BGH: Removal effective as soon as ruling is final
When a shareholder is removed from a GmbH for cause, their removal takes effect from the moment the ruling becomes legally binding, and not from the date on which the shareholder receives their severance pay. That was the verdict of Germany’s federal supreme court – the Bundesgerichtshof (BGH) – in a judgment from July 11, 2023 (case ref.: II ZR 116/21).
While there are no provisions in the German Limited Liability Companies Act – referred to locally as the “GmbH-Gesetz” – that deal with the removal of shareholders, the BGH has ruled that this course of action can be justified by good cause, reports Michael Rainer, managing partner and point of contact for company law at MTR Legal Rechtsanwälte.
Having previously ruled that removal is not possible without first paying the departing shareholder a severance package, the Karlsruhe judges distanced themselves from this position in their judgment from July 11.
The case came about as a result of an action to remove one of the shareholders of a two-person GmbH. The company’s articles of association did not address the possibility of removing shareholders or the redemption company shares.
Exclusion action consistent with actio pro socio
The first time the action to remove the shareholder in question met with a favorable hearing was in the context of appeal proceedings before the BGH. In its default judgment, the court’s 2nd civil division endorsed the widely held view that a shareholder of a two-person GmbH can bring an action for exclusion against the other shareholder provided that the requirements of “actio pro socio” are met. This legal principle requires that the management of the company not be impaired by the shareholder dispute. A shareholder can then be sued if they have breached their fiduciary duty towards the GmbH.
If this breach of duty jeopardizes the assets of the other shareholder or threatens the economic interests of the company, there may be good cause to remove the offending shareholder.
BGH brings an end to legal limbo
This latest ruling sees the BGH depart from its previous position of insisting on the payment of a severance package before the removal of a shareholder takes effect. Its new position is that the removal is effective as soon as the ruling is final. The court thus followed its case law on the redemption of company shares, which takes effect once the shareholder has been notified of the relevant resolution, so long as the resolution is not void.
In order to further clarify the facts, the BGH referred the case back to Munich’s higher regional court, the Oberlandesgericht (OLG) München.
The BGH’s ruling means that the remaining shareholder is better protected, thus bringing an end to a state of limbo that enabled the shareholder set to be excluded to prevent or delay decisions until they had received their severance package. Thankfully, there is now greater legal certainty here.
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