The limited partnership (referred to as KG for short) in its various forms (especially the GmbH & Co. KG) is one of the very frequently chosen forms of company in the business world. The factors of management and representation of the company play an important role primarily for the ability of the limited partnership to act. In addition, in particular the management activity can be used, for example, in tax arrangements (keyword: commercial embossing). Therefore, in the following article we deal with the basics of the essential company law regulations.

In the video we explain the advantages & disadvantages of the commercial stamping of a classic GmbH & Co. KG and the possibilities of avoidance.

1st Management of the limited partnership

1.1. The basics for managing a KG

As usual, the regulations governing the management of the limited partnership are governed by the legal regulations for the open commercial company (OHG) (see §§ 114-117, 161 paragraph 2 HGB). One of the legal guiding principles is the principle of self-organization. This means that in partnerships (GbR, OHG, KG) only shareholders can be considered as organic managing directors. A so-called foreign organization, on the other hand, is unknown in the law of partnerships. However, there are certain special features for the limited partnership, which standardizes § 164 HGB. Accordingly, only a personally liable partner (complementary) of the limited partnership is authorised to manage the company’s business. On the other hand, a limited partner (commander) is excluded from the management according to the regulations of the Commercial Code (HGB). In addition, limited partners generally have no right to object to measures taken by managing directors. Explicitly excluded are measures of the managing directors that go beyond the usual business operations of the limited partnership (§ 164 sentence 1 HGB).

As a supplement to the exclusive management by general managers, the limited partners may not influence the managing directors indirectly through shareholder resolutions. Corresponding shareholder decisions are contestable. With regard to the company’s annual accounts, the preparation (preparation, etc.) falls within the responsibility of the managing directors. However, this is a matter for the shareholders, so that the limited partners also participate in this.

1.2. Strengthening the rights of limited partners

In addition to those mentioned in §§ 161 ff. However, according to § 163 HGB, the legally fixed regulations apply above all to the freedom of design under the social contract. On the basis of this provision, the shareholders can, through corresponding agreements in the articles of association, make the regulations applicable to the limited partnership deviating from the statutory provisions. This opens up the possibility of significantly strengthening the company rights of limited partners. This can be done in individual cases, for example, by special instruction rights, shareholder resolutions and voting rights deviations from § 119 (1) HGB (majority resolutions).

Furthermore, there is the possibility of appointing limited partners themselves as managing directors, contrary to the legal guiding principle. If the scope of the executive management powers of the managing limited partner(s) is not explicitly defined, it corresponds to the powers of personally liable managing directors. According to the case law of the Federal Court of Justice (BGH), it is even permissible, in addition to the appointment of the limited partner as managing director, to exclude the other personally liable partners from the management. In this context, however, § 114 paragraph 2 HGB (in conjunction with § 161 paragraph 2 HGB) does not apply, so that the exclusion of the personally liable partners must in any case be expressly agreed by the management. The revocation of the management authority requires according to §§ 117, 161 paragraph 2 HGB an important reason and can only be obtained by court judgment. Both conditions are meanwhile available and can be replaced by deviating agreements.

1.3. Restriction of the rights of limited partners

In accordance with the strengthening of the rights of limited partnerships in society, further derogations can be made from the legal requirements at the expense of the limited partnerships. A restriction of rights is to be achieved, for example, by an exclusion of voting rights, also applicable for exceptional transactions. Furthermore, it is permissible to appoint a common representative for a large number of limited partners or to further restrict the information rights of the limited partners.

However, the restriction possibilities find their limit in the “core area” of limited partnership rights. These include, inter alia, changes to the articles of association, the inclusion of new partners, changes to the purpose of the company or decisions to use profits. The participation of limited partners in these social actions may not be subject to any restrictions.

The management discussed heretofore must be distinguished from the representation of the company. While the management concerns the decision-making processes within the company, the representation of the company in external relations vis-à-vis third parties. Only the lawful representatives of the limited partnership can conclude legally valid contracts with third parties from the outset. In principle, according to § 170 HGB, the limited partners have no authority to represent the limited partnership. In this respect, this initially applies independently of any management powers granted to the limited partners. The KG is therefore represented exclusively by the personally liable partners. However, it is also permissible within the framework of the granting of representative powers to deviate from the basic legal concept and to grant representative power to the limited partner. Both a simple power of attorney, a general power of attorney or the commercially regulated Prokura come into consideration. On the one hand, such a representative power can already be granted to the limited partner in the social contract. Alternatively, the power of representation can also come about by individual agreement.

If the given power of attorney is based on an individual transaction, the collection of the same is governed by the regulations agreed in this transaction. However, if the representative power of the limited partner was granted on the basis of the social contract, it constitutes in this respect its own membership right from the company affiliation. In this case, the power of representation is probably only possible on the basis of the existence of an important reason and by a shareholder resolution. In contrast to the management authority, the power of representation cannot be withdrawn from a personally liable partner. However, an overall representation can be agreed with an authorized representative. Thus, the right of representation of the personally liable partner can be made dependent on the respective cooperation of a limited partner.

3rd separation of management and representative power in the KG

To what extent the granting of management and representation power is actually possible or permissible separately from each other has so far remained unclear. For example, the legal opinion on this aspect is that every personally liable shareholder entitled to represent must also have executive authority. Accordingly, a withdrawal of one right should only be possible by simultaneous withdrawal of the other right. Otherwise, this view considers the measures concerned to be inadmissible. In any case, it can be said that, as a rule, both rights only make sense if they are jointly granted. Finally, the external measures taken internally by the management must be legally feasible. However, this is only possible for the managing directors, whether general manager or limited partner, insofar as they have correspondingly been granted the power of representation for the limited partnership.