Shareholder disputes in the German GmbH and Aktiengesellschaft (AG)
In a shareholder dispute in a German limited liability company (GmbH) or a German joint stock company (Aktiengesellschaft – AG) there are usually two different levels of escalation. On the first level there remains disagreement on substantive issues, on the second level of escalation there is a dissent in personnel matters. On the first stage, the challenge of a resolution or decision is sought by one or more shareholders. On the second stage it is intended to remove one or more shareholders from the German GmbH or AG or to remove a director (Geschaeftsfuehrer) or board member (Vorstand, Aufsichtsrat).
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. Where 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. In addition, a shareholder may under German Corporate Law only take legal action 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, also, an appropriate authorization in the articles of association is required. Based on our experience, these kinds of regulations will be found in most articles in practice. If non 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
Where 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 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. 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
Where a CEO or director himself is the main reason for a dispute amongst the shareholders, a removal from the corporate office 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 for notice periods (i.e. in this case, in fact, severance payments) from around 3-6 months.
Corporate Lawyer in Germany
For Corporate Litigation and Business Litigation under German Law please contact our German Corporate Lawyers. At the overlaps between German Corporate and Employment Law Attorney at Law Dr. Christian Hendrik Zeller will vigilantly represent your interests and the interests of your business. In business disputes, German Attorney Dr. Zeller provides courtroom representation all over Germany.
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