalisation of the GmbH. A distinction is often drawn between two different kinds of undercapitalisation. A ‘material’ undercapitalisation is present if the share capital of the company does not reach an adequate level in comparison with the scope of its business, that is, the (anticipated) business activities of the company far exceed the stated capital (often when only the minimum required share capital of €25,000 was raised). The other kind of undercapitalisation, so-called ‘formal’ or nominal undercapitalisation, is present if the company actually dispose of the necessary share capital in a manner commensurate to the range of its activities. However, this kind of share capital is only (or to a large extent) provided by means of shareholder loans rather than equity. This creates problem in particular if the company should become insolvent later on. Whether and on which legal ground a direct liability on the part of the shareholders may be established in these situations is a matter of dispute amongst legal scholars. The lower courts, too, are undecided on this matter. In one case, the Federal Supreme Court applied section 826 of the German Civil Code (Bürgerliches Gesetzbuch – BGB), which grants damages in the event of deliberate immoral damage being caused to a third party. In its decision of 28 April 2008,⁵⁷ the Federal Supreme Court ruled that at least occurrences of ‘material’ undercapitalisation do not constitute a case of destructive intervention (see immediately below under Section 69) and thus do not give rise to an internal liability on the part of the shareholders vis-à-vis the GmbH itself. The court ruled that the failure to furnish a GmbH with the necessary share capital may not be equated with a shareholder actively intervening and taking away equity from the company to the detriment of its creditors. The legal provisions regarding the maintenance of the share capital⁵⁸ are considered sufficient and the Federal Supreme Court saw no reason to establish further rules in this regard. The specific function of a GmbH, namely to limit the liability of the shareholders to the stated share capital, would otherwise be endangered. In its decision, however, the Federal Supreme Court also clearly stated that the potential direct liability of a shareholder towards third parties on the basis of tort law (in particular based on section 826 of the German Civil Code) remains unaffected.

69. Destructive intervention (Existenzvernichtender Eingriff)

A destructive intervention occurs if a shareholder intervenes in the financial situation of the company (in particular the stated share capital) such that it is no longer able to satisfy its obligations towards its creditors. Prior to July 2007, intervention of this nature resulted in personal liability on the part of the intervening shareholder towards the creditors of the GmbH. In its decision of 16 July 2007,⁵⁹ however, the Federal Supreme Court ruled that in the event of a destructive intervention, the shareholders would no longer be personally and directly liable towards the creditors. Only the company itself has a claim towards the respective shareholder based on section 826 of the German Civil Code (Bürgerliches Gesetzbuch) (deliberate immoral damage). These rules also apply during the liquidation process if the GmbH goes into liquidation.⁶⁰ In other words, a direct liability on the part of the shareholders towards the creditors of the company has been abolished in this regard. Instead, the ruling has established an internal, unlimited liability on the part of the shareholders towards the company to repay to the company the funds required to satisfy its creditors and to maintain its operations. The creditors of the company are nevertheless entitled to appropriate the internal claim of the company towards the shareholder and afterwards claim payment from the shareholder directly. In order to do so, however, the creditor would need to establish a claim against the company first and may not directly claim compensation from the shareholder.⁶¹

70. Misuse of the corporate structure

It continues to be an issue of dispute amongst legal scholars and courts whether – apart from the cases cited above – (other categories of) the misuse of the corporate structure by the shareholders gives rise to a personal and direct liability towards the creditors of the GmbH. The Federal Supreme Court has not yet issued a definite ruling on this question, nor have the lower courts reached agreement on this issue. It is therefore possible that a misuse of the corporate structure could give rise to personal liability on the part of the shareholders. However, this would have to be decided on a case-by-case basis, and exceptional circumstances would certainly be a prerequisite in this regard. Furthermore, a situation involving an intervention as regards the financial situation of a GmbH which does not already fall under the situations outlined above is hardly conceivable.

1Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s47, para. 3 (FRG).

2Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s47, para. 2 (FRG).

3Bürgerliches Gesetzbuch (BGB) (Civil Code) 1900, s138 (FRG).

4Bürgerliches Gesetzbuch (BGB) (Civil Code) 1900, s134 (FRG).

5Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s47, para. 4 (FRG). For details see Section 86.

6Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s51a, para. 1 (FRG).

7For details see Aktiengesetz (AktG) (Stock Corporation Act) 1965, ss131, 132 (FRG).

8Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s51a, para. 2 (FRG).

9Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s51b (FRG).

10Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s29, para. 1, sentence 1 (FRG).

11Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies), 1892, s29, para. 3 (FRG).

12Aktiengesetz (AktG) (Stock Corporation Act) 1965, s186 (FRG).

13Aktiengesetz (AktG) (Stock Corporation Act) 1965, s241 (FRG).

14Aktiengesetz (AktG) (Stock Corporation Act) 1965, s242, para. 2 (FRG) accordingly.

15Aktiengesetz (AktG) (Stock Corporation Act) 1965, s243, para. 1 (FRG) accordingly.

16Aktiengesetz (AktG) (Stock Corporation Act) 1965, ss248, 249 (FRG) accordingly. For details on the challenging of shareholders’ resolutions see also Section 92 et seq.

17Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s75 (FRG).

18Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s72 (FRG).

19Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s49, para. 1 (FRG).

20Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s50, para. 1 (FRG).

21Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s50, para. 3 (FRG).

22Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s50, para. 2 (FRG).

23Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s60, para. 1, no. 3, 61; para. 1 (FRG).

24Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s61, para. 2, sentence 2 (FRG).

25Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s61, para. 2, sentence 1 (FRG).

26Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s66, para. 1 (FRG).

27Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s66, para. 2 (FRG).

28Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s66, para. 3 (FRG).

29Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s37, para. 1 (FRG).

30Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s46, no. 6 (FRG).

31Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s46, no. 8 or, alternatively, 1 (FRG).

32Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s47, para. 4, sentence 2 (FRG).

33Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s46, no. 8, Alt. 2 (FRG).

34Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s47, para. 4, sentence 2 (FRG).

35Gesetz über die Mitbestimmung der Arbeitnehmer (MitbestG) (Co-Determination Act) 1976, s25 (FRG); Gesetz über die Drittelbeteiligung der Arbeitnehmer im Aufsichtsrat (Drittelbeteiligungsgesetz – DrittelbG) (One Third Employee Participation Act) 2004, s1, para. 1, no. 3 (FRG); Aktiengesetz (AktG) (Stock Corporation Act) 1965, s112 (FRG). For details on the application and consequences of the various Co-Determination Acts, see Sections 141–156.

36For further details on the Co-Determination Acts, see Sections 141–156.

37Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s19, para. 1 (FRG).

38For details, see Sections 9–10.

39For details, see Section 157 et seq.

40Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s26, para. 1 (FRG).

41Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, ss27, 28 (FRG).

42Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s27, para. 1 (FRG).

43Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s27, para. 3 (FRG).

44Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s28 (FRG). For details on the forfeiture of the shares see Section 185.

45Aktiengesetz (AktG) (Stock Corporation Act) 1965, s88 (FRG).

46Handelsgesetzbuch (HGB) (Commercial Code) 1897, s112 (FRG).

47Decision as of 5 December 1983, Bundesgerichtshof (German Federal Supreme Court) – BGHZ 89, 162 et seq.

48File no. U K 2143/10.

49Bürgerliches Gesetzbuch (BGB) (Civil Code) 1900, s138 (FRG).

50Gesetz gegen Wettbewerbsbeschränkungen (GWG) (Act against Restrictions of Competition), 1 (FRG).

51Regarding non-compete obligations for managing directors in a GmbH, see also Section 107.

52File no. 12 U 681/09, decision of 25 November 2009.

53Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s51a (FRG). For details see Section 41.

5428 September 1992, Bundesgerichtshof (German Federal Supreme Court) (II ZR209/91) – BGHZ 119, 257.

55Gesetz betreffend die Gesellschaft mit beschränkter Haftung (GmbHG) (Act on Limited Liability Companies) 1892, s13, para. 2 (FRG).

5613 April 1994, Bundesgerichtshof (German Federal Supreme Court) (IIZR 16/93) – BGHZ 125, 366 et seq.

5728 April 2008, Bundesgerichtshof (German Federal Supreme Court) (II ZR 264/06) – BGH NJW 2008, 2437 et seq.

58See Section 163 et seq. for further details.

5916 July 2007, Bundesgerichtshof (German Federal Supreme Court) (II ZR 3/04) – BGH NJW 2007, 2689 et seq.

609 February 2009, Bundesgerichtshof (German Federal Supreme Court) (II ZR 292/07) – BGH NJW 2009, 2127 et seq. For further details on the liquidation process see Section 263 et seq.

61For further details, see Section 262.