The assessment of a statutory-breaking decision is controversial. One of the fundamental problems with the right to improprietary resolution is the relationship between nullity and contestability. This is particularly ignited in the case of violations of general meeting resolutions against the articles of association of a public limited company. We explain the different criteria for assessing statutory-breaking General Meeting resolutions.

1st problem of the statutory-breaking decision

1.1. Mandation of statutory rigour

In stock company law, there is the requirement of statutory strictness. The statutes of an AG must be defined at the time of establishment and must have certain minimum contents (§ 23 AktG). Amendments to the statutes can only be made under certain conditions by resolution of the general meeting. However, a qualified majority is usually required (§ 179 paragraph 2 AktG). The scope for statutory regulations must be maintained within the Stock Corporation Act. This applies not only to the founding statutes, but also to any subsequent statutory amendment.

The organs of the AG, in particular the Management Board and Supervisory Board, are bound by the Articles of Association in their management. Actions that contradict the statutes may be unlawful. The requirement of statutory rigour ultimately protects the interests of shareholders by ensuring that corporate governance is carried out within the agreed rules.

The Stock Corporation Act, in particular in combination with case law, thus establishes a system in which the statutes of the AG play a central role for the organization and internal governance of the company. This creates a reliable legal framework for investors, creditors, employees and other stakeholders.

1.2 Admissibility of a decision amending the Statutes

§ 179 AktG is the central provision in the section on the amendment of the Statutes. It contains general rules on majority requirements and any other requirements (§ 179 (2) AktG). Amendments to the Statutes shall be adopted by qualified majority. This means that in addition to a simple majority vote (more than 50% of the votes cast), at least three quarters of the share capital represented in the resolution must also approve (§ 179 paragraph 2 AktG). In principle, the General Meeting is responsible for amending the Articles of Association. The resolution of the Annual General Meeting on an amendment to the statutes requires notarization (§ 130 AktG).

§ 124 paragraph 2 sentence 3 AktG is of importance for the procedure of amending the statutes. This requires that the text of a proposed amendment to the Statutes be published as soon as the agenda of the general meeting is announced. After the Annual General Meeting has adopted the amendment, it must be entered in the commercial register for effectiveness (§ 181 AktG). Registration shall take place on registration of the Bureau.

Furthermore, there are special provisions for certain cases of statutory changes. This applies, for example, to measures to increase capital and reduce capital.

The AG cannot effectively exclude changes to its Articles of Association. According to § 179 (2) sentence 2, 3 AktG, however, the amendment of the statutes may be made more difficult. These may include increased majorities at the general meeting and other requirements.

1.3.Breakthrough resolution with formal infringement

General meeting resolutions deviating from the articles of association, which are neither covered by the articles of association nor meet the requirements for an amendment to the articles of association, are referred to as statutory-breaking resolutions.

Then the question arises as to how such a decision should be dealt with. It depends on whether such decisions are null and void or merely contestable.

Although the decision is illegal in both models. However, the legal effects differ. If the resolution is only contestable, the failure to bring an action for deficiencies leads to the effectiveness of the decree, § 246 (1) AktG. Only this potential strengthening of the unlawful into an effective resolution makes it necessary to examine whether statutory-breaking general meeting resolutions are unlawful or merely challengeable.

If the statutory contrary resolution is regarded as an unsuccessful attempt to amend the statutes, which has failed, for example, the qualified majority in accordance with § 179 (2) sentence 1 AktG or the registration requirement of § 181 (1) sentence 1 AktG, the resolution is null and void. § 181 paragraph 3 AktG shows that the resolution shows no effects. This applies irrespective of the initiation of an imperfection procedure.

If, on the other hand, the resolution is understood as a measure in which the shareholders simply did not recognize the contradiction with the current statutes, there is mere contestability. As a result, the decision remains in force. The violation of the Articles of Association is mentioned in § 243 (1) Variant 2 AktG. On the other hand, the grounds for invalidity in § 241 AktG do not hold the violation of articles of association in its own category.

Ultimately, the question is therefore whether there is another legal way to temporarily suspend the current statutory law in addition to the regular statutory amendment.

2. The different solutions for a statutory-breaking decision

The handling of such statutory-breaking resolutions is controversial on several levels. There are different proposals for a criterion to distinguish between nullity and contestability.

In previous decisions, the BGH focused on the duration of the effect. In principle, a breach of the articles of association which regulates an individual case does not lead to nullity, but at best to contestability, even without complying with the formal requirements of an amendment to the articles of association. On the other hand, only the breach of the statutes which establishes the state, i.e., which is intended to be permanent, should be null and void without further ado.

Others, on the other hand, always recognize in the violation of the articles of association a failed amendment of the articles of association with the consequence of nullity. This should be independent of whether the measure should be permanent or only in individual cases. The reason for this is that punctual and conditional effects cannot be precisely distinguished from one another.

In addition, the intention comes into consideration as a distinguishing criterion. If the violation of the statutes occurred without a corresponding awareness, the decision is to constitute a simple violation of the statutes. It should therefore only be countervailable. However, such a distinction is not convincing. It does not make sense why such a decision should be privileged over the deliberate violation of the statutes. Then the question arises in which person this subjective element must be present at which time. Its actual findings are also challenging.

In any case, there is agreement that de facto changes to the statutes are not possible. Even repeated violations of the statutes do not lead to the statutes giving way.

In order to prevent durability from occurring, opposing shareholders should, as a precautionary measure, bring an action against the corresponding resolution.

3rd decision of the BGH on the statute-breaking decision

3.1. Structure of the statutory-breaking decision

The Federal Court of Justice (BGH) had to examine such a statutory-breaking decision in one case.

The articles of association of the defendant public limited company stipulated that the annual accounts must always be audited regardless of legal obligations. This obligation has not been observed in a few years. When the corporation became aware of this, it wanted to solve the issue for the future and the past. Therefore, the Annual General Meeting duly decided to amend the Articles of Association so that in future a final audit beyond the legal obligations will be at the discretion of the Executive Board. In addition, the Annual General Meeting decided to waive the omitted annual audits of previous years. Two shareholders appealed against the last decision.

3.2. Legal assessment

The lower court had still based on the fact that the Annual General Meeting subsequently dealt with the handling of the examination, which had been omitted for years. It would therefore have met the requirements of the Statute. This did not imply an amendment to the statutes or an infringement of the statutes. The OLG therefore considered the decision neither null and void nor countervailable.

The BGH, on the other hand, did not share this assessment. It is without influence that the Executive Board actually violated the statutory obligation for years. Merely contrary to the statutes does not yet bring about a change in the statutes. By waiving the statutory audit obligation laid down in the articles of association, however, the resolution violates the company statute.

Then the question arises whether this waiver decision could become effective as a punctual breakthrough of the statutes. The BGH pointed out that the legal institute of breaking the statutes is controversial both with regard to its case groups and with regard to the need for it. Subsequently, the BGH responded by explaining that, in view of the breach of the Articles of Association, there was no need for a decision between nullity and countervailability. Therefore, the decision must in any event be annulled.

In this case, the BGH had the opportunity to decide how to assess statutory-breaking Annual General Meeting resolutions. Nevertheless, he decided against it again. It is right that he should not have declared the decision null and void. In procedural terms, the fact that an already annulled decision can no longer be declared annulled must be criticised. In this case, the declaratory action shall have logical precedence over the arrangement action.

Impact at the GmbH?

A statutory-breaking resolution is also conceivable at the GmbH. In contrast to stock company law, however, GmbH law has no formal statutory rigour in the sense. Here too, however, a clear line is still missing and thus a demarcation from the law of the public limited company. However, it can be assumed that higher requirements are to be imposed on the nullity of resolutions than in the case of a public limited company.