If the shareholders’ meeting of the GmbH has recalled the managing director by resolution, the question arises as to when the recall is effective. A fundamental distinction must be made between co-determined and non-co-determined GmbHs. In the case of the latter, it is then still decisive whether the manager has a special right to management and whether the decision has been formally established. In this article, we explain when the removal is effective and how the company forfeits the removal right.

1. removal of the managing director

The removal of the managing director is regulated in § 38 GmbHG. Accordingly, the appointment of the managing director can be freely revoked at any time. A restriction of this free revocability is possible in the social contract. However, according to § 38 (1) GmbHG, the removal must always be possible for important reasons. Responsible for the removal of the managing director of a GmbH is the shareholders' meeting.

Effectiveness of the removal of the Managing Director

2.1. First, distinction between co-determined and non-co-determined GmbH

If the shareholders’ meeting has decided to dismiss, the question arises when the dismissal of the managing director takes effect, i.e. he loses his position as managing director. This depends primarily on whether the GmbH is co-determined.

At a co-determined GmbH, employees have co-determination rights. These co-determination rights enable employees to influence the company’s decisions. This applies, for example, to the working conditions or the strategic orientation of the company. Co-determination aims to strike a balance between the interests of employees and those of the company, thus contributing to a harmonious and efficient working environment.

Co-determination in a GmbH is regulated by the Works Constitution Act and the Co-determination Act. There are different forms of co-determination, depending on the size of the company. In small and medium-sized enterprises (up to 500 employees), there is a works council that represents the interests of employees. In companies with more than 500 employees, company participation comes into force in addition to the works council level. Employee representatives are sent to the Supervisory Board. Depending on the size of the company and the applicable co-determination law, the number of employee representatives may vary. In some cases, employee representatives can take up to half of the Supervisory Board seats

In the case of a co-determined GmbH, the removal is immediately effective even in the event of a dispute over the existence of an important reason (§ 84 (3) sentence 4 AktG, § 31 (1) MitbesG).

In the case of a non-co-determined GmbH, on the other hand, it is decisive whether the dismissed managing director has a special statutory right to management. It is also relevant whether the dismissal order was formally established by a meeting leader. If no resolution is adopted, the effectiveness depends on whether § 84 (3) sentence 4 AktG applies.

2.2. Managing Director with special management law

Managing Directors may have a special right to management. This then interferes with any recall that the managing director has not approved. Therefore, the corresponding dismissal order violates § 35 BGB. The legal consequence of § 35 BGB is then the ineffectiveness of the Abberung decision. Even a merely provisional recall is therefore ineffective.

If the shareholders grant such a special right to the managing director, they must accept that he only loses it when it is legally established that the conditions for the withdrawal of the special right exist. Until this legally binding determination, the managing director therefore remains authorised to represent. Only the judgment then replaces, according to § 894 ZPO, his lack of individual consent to his removal. Until the final judgment, however, the decision remains pending ineffective.

If the managing director refuses his approval, the dismissal order is finally invalid. It is therefore null and void, so that an action for an order is not absolutely necessary. Nevertheless, the special right holder who has been removed without his consent is usually advised to bring the action for a deficiency in resolution, in any case in the actual absence of an important reason. Otherwise, in his further work for the society, he is always under compulsion to justify why he has not lost his organ position. This is especially true if the meeting leader has erroneously established the dismissal decision despite lack of consent.

2.3 Decision adoption

If the managing director is not entitled to a special right, the at least provisional validity of the dismissal order is determined by the result of a resolution. After that, the formally established recall is first effective. It must be challenged by the dismissed manager. However, the position of institution shall be retained in the first instance if the rejection of the request for revocation has been rejected by the vote of the person concerned and this result of the vote has been found to be effective.

2.4. provisional effectiveness of the removal of the managing director analogous to § 84 (3) sentence 4 AktG?

According to § 84 (3) sentence 4 AktG, the revocation of the Executive Board of a public limited company is effective for an important reason until its ineffectiveness has been legally established. According to § 31 (1) MitbesG, this also applies to GmbHs co-determined under this Act. Therefore, the managing director loses his office on receipt of the dismissal declaration, as explained above, regardless of whether there is actually an important reason.

Originally, § 84 (3) sentence 4 AktG was also applied to non-co-determined GmbHs if a third-party managing director or a shareholder managing director without a special right of managing director was removed. However, the Federal Court of Justice (BGH) ruled on 14.05.2019 that § 84 (3) sentence 4 AktG does not apply.

The reason for this is that § 84 (3) sentence 3 AktG is tailored solely to the circumstances in a public limited company. In this case, there is a separate appointment and removal committee with the Supervisory Board, independent of the shareholders and thus neutral. In a GmbH, on the other hand, dismissal falls within the remit of the shareholders’ meeting. Then, with the mere assertion that the other shareholder is unacceptable for an important reason, a shareholder could eliminate his vote and bring about a formally valid dismissal order. This would be a convenient means of eliminating a managing partner for years in the event of disagreements in a two-person GmbH. This creates the risk of the influence of non-company interests.

There is no doubt in the analogous application of § 84 (3) sentence 4 to a GmbH which has voluntarily appointed a Supervisory Board, which has the exclusive responsibility for the removal of the Managing Directors. Even then, however, there may be well-founded doubts about the neutrality of the Supervisory Board. This applies, for example, if a majority shareholder managing director is to be removed, who has often also selected the majority of the supervisory members.

2.5 Conclusion: Effectiveness of Dismissal

In the case of co-determined GmbHs, the removal is effective immediately (§ 84 (3) sentence 4 AktG, § 31 (1) MitbesG).

In the case of a non-co-determined GmbH, care must be taken whether the managing director has a special right to management or whether the decision has been formally established.

If there is a special right of the managing director, the resolution of dismissal according to § 35 BGB is null and void. Therefore, the recall is ineffective.

If the decision has been formally established, the removal is in principle effective.

In the absence of a formal decision, the removal shall not be provisionally effective. The effectiveness of the removal depends on the material legal situation. The state of limbo resulting from the consideration of the material legal situation is to be accepted until the final decision on the effectiveness of the removal.

2.6 Effectiveness of the removal of the Managing Director in external relations

However, the question also arises as to when the dismissed Managing Director no longer has any representation authority in relation to the GmbH’s business partners. The business partner who knows that the managing director registered in the commercial register has been recalled, but who defends himself against the recall in court, may in principle rely on the power of representation according to § 15 HGB until he is positively aware that the recall is effective or that it has been registered in the commercial register. This commercial register publication effect regularly establishes a reason for disposition against the effectively removed managing director to refrain from any further activity for the company. Whether actions of the managing director are effective against a third party depends on whether the dismissal decision of the shareholders’ meeting was effective.

3rd Revocation

3.1. Definition of mutual dismissal of directors

In the case of zwei-Personen-GmbH, it is not uncommon for the shareholder-managing directors to be reciprocally recalled for an important reason. In doing so, the Managing Director of the shareholder who is threatened with dismissal responds to the announcement of his dismissal by saying that he – irrespective of whether there are any important reasons in the person of his counterparty – has his dismissal as Managing Director resolved for an important reason.

In his view, the advantage lies in creating a confusing situation through the mutual coercive measures. The more confusing the factual and legal situation is, the more courts tend to maintain the status quo. Then the counter-dismissal can possibly have the effect that against an actually effective dismissed person at least once no interim order is issued, which prohibits him the further exercise of his management activities. Furthermore, the other shareholder gets on the defensive, as so also important reasons in his person, i.e. possible own misconduct, are addressed. If, in the course of the mutual accusations, a lasting disruption of the relationship among the managing director turns out, the original attacker must fear for the loss of his organ position. Overall, the mutual recall may then result in considerable pressure to agree amicably.

3.2 Effectiveness of mutual recall

However, such a dismissal race is defused by the fact that the effectiveness of the dismissal depends on the objective legal situation. Therefore, both managing directors must continue to officiate in the main in the provisional injunction procedure, subject to other provisions in the articles of association, until the final court decision. Thus, according to § 49 GmbHG, the dismissed person still has the opportunity to convene a shareholders’ meeting. In addition, he has access to the business premises and the documents contained therein. Preventive interim legal protection against the imminent dismissal is also possible if dismissal reasons are not recognizably present or even on request are not substantiated and the legal situation is clear.

3.3 Joining of actions

If an action has been brought against both dismissals, it must be ensured that both dismissals are jointly tried and jointly decided. The same applies in the provisional injunction procedure. A separate negotiation and decision is errors of discretion, since the conduct of both managing directors must be taken into account in substantive law in the overall assessment of the existence of important reasons.

4. Time limits for the removal of the managing director

The removal of the managing director is not bound by any deadline. Therefore, a recall can also be based on longer past incidents. In particular, the period of § 626 paragraph 2 BGB does not apply to them. The right of removal can only be forfeited on general principles if it has not been exercised within a reasonable period of time. The time moment, i.e. the pure time elapse, is not yet sufficient for the effect. There must also be a circumstance. This is the case if the managing director may assume due to the behavior of the shareholders that they no longer wanted to derive rights for the important reason. However, waiting for a long time with the recall can still speak against the fact that the relevant process was a serious one.