Definition and Significance of the Exclusion Resolution
Der Exclusion Resolution is a legally binding decision by a body of an association (e.g., a club, cooperative, or company) through which the membership or participation of a member, partner, or shareholder is revoked. It is considered one of the most serious measures a club or company can take and is generally subject to strict statutory or constitutional requirements. The main objective of the exclusion resolution is to protect the orderly coexistence or functionality of the organization by removing a member.
Legal Basis for the Exclusion Resolution
Association Law (§ 34 BGB, § 40 BGB)
In German association law, the German Civil Code (BGB) forms the basis for exclusion resolutions. The relevant sections are, in particular, §§ 34 and 40 BGB:
- § 34 BGB: Clarifies that the exclusion of members may only take place for good cause, unless otherwise specified in the bylaws. If the bylaws grant the member grounds for exclusion or protection provisions, these must not be circumvented.
- § 40 BGB: Allows associations to independently regulate the modalities of an exclusion in their bylaws, provided the legal boundaries are observed.
German association law grants members extensive protection against arbitrary exclusions by imposing strict requirements on form, justification, and the right to be heard.
Cooperative Law (§ 68 GenG)
In cooperative law, the exclusion resolution is found in § 68 of the Cooperative Act (GenG). It stipulates that members of a cooperative may be excluded for reasons specified in the bylaws or the law by means of a resolution. The affected member is entitled to be heard and may file an objection to the decision within a specified period.
Corporate Law (GmbH, AG, Partnership Company)
In corporate law, the exclusion resolution plays a particular role in partnerships (such as GbR or OHG) as well as in corporations (e.g. GmbH, AG). The following applies to companies:
- GmbH: A shareholder can, according to the Limited Liability Companies Act (GmbHG), be excluded by a resolution of the shareholders if there is an important reason and the bylaws allow for it. Such resolutions require a high majority—typically a three-quarters majority—and compliance with special procedural provisions.
- Stock Corporation (AG): Here, the exclusion of shareholders is only permitted by statutory law in rare exceptional cases, such as in squeeze-out proceedings (§§ 327a ff. AktG).
Employment Law Context
In works constitution bodies (e.g., works council), exclusion resolutions can also be significant, for example when a member is to be excluded by resolution of the body for good cause (§ 23 BetrVG).
Requirements for an Exclusion Resolution
Good Cause
The central criterion for an exclusion is typically the existence of good cause. A good cause is deemed to exist if, according to objective standards, the body can no longer be reasonably expected to continue the membership or corporate relationship. Typical examples include:
- Serious violations of bylaws
- Gross breaches of duty
- Damage to the reputation or objectives of the organization
- Payment arrears (in membership fees or business shares)
The definition and specification of grounds for exclusion are generally set out in the relevant bylaws or articles of association.
Procedural Requirements
Strict formal requirements must be observed to ensure the validity of an exclusion resolution:
- Written notification and announcement to the affected member
- Granting the right to be heard (hearing/right to make a statement)
- Adhering to notice and decision-making deadlines
- Documentation of the decision-making process (minute-taking)
Violations of these requirements regularly lead to the invalidity of the exclusion.
Decision-making Body and Adoption of the Resolution
The body responsible for the exclusion resolution is determined by the bylaws or articles of association. This is usually:
- In associations: the board, sometimes also the general assembly
- In cooperatives: the board, often upon recommendation of the supervisory board
- In companies: the shareholders’ meeting
The resolution must be adopted by the prescribed majority and properly recorded. Voting involving the member to be excluded is generally not permitted.
Legal Consequences of the Exclusion Resolution
With a valid exclusion resolution, the membership or corporate relationship ends at the corresponding time; this may be immediate or after expiry of any deadlines. The excluded member loses all membership rights, particularly the right to vote, participate in decision-making, and any entitlement to benefits from the organization. Any additional payment obligations or repayment claims are determined by the bylaws or articles of association.
Legal Protection Against Exclusion Resolutions
Challenging and Judicial Protection
Exclusion resolutions are subject to judicial review. The affected member may challenge the exclusion resolution, typically invoking formal or substantive errors (e.g., lack of good cause, violation of the right to be heard, procedural errors). In association law, actions for annulment are possible under § 38 BGB; in corporate law, the procedure depends on the type of company and the articles of association.
Interim Legal Protection
To safeguard the rights of the excluded member, interim legal protection can be requested in urgent cases (e.g., by interim injunction) while the main proceedings are pending.
Special Cases and Distinctions
Difference Between Exclusion, Withdrawal, and Special Termination Rights
While an exclusion resolution is a unilateral measure by the organization, withdrawal is effected by the declaration of the member himself. Special termination rights also fundamentally differ from exclusion both in terms of requirements and legal consequences.
Autonomy of Bylaws
The bylaws or articles of association may partially deviate from statutory requirements, but must not contain arbitrary or disproportionate exclusion provisions. Such regulations are subject to judicial review for content.
Literature and Case Law
Numerous court decisions and commentaries focus on the exclusion resolution, in particular on the interpretation of good cause and procedural requirements. Landmark rulings come from the constant case law of the Federal Court of Justice (BGH) as well as the higher regional courts.
Summary
Der Exclusion Resolution is a means by which associations can respond to serious breaches of duty or incompatibilities of members or partners. It requires a statutory or bylaw-based good cause, careful observance of formal requirements, and fair hearing of the party concerned. Judicial protection is available against flawed resolutions. In all organizational forms, the exclusion resolution is an important instrument for maintaining proper association life and protecting collective interests.
Frequently Asked Questions
What formal requirements must be met for a valid exclusion resolution?
For an exclusion resolution to be legally valid, the formal requirements set out in the relevant statutes (e.g., association bylaws, internal regulations) and applicable laws (such as the German Civil Code for associations) must be complied with. This generally includes the proper convening of the competent decision-making body (e.g. general meeting, board), listing the item ‘exclusion of a member’ on the agenda, timely and detailed notification of the affected member about the circumstances leading to the exclusion, as well as the opportunity to provide a statement. A qualified majority is usually required, which is regulated in the bylaws. The decision must also be made in writing and notified to the affected member along with information about legal remedies.
Does the affected party have to be heard before the exclusion resolution?
Yes, the right to be heard is mandatory. According to Art. 103 para. 1 of the Basic Law and general principles of the rule of law, the member must be given the opportunity to comment before an exclusion resolution is made. This includes informing the member of the allegations and the decisive facts and evidence for the exclusion. The member must have sufficient time and opportunity to respond, possibly even in person at the meeting. Violation of the right to be heard usually results in the exclusion being invalid.
What legal remedies are available against an exclusion resolution?
The affected member generally has both internal association remedies and the right to seek judicial relief against an exclusion resolution. Usually, an internal appeal or complaint procedure must first be carried out if the bylaws provide for it. Only after exhausting these avenues can the member then file a claim in the ordinary courts (e.g., with the competent district court) to have the exclusion declared invalid. It is essential to observe deadlines for filing legal remedies and that the procedure requires documentation and written form.
In which cases is an exclusion resolution invalid?
An exclusion resolution is invalid if essential procedural regulations were violated, for example, if the responsible decision-making body lacked competence, procedural or deadline requirements from the bylaws were not met, the member was not (properly) heard, or the grounds for exclusion are not sufficiently demonstrated and documented. Invalidity also exists if the exclusion is based on reasons incompatible with higher-ranking law, such as the principle of equal treatment or the prohibition of arbitrariness. Any of these errors can result in the resolution being subsequently declared null and void.
What substantive requirements must be met for the reasoning of the exclusion resolution?
The reasoning of the exclusion resolution must set out in detail and comprehensibly which specific circumstances and breaches of duty are attributed to the member and to what extent these justify exclusion. Vague or insufficient statements are not enough. In particular, it is necessary that both the facts of the case and the balancing of interests are clearly explained, to enable the affected member to present an adequate defense and to allow subsequent judicial review.
What effects does an exclusion resolution have on the member and their rights?
With the legally effective exclusion resolution, the member generally loses all membership rights and obligations from the date the exclusion takes effect, unless the bylaws provide otherwise. This includes in particular the right to vote and participate in general meetings as well as all other internal privileges. However, outstanding payments that arose before the exclusion generally remain due and may still be enforced. If the exclusion resolution is invalid or subsequently revoked, the rights must be restored retroactively.
Can an exclusion resolution that has been passed be reversed?
An exclusion resolution can, in principle, be revoked or amended by a new resolution of the competent body, provided the bylaws allow it or there is no good cause against it. Additionally, an exclusion resolution may be declared invalid through a successful internal or judicial procedure. In any case, the relevant procedural rules as well as the protection of legitimate expectations and the principle of equal treatment must be observed. Readmission of the excluded member usually requires a new admission process if this is stipulated by the bylaws.
