Board members may delegate supporting activities, but they cannot simply simply hand over core responsibilities defined in the articles of association. The Higher Regional Court of Frankfurt held that an agreement under which a national sports federation had transferred its licensing operations to another association without a resolution of the members’ meeting was contrary to public policy and therefore null and void in its entirety. We explain how board members in Germany can distinguish between permissible supporting activities and the impermissible transfer of core functions.
Association law governing the transfer of core association functions
A national sports federation transferred its training and licensing operations for a minimum of ten years to a legally independent association. Going forward, that association was to issue licenses for coaches and referees and collect the associated fees and subsidies. Only the federation’s executive committee had approved the arrangement; no resolution had been adopted by the federal members’ assembly, the association’s supreme governing body. There were also extensive personal ties between the parties: the federation’s long-serving president acted on behalf of the contractual partner, while the two vice presidents who signed the agreement also served on that association’s board.
The Regional Court held the agreement valid and dismissed a claim for payment of approximately EUR 14,000 solely because the contractual partner had failed to substantiate the services it had invoiced. The appeal was directed only against that dismissal. In a notice issued pursuant to § 522(2) ZPO, however, the Higher Regional Court considered the appeal manifestly without merit, albeit for an entirely different reason. After the appeal was withdrawn, the federation’s cross-appeal lost its effect pursuant to § 524(4) ZPO. As a result, the finding that the agreement was valid remains legally binding between the parties, even though the Higher Regional Court considers the agreement null and void. The decision nevertheless remains valuable for legal practitioners because it sets out the criteria for outsourcing functions under association law with unusual clarity.
Articles of association determine the limits of delegating core functions
German law is stricter in this respect than many boards may assume. § 27(3) sentence 1 BGB refers to the law of agency and mandates, including § 664(1) sentence 1 BGB, which prohibits transferring an entrusted task to a third party. The court summarized the principle as follows: “Without express authorization in the articles of association, the board may therefore not generally transfer management of the association to another person or body.”
This does not prohibit every form of delegation. It prohibits what is known as substitution, that is, transferring substantial parts of a responsibility to a third party that thereby assumes the role of the principal actor. Individual tasks, by contrast, may still be assigned to support personnel. At the other end of the spectrum are duties that the law assigns personally to the board, such as filing applications with the association register, the obligation to file for insolvency, and the tax obligations of the association’s legal representatives. These duties cannot be delegated at all. Core functions based on the articles of association fall between these two categories: they may be outsourced, but only if the articles of association expressly permit it or the association’s supreme governing body adopts a resolution authorizing the transfer.
The court did not distinguish between core and supporting activities based on a single factor. Instead, it conducted an overall assessment, beginning with the articles of association themselves, which expressly identified the education and further training of coaches and referees as a function of the federation. The court also considered substantive, formal, and financial factors. It assessed these factors together because the German Olympic Sports Confederation had granted the federation the authority to issue licenses, meaning that the federation assumed responsibility to the public for ensuring a particular level of qualification. The articles of association also provided for separate regulations and sanctions, including the revocation of licenses, while the licenses generated fees and subsidies. The fact that the transfer was made for a minimum of ten years to a third party that was neither subordinate to the federation nor formally affiliated with it further reinforced the conclusion. The case expressly did not concern a statutory duty of the board that could not be delegated at all. The function could be delegated; it simply could not be delegated by the board acting alone.
Association law affects contract validity only in exceptional cases
A violation of internal authority requirements does not automatically render a contract invalid. The board’s power of representation is generally unlimited with respect to third parties, and the articles of association had neither limited that power vis-à-vis third parties pursuant to § 26(1) sentence 3 BGB nor was the transaction a self-dealing transaction within the meaning of § 181 BGB. Defects in internal corporate governance therefore generally do not affect the validity of a contract vis-à-vis third parties. However, a party that knew of the misuse of the power of representation, or should have recognized it under the circumstances, may no longer invoke the validity of the transaction in accordance with the principle of good faith under § 242 BGB. Before entering into a far-reaching agreement, that party should therefore independently verify whether the required resolutions of the association’s governing bodies have been adopted.
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Only collusion, that is, deliberate cooperation between the representative and the contractual partner to the detriment of the represented party, results in nullity. Under § 138(1) BGB, such a transaction is null and void from the outset, has no legal effect, and cannot be cured; pursuant to § 139 BGB, the nullity extends to the agreement as a whole. The court found the requisite detriment in the fact that the federation could no longer exercise the licensing rights itself while remaining externally responsible for them, lost the associated revenues, and was deprived of the members’ assembly’s right to participate in the association’s decision-making process. A quantifiable financial loss was not required. The court inferred the parties’ knowledge of the applicable resolution requirements from their longstanding positions as officers and attributed that knowledge to both associations pursuant to § 166(1) BGB. The fact that the members’ assembly had met on the very day the agreement was executed was particularly significant, because obtaining its approval would therefore have been an obvious step. The contractual partner ultimately received nothing, because neither the agreement itself nor reimbursement of expenses, management of another’s affairs without a mandate, or restitution based on unjust enrichment provided a legal basis for payment.
Avoiding liability within an association through clear articles of association
The second headnote states the potential legal consequence particularly clearly: “Entering into an agreement to transfer an association’s core functions as defined by its articles of association to a third party without authorization in the articles of association or approval by the members’ meeting may violate public policy.” Such a violation may not only result in the agreement being null and void; it may also give rise to liability on the part of the officers involved toward the association. The liability privilege under § 31a BGB applies to officers who serve without compensation or receive annual compensation of no more than EUR 3,300. It protects only against liability for ordinary negligence. Intentional or grossly negligent conduct may give rise to liability for a breach of duty.
Our practical recommendation is to determine before any outsourcing whether the matter concerns a supporting activity or a core function assigned to the association under its articles of association. Relevant indicators include an authorization granted by an external body, an assumption of responsibility toward third parties, sanctioning powers, the generation of the association’s own revenues, and lengthy minimum terms. For core functions, the articles of association should expressly authorize delegation, or the members’ meeting should adopt a resolution in advance specifying the subject matter, scope, term, compensation, and rights of oversight and termination. Reports, presentations, or budget allocations are not sufficient for this purpose.
Comprehensive advice on drafting articles of association in Germany
Has your organization transferred functions assigned to it under its articles of association to another legal entity without the members’ meeting specifically approving the transfer? Are you, as a supporting association, service gGmbH, or cooperation partner, entering into agreements with an association and unsure whether you can rely on the association’s internal approval process? Do you have personal ties with contractual partners that create additional requirements regarding corporate governance and articles of association?
Our Nonprofit Team would be happy to advise you on reviewing planned or existing agreements, drafting articles of association, and ensuring that association functions are delegated in a legally sound manner.
Higher Regional Court of Frankfurt, decision dated May 12, 2026, 9 U 32/25
