Challenging a resolution in the German GmbH or AG
In the German GmbH or AG, unlawful resolutions can be challenged by other shareholders by means of court action. When statutory law, the articles of association, the by-laws, or fiduciary duties of the shareholders are violated by a resolution, the legal action will most likely be successful. Additionally, a shareholder may only take legal action under German Corporate Law if he has not consented to the challenged resolution at the shareholders’ meeting.
Removal of a shareholder of the German GmbH
Provided there is an appropriate authorization in the articles of association (which is usually the case), a shareholder can be removed from the German GmbH for cause. Alternatively, or additionally, a confiscation and forced transfer of the shareholder’s shares is an option under German Corporate Law. For this measure, an appropriate authorization in the articles of association is also required. Based on our experience, these kinds of regulations will be found in most articles in practice. If none of the above-described measures can be taken, a removal has to be enforced via court action.
Resignation of a shareholder of the German GmbH
When a shareholder of the German GmbH feels isolated and would like to leave the GmbH voluntarily, he may terminate his corporate relationship with the GmbH – provided there is the appropriate authorization for this in the articles of association. Based on our experience, such an option is included in most articles in German legal practice.
Severance payments to shareholders under German Corporate Law
In the case of involuntary or voluntary return of the shares of a German GmbH (due to removal, confiscation, or termination) the shareholder is entitled to a severance payment. A frequent reason for a shareholder dispute in this regard is the amount of that payment under German Corporate Law, since, although many articles provide for value reductions, this law practice is strictly limited by the German courts.
Dismissal and termination of the CEO/director under German Corporate Law
When a CEO or director himself is the main reason for a dispute amongst the shareholders, removal from the corporate officer with immediate effect is possible. Besides, the employment relationship of the CEO or director has to be terminated. Most CEO contracts in practice under German Law provide notice periods (i.e. in this case, in fact, severance payments) from around 3-6 months.