# BAG on Termination by Supervisory Board Members of a GmbH > The BAG confirms a dismissal is invalid if supervisory board members fail to properly prove their authorisation. Source: https://www.mtrlegal.com/en/bag-on-termination-by-supervisory-board-members-of-a-gmbh/ · Language: en · Updated: 2026-10-18 --- ## BAG Confirms Invalidity of the Termination The Bundesarbeitsgericht (BAG, Federal Labour Court) ruled on 7 May 2026 – 2 AZR 130/25 – on the termination of a managing director service agreement by members of the supervisory board of a GmbH (limited liability company). The decision bears the identifier ECLI:DE:BAG:2026:070526.U.2AZR130.25.0. In the result, the appeal on points of law brought by the defendant GmbH was unsuccessful. [The BAG dismissed the appeal on points of law](https://www.bundesarbeitsgericht.de/entscheidung/2-azr-130-25/) against the judgment of the Hessisches Landesarbeitsgericht (Hessian Higher Labour Court) of 28 April 2025 – 7 SLa 739/24 – and ordered the defendant to bear the costs of the appeal proceedings. The Arbeitsgericht Frankfurt am Main (Frankfurt am Main Labour Court) had already upheld the claim; the Hessisches Landesarbeitsgericht had dismissed the defendant’s appeal. The central issue was whether a [termination of the managing director service agreement](https://www.mtrlegal.com/offices/berlin/arbeitsrecht/kuendigung-geschaeftsfuehrer/) had been validly declared, even though it had been signed by only two supervisory board members and no proof of a special authorisation of these members had been attached for the person whose contract was terminated. ## Facts: Managing Director, Supervisory Board and Termination ### Service Relationship Since 2018 The claimant had worked as managing director of the defendant GmbH since 1 July 2018 on the basis of a service agreement dated 27 March 2018. The sole shareholder of the GmbH was a company domiciled in Turkey. The defendant’s articles of association provided for a supervisory board with three to five members. Under the relevant provisions of the articles, the supervisory board was responsible, among other things, for the appointment and removal of managing directors. In addition, the supervisory board represented the company in legal transactions with managing directors, in particular when concluding and amending service agreements. ### Resolution of the Supervisory Board and Notice of Termination In August 2023, the defendant’s supervisory board consisted of three members. On 7 August 2023, the supervisory board, with all three members, adopted the resolution to remove the claimant as managing director with effect from 14 August 2023 and to terminate the managing director service agreement with due notice. By letter of 11 August 2023, the defendant terminated the managing director service agreement with ordinary notice as of 31 October 2023, alternatively as of the next possible date. The letter was signed by the chair of the supervisory board and another supervisory board member. It was received by the claimant on 14 August 2023. In addition, the claimant was removed as managing director with effect from 14 August 2023. The claimant rejected the termination by letter dated 18 August 2023. He objected that no proof of authority to represent had been attached and challenged the lack of authority to represent. ### Further Termination in the Court Proceedings During the proceedings, the defendant, by means of a pleading from its legal representative dated 7 December 2023 and transmitted electronically to the Arbeitsgericht (Labour Court), declared, as a precaution, the extraordinary termination without notice of the employment relationship. The claimant had already brought an action on 31 August 2023. The action was served on the defendant on 9 October 2023. He challenged the termination of his employment relationship and also sought continued employment as managing director. ## Employment Relationship as a Procedural Legal Fact ### Failure to Contest in the Lower Instance Was Decisive The BAG assumed that an employment relationship existed between the parties. In doing so, it relied on the findings of the Landesarbeitsgericht (Higher Labour Court). According to those findings, the defendant had ultimately, in the appellate instance, no longer disputed that the legal relationship was an employment relationship within the meaning of § 611a BGB (German Civil Code). The BAG classified the concept of an employment relationship as a simple legal term. Procedurally, such a classification constitutes a legal fact. If such a legal fact is not disputed, the court may assume its existence and treat the corresponding submissions as conclusive and not requiring evidence. This finding was binding on the court hearing the appeal on points of law. The defendant raised no objections to this in the appeal on points of law. ## Action for Protection Against Dismissal Was Filed in Time ### Service Was Still Effected “Soon Thereafter” The [termination of 11 August 2023](https://www.mtrlegal.com/regions/luebeck/kuendigungsrecht/) was not deemed valid under § 7 half-sentence 1 KSchG (German Protection Against Dismissal Act). The claim had been received by the court on 31 August 2023. The fact that service on the defendant did not take place until 9 October 2023 did not preclude this. In the BAG’s view, service was still effected “soon thereafter” within the meaning of § 167 ZPO (German Code of Civil Procedure). There is no rigid maximum time limit in this respect. Delays in court operations are not to the detriment of the claimant if the claimant has performed the necessary acts of cooperation for proper service. ## Application of § 174 BGB to Acts of Corporate Body Members ### Principle of the Provision Under [§ 174 sentence 1 BGB (German Civil Code)](https://www.gesetze-im-internet.de/bgb/__174.html), a unilateral legal transaction is invalid if an authorised representative undertakes it vis-à-vis another person without producing a power of attorney document and the recipient rejects the legal transaction without undue delay for that reason. This applies irrespective of whether a power of attorney actually existed. Subsequent curing or approval is not possible in this context. According to its wording, § 174 BGB directly covers the act of a representative on the basis of authority granted by legal transaction. The provision expressly refers to the authorised representative, the principal and the power of attorney document. ### Analogous Application in Cases of Representation by Corporate Bodies However, the BAG confirmed that § 174 BGB may be applicable by analogy. The prerequisite is that, for the recipient, there is comparable uncertainty regarding the authority to represent and that the authority to represent is based on a decision of will by the person represented that can be evidenced to the recipient. Such a situation exists in particular where members of a corporate body authorised to represent jointly authorise an individual body member to act alone in place of the otherwise existing joint representation. If a corporate body’s authority of joint representation is expanded by authorisation into an authority of sole representation by a corporate body member, § 174 BGB applies by analogy. In this respect, the BAG emphasised that such authority of sole representation cannot be derived from any public register. Proof may be furnished by a declaration of all or of the remaining members of the corporate body. ## Authority of the Supervisory Board as a Body to Represent ### Responsibility for Managing Director Service Agreements As a rule, in a GmbH, the shareholders’ meeting is responsible for terminating a managing director service agreement insofar as it is also responsible for removal under § 46 no. 5 GmbHG (German Limited Liability Companies Act). This responsibility is understood as an ancillary competence. However, the articles of association of a GmbH may transfer responsibility for the conclusion and termination of managing director service agreements to another corporate body established under company law. The defendant had made use of this possibility. Its articles of association provided that the supervisory board represents the company in legal transactions with managing directors. The supervisory board’s authority to represent therefore also included the termination of the managing director service agreement. ### No Individual Authorisation Under the Articles of Association Under the defendant’s provisions in the articles of association, authority to represent the company vis-à-vis the managing director was vested in the supervisory board as a body. The articles of association contained no provision under which individual supervisory board members or the chair of the supervisory board were permitted to issue the body’s declarations of intent externally within the framework of resolutions adopted. The articles of association distinguished in various places between: - the supervisory board as a body, - individual supervisory board members, - the chair of the supervisory board. Where the articles of association provided that “the supervisory board” was responsible and that “it” represented the company, this referred, according to the BAG’s interpretation, to the body as a whole. ## Lack of Proof of a Special Authorisation ### Resolution Was Not Handed Over to the Claimant with the Termination The termination of 11 August 2023 was signed by two supervisory board members. No proof that these two members were authorised to act externally for the body as a whole was attached to the notice of termination. Even if the supervisory board resolution of 7 August 2023 could be understood as at least an implied authorisation of the acting members, that resolution was not handed over to the claimant together with the termination. According to the binding findings of the Landesarbeitsgericht, the resolution was first submitted to the court file by the defendant in the court proceedings. Thus, when the termination was received, the claimant lacked proof of any further authorisation of individual supervisory board members to declare the termination for the body. ## Rejection Was Made Without Undue Delay ### Standard Under § 121 BGB The principles developed in relation to § 121 BGB apply mutatis mutandis to whether a rejection under § 174 sentence 1 BGB is made without undue delay. The recipient does not have to reject the declaration immediately. The recipient is entitled to a certain period for consideration. This also includes the possibility of obtaining legal advice. The relevant period begins when the recipient actually becomes aware of the termination and of the fact that no proof of authority to represent is attached. According to case law, the rejection of a notice of termination is, absent special circumstances, generally no longer without undue delay if more than one week has passed. ### Rejection After Four Days Sufficient The termination was received by the claimant on 14 August 2023. The rejection was made by letter dated 18 August 2023. The Landesarbeitsgericht had regarded this as a rejection without undue delay. The BAG did not object to this assessment. The termination of 11 August 2023 was therefore invalid by analogous application of § 174 sentence 1 BGB. ## No Exclusion of the Right of Rejection ### No Sufficient Prior Notification The right of rejection was not excluded by analogous application of § 174 sentence 2 BGB. Under this provision, there is no right of rejection if the person represented had previously notified the recipient of the authorisation. Such notification is possible without any formal requirements. However, it must be an equivalent substitute for the missing proof of authority to represent. It is not sufficient for a function to have been assigned internally if that function was not made externally apparent or otherwise communicated to the recipient. The BAG held that, from the perspective of an appeal on points of law, there was no objection to the Landesarbeitsgericht having denied such notification. The defendant had not shown that precisely an authorisation of the chair of the supervisory board to act for the supervisory board as a body, either alone or jointly with another supervisory board member, had been made known. ### No Exclusion Based on Good Faith Nor did § 242 BGB exclude the claimant’s right of rejection. A rejection may be contrary to good faith if the recipient has repeatedly acknowledged the representative as such in an ongoing business relationship, thereby creating a basis of reliance. According to the findings of the Landesarbeitsgericht, no such circumstances were apparent. In particular, it had not been established that the claimant had in the past acknowledged the signing supervisory board members as representatives of the entire supervisory board. In the BAG’s assessment, alleged knowledge of management structures was not sufficient. It does not readily permit the conclusion that there was knowledge of further authorisations to act with external effect within a body. ## Electronic Termination of 7 December 2023 Was Void ### Written Form Under § 623 BGB Not Observed The employment relationship also continued beyond 31 October 2023. In particular, it was not terminated by the termination contained in the electronically transmitted pleading of 7 December 2023. This termination did not satisfy the written form requirement of § 623 BGB in conjunction with § 126 para. 1 BGB. Under § 623 half-sentence 2 BGB, electronic form is excluded. Until § 46h ArbGG (German Labour Courts Act) entered into force with effect from 17 July 2024, transmitting a termination in an electronic document therefore did not satisfy the statutory written form requirement. The consequence was nullity under § 125 sentence 1 BGB. ### General Declaratory Claim Was Admissible The BAG also confirmed the admissibility of the general declaratory claim. Since § 4 sentence 1 KSchG refers to receipt of a written notice of termination, the invalidity of a termination that violates the written form requirement may be asserted by means of a general declaratory claim under § 256 para. 1 ZPO. For the period after the expiry of the notice period of the first termination until the last oral hearing in the factual instances, the defendant had relied solely on the termination of 7 December 2023. Since that termination was invalid, the employment relationship continued. ## No Decision on the Claim for Continued Employment The BAG no longer had to decide on the claim for continued employment. The application was directed at employment until the final conclusion of the proceedings for protection against dismissal. With the BAG’s decision, those proceedings were finally concluded with binding effect. The claimant had not asserted any employment claim extending beyond that. ## Significance of the Decision for GmbHs and Supervisory Boards The decision illustrates the strict requirements placed on authority to represent that is externally apparent in unilateral legal transactions. In the case of a GmbH with an optional supervisory board, authority to represent the company vis-à-vis managing directors may be assigned to the supervisory board as a body. If only individual members act, a corresponding authorisation must be proven or must previously have been made sufficiently known to the recipient of the declaration. The key statements of the decision can be summarised as follows: - The termination of a managing director service agreement may fall within the competence of the supervisory board if the articles of association so provide. - If the supervisory board as a body is authorised to represent, individual members do not automatically act with external effect for the body. - § 174 sentence 1 BGB may apply by analogy if a corporate body’s authority of joint representation is expanded by authorising individual members. - A rejection without undue delay may lead to the invalidity of the termination if proof of authority to represent is lacking. - In the period decided, an electronically transmitted termination did not satisfy the written form requirement of § 623 BGB. Specialist reporting did not begin until several months after the judgment was delivered; a published report by Verlag Dr. Otto Schmidt is dated 8 September 2026. ## Employment Law Classification by MTR Legal Rechtsanwälte The BAG’s decision shows that terminations in the context of corporate office, managing director service agreements and employment-law classification require a precise review of competence, authority to represent and formal requirements. Particularly in employment relationships shaped by company law, provisions in the articles of association and employment-law protection mechanisms may interact. MTR Legal Rechtsanwälte advises companies, corporate body members, investors and high-net-worth individuals on employment-law issues relating to corporate and governance structures. Further information can be found at [Legal advice in employment law](https://www.mtrlegal.com/rechtsberatung/arbeitsrecht/).