The company form of the GmbH is largely designed for a personal connection of the shareholders. For a wide variety of reasons, however, in practice a GmbH shareholder regularly leaves the company. The severance payable may even jeopardise the economic survival of society in individual cases. In order to avoid such a scenario, the individual design options with regard to severance payment clauses in GmbH company contracts will be briefly presented below.

If a shareholder leaves a GmbH, he has, regardless of the reason, a right to payment of a severance payment. The entitlement to severance pay therefore exists in principle both in the case of voluntary and involuntary withdrawal of a GmbH shareholder from the company (cf. the article “Exclusion of GmbH shareholders” on involuntary withdrawal). Although this entitlement is readily due to each shareholder as a general legal principle, it is appropriate for various reasons to regulate the severance payment arrangements in detail in the articles of association by means of a severance payment clause. The legal certainty created in this way benefits GmbH and shareholders equally.

If there is no social contractual provision for the severance pay, the amount of the severance pay entitlement depends on the full economic value of the GmbH shareholding. In individual cases, this can severely affect the financial security of a GmbH. However, the amount of the severance payment can be individually adjusted and agreed by means of a corresponding severance payment clause in the social contract. Thus, it is also possible to design the severance payment amount differently for different cases of departure of a shareholder. In particular, by means of such a severance payment clause, the factual differences between voluntary resignation (e.g. by termination) and involuntary resignation of a shareholder (exclusion, confiscation) with regard to the severance payment can be taken into account. In special circumstances, it is even permissible to completely exclude a severance payment of the retiring shareholder.

2. The legal limits of the freedom of design of a severance payment clause

Within the framework of the drafting of contracts, particular attention must be paid to the limits of freedom of design. If the statutory severance payment clause exceeds certain content limits, this has a direct negative impact on the effectiveness and applicability of the clause. Accordingly, when drawing up a severance payment clause for a GmbH social contract, particular attention must be paid to the equal treatment of all shareholders and the avoidance of a gross mismatch between severance payment amount and share value. Exceeding these limits, which are not uniform in the absence of legal regulations, can in many cases lead to the nullity of the severance payment clause (according to § 138 BGB or § 241 ff AktG analogue). Consequently, the clause would be worthless for GmbH and shareholders.

For this reason, the clause should already be drawn up with foresight when the contract is drawn up, since even a gross mismatch between the severance payment amount and the value of the share leads to the inapplicability of the severance payment clause after several years. In principle, due to this complexity, it is highly recommended to adapt a severance payment clause when drawing up a social contract to the specifics of the individual case.

In practice, the design of severance clauses occurs in numerous different forms. One of the most frequently chosen variants is the book value clause. Through the inclusion of a book value clause, the severance payment owed upon departure is limited to the book value of the company assets corresponding to the share of the departing shareholder. For the amount of the settlement, existing hidden reserves and goodwill are not taken into account in this way. Thus, the amount of the severance payment is reduced compared to a severance payment according to the true economic value of the shares. The integration of a book value clause into the GmbH Statute is generally permissible. However, as the economic value of the company increases, there is a risk that the severance pay clause will become inapplicable due to a subsequent gross mismatch between the amount of the statutory and the economically appropriate severance pay. In this case, according to the case law of the Federal Court of Justice [BGH], the outgoing shareholder is entitled to an appropriate severance payment.

A modification of the book value clause is the nominal value clause. In the calculation of the severance payment amount, this even disregards reserves that are openly shown. Accordingly, the risk of ineffectiveness of the severance payment clause is even greater than that of the book value clause.

3.2. The substance value clause

Another design alternative is the substance value clause. Such a severance payment clause is based on the determination of the share value on the basis of the exposure value. Through the separate valuation of the individual assets of the GmbH, the hidden reserves of the company for the severance payment amount are taken into account under this severance payment clause. However, a potential company / or business value is left out. Therefore, there is also the risk of a gross mismatch between the final severance payment value and the full economic value of the share of the business when integrating substance value clauses into the company’s social contract, in particular in profitable companies. Nevertheless, a substance value clause in special individual cases (e.g. pure asset management GmbH) can constitute a sensible contractual regulation.

3.3. The income value clause

In addition to the book value clause, the most frequently chosen design variant in practice is the income value clause. Income value is a separately calculated variable that is based on the company’s previous and future income. The income value clause per se does not constitute a fundamental change to a severance payment according to the full economic value of the shares, since the full economic value is usually to be determined according to the income value. However, income value clauses can usually be modified by the contract designers in such a way that a fair and appropriate result is achieved for the company and the shareholder. This can be achieved in particular by means of percentage restrictions or by means of a risk premium on the base rate. For reasons of legal certainty, the definition of the method of calculating the return value should be taken into account in drawing up contracts.

3.4. Simplified calculation methods

Simple social contractual references to special calculation methods, such as the “Stuttgarter method” valid until the end of 2008 or the “simplified income value method” valid since then (§§ 199 ff.). BewG, as a rule evaluation, simplifies the company valuation considerably, but in many cases leads to inaccurate or inappropriate results. The differences between the two calculation methods mentioned above are already considerable. While the “Stuttgart method” often leads to a relatively low share valuation, the opposite is usually the case when applying the “simplified income method”. In particular when using the “Stuttgart method”, there is therefore an increased risk of a subsequent gross mismatch between severance pay and share value. Shareholders whose articles of association still contain an unmodified reference to the “Stuttgart procedure” should therefore consider amending the severance payment clause.

4. Exclusion of severance payments

All the variants of severance payment clauses presented so far have different advantages and disadvantages, as shown briefly in the offered version. By cleverly selecting and modifying the severance payment modalities through the drafting of the contract, a regulation useful for all parties can usually be created. In addition, in special individual cases – as already mentioned at the beginning of the article – there is the possibility of a complete exclusion of the severance payment entitlement of the outgoing shareholder. Since such an approach constitutes a significant interference with the economic freedom of the shareholders, it is only permissible on the basis of a special objective justification in favour of the GmbH and at the expense of the shareholders concerned. In particular in circumstances in which the company membership exists only on the basis of other contractual agreements (e.g. “Manager/employee model”) or the GmbH could not choose the membership of the shareholders (e.g. not blood-related heirs of a deceased shareholder) such a justification can exist.

5th Conclusion

All in all, it remains to be noted that even a matter that is manageable at first glance, such as that of the severance payment clause in GmbH statutes, requires both a pronounced factual analysis in individual cases and an interest-oriented contract drafting. Here the devil lies – as so often – in the detail, a blanket solution that equals all companies and shareholders does not exist. If you are in a GmbH start-up process or have questions about the severance payment clause in your GmbH statutes, our experts can advise you individually.