The managing director’s authority is often the subject of disputes at shareholder meetings. The German Federal Supreme Court (Bundesgerichtshof, BGH) also had to deal with this issue recently. The BGH judgement was based on the following facts: The sharehlders’ meeting of a estate managing GmbH & Co. KG (a closed real estate fund) wanted to change the articles of association in such a way that the power of representation and management can be withdrawn from the personally liable partner without having to state any reasons. The Berlin Court of Appeal considered the resolution to be effective.
Amendment of the articles of association
The articles of association of the KG provided that the personally liable associate alone is entitled and obliged to represent and manage the company. The agreement did not contain any provision for the withdrawal of this power of representation and management. Such a provision was intended to be introduced only by amending the articles of association. Therefore, the articles of association did not provide for a special majority required for such an amendment. The general rule, i.e. the simple majority, applied.
Simple majority is sufficient
The BGH concludes that it is generally not contestable to introduce the mentioned regulation via a resolution passed by simple majority, contrary to Section 119 (1) of the German Commercial Code (HGB), which requires unanimity. The power of representation and management is also not an irrevocable special right.
Withdrawal of authority not permissible in law
The power of representation and management is a relatively irrevocable right. Intervention is only lawful if it is required in the interest of the company and is reasonable for the shareholder concerned or if he/she has agreed to the intervention.
The Court of Appeal had found a simple interest in the intervention, but this was not enough. The intervention must be indispensable or necessary, i.e. imperative for the company.
Our specialist attorneys for corporate law will be happy to help you with all questions regarding company agreements and articles of association.
BGH, judgement dated October 13, 2020, II ZR 359/18
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