The shareholders’ meeting decides to remove the managing director. This can lead to errors in the framework of the decision-making process or the removal may be unjustified. Then the question arises as to how the dismissed managing director receives legal protection against the erroneous dismissal order. In this article, we declare the legal protection of the managing director against the resolution of the shareholders’ meeting to remove him as managing director. We also clarify what particular attention should be paid to.

1. Legal protection of the managing director: legal action possibilities

1.1.

With regard to the legal protection of the Managing Director of the shareholder, a distinction must be made according to whether the head of the shareholders' meeting has determined the result of the vote in a binding manner. In the event of a binding establishment of the order, the director may attack either by means of an action for an appeal or by means of an action for a declaration of invalidity of the order. However, because of his protected status as a member, he may exercise the office temporarily, provided that he is not prevented from doing so by an injunction.

If, on the other hand, the result of the decision is not positive, the appeal is not admissible. Then the managing director must file a declaratory action. The aim of this is to establish the rejection of the recall binding.

1.2.

The external managing director is not a shareholder of the GmbH in addition to his position as managing director. In the event of a binding establishment of the outcome of the decision, he may only call into question the effectiveness of the removal if the legal deficiencies are so serious as to render the decision null and void. The invalidity of the order must be asserted by the third-party managing director by means of an action for a declaration of assurance. On the other hand, the third-party managing director is not entitled to challenge the decision because of his/her lack of a shareholder.

If, in the case of the third-party managing director, no shareholder brings an action for a challenge, the dismissal remains legally valid even if the dismissal order suffers from a legal defect, provided this does not lead to nullity.

Under certain circumstances, however, the third-party managing director may enforce his reappointment as managing director by means of action for performance. He may be entitled to such a claim on account of a right of management laid down in the articles of association or on account of a limitation of dismissal to such a right for an important reason contained in the employment contract or in the articles of association.

1.3. Provisional measures

In case of dismissal conflicts, there is the possibility of temporary legal protection in the form of a regulatory order. This may already be considered in advance of the shareholders’ meeting. However, the external managing director has no possibility to intervene in the decision-making process of the shareholders’ meeting in this way.

In addition to the removal as such, the injunction may also include prohibitions of activity, access and inspection. If the dismissed managing director requests the issuance of an injunction, this is directed to the full or limited continuation of the exercise of office. It therefore includes, in particular, access to business premises, use of work equipment and access to commercial documents.

General for the legal protection of the managing director

2.1 Conflicting interests

In the event of a dispute over the proper dismissal of the Managing Director, the interests of the Managing Director and the GmbH collide with regard to the suspension regime. In principle, the interest of the GmbH in the precautionary removal of the managing director from his functions should enjoy priority.

2.2 Formal requirements for the legal protection of the Managing Director

The ordinary courts are competent for legal disputes concerning the removal of the managing director and the termination of the employment contract. Local jurisdiction is the court of the company’s registered office. Functionally competent is the Chamber for Commercial Matters. The amount in dispute of an action for a deficiency resolution on the removal of the managing director is determined according to § 3 ZPO. Decisive is therefore the interest of the dismissed person to continue to be managing director and thus to have the steering and management power in his hands. On the other hand, there is the interest in keeping the recalled person away from the management. In any case, the removal of a Managing Director does not constitute a more serious interference with the rights of the Managing Director than his exclusion as a Partner. Consequently, the maximum value in dispute of the recall is the economic value of the recalled person’s share.

2.3. Representation of the GmbH in the process

2.3.1. Principle

If the management position is in dispute, the question arises who will take over the representation in the process. Under no circumstances may the managing director seeking legal protection indicate himself in his application as a representative of the GmbH. It is not permissible to engage in litigation both as a plaintiff and as a representative of the defendant. This also applies to disputes concerning resolution deficiencies. The representation of the GmbH is therefore carried out by the person who is to be regarded as its managing director in the event of victories of the company.

There are fundamentally two cases to distinguish. On the one hand, the managing director can sue against the appointment of a new managing director. To others, he may oppose his own removal.

If a shareholder claims that the decision to appoint a new managing director is ineffective, the GmbH, if the newly appointed person is the sole managing director of the company, will be represented by the company. If the newly appointed person is not the only managing director, the GmbH will be represented by the managing directors in representative numbers.

If a shareholder brings an action for invalidity of the decision on his own removal as managing director, the GmbH is represented by the other managing director(s). However, any overall power of representation of the sole other managing director shall not become sole power of representation when a challenge is brought by the other managing director. If the Managing Director has been the sole Managing Director, the representative shall be the newly appointed Managing Director or the Emergency Managing Director.

2.3.2. Special Representative

In addition, § 46 no. 8 GmbHG applies. After that, the company can appoint a special representative, but does not have to do so. If the GmbH does not make use of this possibility, any other managing directors, who are still in an authorized number, remain entitled to represent the GmbH.

2.3.3. Process maintainers

If the shareholders’ meeting is inactive, although the GmbH no longer has a sufficient number of managing directors, a process manager must be appointed for the GmbH in accordance with § 57 ZPO. The managing director seeking legal protection already has to work towards this with his bringing an action. When deciding on the appointment of a legal representative, the dismissed Managing Director shall be subject to a vote ban.

Subject to a deviating resolution of the shareholders’ meeting, the special representative or the process manager will then, at his own discretion, select the lawyer representing the GmbH in the process.

In the event of a dispute over the effectiveness of the appointment of the special representative, the special representative shall remain authorised to represent the GmbH as long as the defectiveness of the order has not been legally decided. This is particularly important to know. If the action indicates a false legal representative of the defendant company, the action is inadmissible for this reason alone. A new challenge is regularly time-limited because of the expiry of the challenge period. It is therefore appropriate not to jeopardise the effectiveness of the appointment of the special representative but to allow the appointment decision to take effect by refusing to bring an action for deficiency.

2.3.4. Representation by partners

If there are no other managing directors, the company does not have a supervisory board or advisory board and has not appointed a special representative, the plaintiff managing director can make his claim according to § 35 (1) sentence 2 GmbHG against the GmbH represented by the shareholders pending. Once again, service to one of several partners is sufficient. § 35 (1) sentence GmbHG does not remedy the inability of the leaderless company to take legal action. The standard only brings about the lis pendency of the thing. This is the reason why the managing director should already work in his application for the appointment of a process manager according to § 57 (1) ZPO.

2.4 Effect on organ position

The final decision that the removal is effective is ex tunc. Therefore, the person concerned loses his position retroactively to the date of the notification of the dismissal order. If, on the other hand, the court decides that the removal is ineffective, the removal ceases.

3. costs of legal protection of the managing director

In the event of participation in the company, even if the contestant wins the contest process, the contestant must share the costs of the contest due to the participation. However, the GmbH, which is defeated in the process, has a material-legal claim for reimbursement of costs against the shareholders voting for the resolution. The prerequisite for this is that they have brought about a manifestly unlawful dismissal order and thus drove society's eyes into a hopeless challenge process. However, beyond these cases of intentional breach of fiduciary duty, there is no right of recourse. Therefore, there is no recourse to mere negligent breaches of fiduciary duty and certainly no fault-free nature.

Submission of grounds by the shareholders

Partners engaged in dismissal may have an interest in ensuring that internal business is not known and that certain incidents which constitute an important reason in the person of the dismissed person do not become public. In particular, there may be a risk that the civil court will involve the public prosecutor or that the Treasury or other third parties will assert claims against the company. Therefore, not all reasons are regularly introduced into the process. However, it may turn out during the trial that the reasons given do not or possibly do not bear the recall. Then the question arises under which conditions the shareholders can be given important reasons during the ongoing process. In the absence of the prerequisites, legal protection of the managing director in the process must be considered again.

Revocation may subsequently be based on circumstances that already existed at the time of revocation. This also applies if they were not yet known to the competent body at that time. Boundaries can arise from the internal social competence order. In particular, the legal representative of the company may not add any further reasons on his own initiative. This requires a new decision by the recalling body and a new recall. In the case of a two-person GmbH, however, important reasons can be added in the proceedings without a new resolution of the shareholders’ meeting, if the shareholder who made the dismissal decision is at the same time the person representing the company in the dispute.