Every GmbH needs at least one managing director to be able to act. The managing director represents the GmbH externally and makes everyday business decisions. But if a significant change in the relationship between the GmbH and its GmbH Managing Director is to occur, the resulting termination can quickly become more important for both parties. Therefore, a basic understanding of the role of the GmbH Managing Director and the different separation options helps to identify avoidable errors and create the greatest possible legal certainty for Managing Directors and society.

Managing Director Salary

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1st termination of a GmbH Managing Director: position of organ vs. employment relationship

1.1. Termination of a GmbH Managing Director: the organ position

German company law distinguishes between the position of executive and the employment of the GmbH managing director. The corporate position results from the appointment of the managing director. As a rule, this is done by a corresponding resolution of the shareholders’ meeting or already by stipulation in the GmbH Statute. Due to the position of executive, the managing director becomes the representative of the GmbH in accordance with § 35 GmbHG. In addition, there are various other organic duties of the GmbH Managing Director, such as the primary management competence or certain notification obligations to the commercial register according to § 78 GmbHG.

1.2. Termination of a GmbH managing director: the employment relationship

The employment relationship between the GmbH Managing Director and the GmbH must be strictly separated from this. Of course, the employment relationship is usually based on an employment contract concluded between the parties within the meaning of § 611 BGB. This contract regulates in particular the remuneration, the working time, the field of activity and the holiday entitlement of the GmbH Managing Director. Whether the GmbH Managing Director is to qualify as an employee within the framework of this employment relationship is very controversial in law. Therefore, this topic should be left out of this article.

1.3. Implications of the distinction between organ position and employment relationship

Due to the strict separation of organ status and employment relationship, the effectiveness or existence of both legal relationships must also be assessed independently of each other. Thus, it is possible to justify the position of a GmbH Managing Director without concluding a corresponding employment contract. Conversely, it is permissible to conclude an employment contract without establishing the organic status as managing director. In practice, of course, only both actions together make sense for the GmbH. However, the distinction between the two legal relationships becomes really relevant when they are terminated. In this context, the effective termination of one does not automatically affect the existence of the other legal relationship. As a rule, therefore, in the event of separation from a managing director of the GmbH, care must be taken to effectively terminate both the position of director and the employment relationship.

2nd termination of the executive position after termination of the GmbH Managing Director

The termination of the executive position of the managing director takes place in accordance with § 38 GmbHG by revocation of the order. The revocation is in principle possible at any time and without material conditions. However, the partnership agreement of the GmbH can make the revocation of the order dependent on the existence of an important reason. The General Meeting is responsible for the removal of the GmbH Managing Director without deviating from the provisions of the social contract. In this case, the revocation of the order must be made by a corresponding decision. If the director to be removed is at the same time a shareholder, he is not entitled to vote under the resolution (see § 47 paragraph 4 GmbHG). In any case, the revocation must be declared to the managing director after the resolution. Subsequently, the revocation takes effect by receiving the revocation declaration from the managing director. This, of course, also immediately results in the extinction of the organic management authority and representative power.

In order to terminate the employment relationship of the GmbH Managing Director, different options for action are considered, depending on the circumstances.

3.1. Ordinary termination of employment

If there is a permanent employment relationship between GmbH and Managing Director, then a regular termination according to § 620 paragraph 2 BGB can generally be made on both sides. In addition, it is of course also possible to agree on a proper right of termination for a temporary employment relationship between both parties. In the absence of a different social contractual provision, the general meeting is also responsible for the termination. In addition to an effective termination decision, the GmbH must pay particular attention to compliance with the termination period within the framework of an ordinary termination. Primarily, an individually agreed notice period applies. If this does not exist or is ineffective, the statutory deadlines for employment contracts according to § 622 BGB apply accordingly. In the meantime, there is no need for any special objective reason for termination.

3.2. Extraordinary termination of employment for an important reason

Every employment relationship, regardless of a possible term, is exceptionally cancellable for an important reason (see § 626 (1) BGB). This principle also applies to the employment relationship of a GmbH Managing Director. In principle, the shareholders’ meeting is also responsible for extraordinary termination. In this context, the Managing Directors of the shareholders have no voting rights with regard to the termination decision. In contrast to ordinary termination, extraordinary termination of employment may be declared without notice with immediate effect. However, this far-reaching and drastic measure is therefore only permissible on the basis of the existence of a justifiable important reason. According to § 626 paragraph 1 BGB, the existence of facts shall be deemed to be unreasonable as such, on the basis of which the announcer considers the continuation of the employment until the expiry of the termination period or termination of the employment relationship.

What is to be considered as an important reason in this sense depends on the respective circumstances of the individual case and the interests of the contracting parties. An important reason for the GmbH is, among other things, personal enrichment at the expense of the company, the committing of crimes or the disregard of shareholder rights by the managing director. Conversely, in individual cases for the managing director, for example, the subsequent restriction of the management authority or the violation of personal honour by shareholders may constitute a reason for immediate termination. It is hardly possible to lump together the issues in question due to the fundamentally necessary consideration of interests. Therefore, in any case, an examination of the specific individual case is necessary before extraordinary termination.

3.3. The termination agreement for the termination of a GmbH managing director

In many cases, especially in the case of consensual separations, the conclusion of a termination agreement is a worth considering alternative to termination. The advantage of the termination agreement is that it can be much more flexible in implementation than a termination. Thus, it does not presuppose an important reason or the observance of a deadline. Instead, however, the parties must agree on the contract details. The various contractual contents include, among other things, the time of termination, possible exemption or severance payment of the managing director, the issuance of an employment certificate and the duty of confidentiality. If the contracting parties want to finally settle existing claims from the employment relationship through the termination contract, this intention must clearly emerge from the contract.

Competence to conclude the termination agreement falls under the jurisdiction of the shareholders' meeting without a different regulation, as in the case of termination. When concluding the contract, care must always be taken to preserve the written form (see § 623 BGB). A termination agreement that leaves this formal requirement unfulfilled is without effect according to § 125 BGB.

Termination of a GmbH Managing Director: the tying agreement

Although it is possible in principle to eliminate the strict separation between organ relations and employment relations. For this purpose, a coupling clause can be included in the employment contract of the managing director. Legally, this is a dissolving condition of the service contract in the case of revocation of the order as managing director. However, if the Managing Director is not recalled on the basis of facts that would entitle the GmbH to terminate without notice, the notice periods according to § 622 BGB must also be observed accordingly in the case of a coupling agreement. The linking clause thus leads above all to the fact that the organic removal of a managing director can be interpreted at the same time as ordinary termination of the service contract.

Unauthorized extraordinary termination of the GmbH Managing Director

If a GmbH Managing Director has been terminated by the GmbH without notice, although there is no justifiable important reason, he can in principle demand the further payment of his remuneration. However, this only applies if he expressly objects to the termination and offers his work to the GmbH.

Conclusion on the termination of a GmbH Managing Director

If a GmbH and its managing director separate from each other, you have to terminate both the organ relationship and the employment relationship separately. In particular, attention must be paid to the respective individual requirements for the chosen action option, in particular any possible deadlines or necessary justification reasons. This also applies to the case of the integration of a tying agreement in the employment relationship. Also such a contractual clause does not automatically lead to an immediate termination of the employment relationship by the mere revocation of the appointment of managing director.