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Prohibition of Competition When A German LLC Partner Withdraws

Jun 30, 21 • Corporate LawNo Comments

Prohibition of Competition When A German LLC Partner WithdrawsRegulation in the articles of association

The articles of association state, among other things, that

  • no partner may acquire an interest in a competing company during the term of the agreement,
  • a post-contractual non-competition clause shall not be stipulated, and
  • the voting right of a shareholder shall be suspended in the period between the declaration of withdrawal and the final departure.

In the context of provisional legal protection, the Nuremberg Higher Regional Court (OLG) had to decide whether a non-competition clause stipulated in the articles of association of a German LLC also applies to the partner who has withdrawn from the company but not yet resigned.

Partner withdraws from the company

In the present case, a partner declared his withdrawal from the company on December 23, 2019. Due to the deadline agreed under corporate law, the withdrawal did not take effect until December 31, 2020. On the same day (December 23, 2019), the partner also terminated his managing director employment contract, to be effective on June 30, 2020.

On March 20, 2020, the partner invested in two companies operating in the same field as the company from which he had resigned. As a result, litigation ensued.

Does the prohibition of competition apply?

The Regional Court (LG) of Regensburg ruled that the prohibition of competition under corporate law applied and justified this on the basis of a duty of loyalty existing until the final departure.

However, the Nuremberg Higher Regional Court has a different opinion. The prohibition of competition is to be interpreted restrictively in accordance with Art. 12 (1) of the German Basic Law (freedom of occupation). Its continued application would be tantamount to prohibiting the partner from practicing his profession, and there are no apparent grounds for doing so. It is not relevant to the decision whether the partner also lost a possible position as managing director, since a managing director cannot significantly shape the company’s purposes against the will of the shareholders and the loss of the voting right is not compensated by the position as managing director.

Consulting for all aspects of German corporate law

Our specialist attorneys in corporate law will be happy to advise your company on all aspects of German corporate law and articles of association. Please contact us at or +49 69 76 75 77 80.

Continue reading:
Legal Advice on German Corporate Law
Can the Management Authority in a German Limited Partnership (KG) Be Revoked?

Thomas Schwab

Attorney Thomas Schwab mainly handles general contract, corporate, civil, commercial, inheritance and international business law matters.

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