Managing Directors of a GmbH can also take time off in accordance with § 38 paragraph 3 GmbHG. There are different reasons for taking time out. We explain when you can take time off, what proof is to be provided and what rights and obligations the managing directors and the company have.

1st time off for managing directors

§ 38 paragraph 3 GmbH is intended to ensure that managing directors are no longer faced with the choice of either resigning their mandate in special life situations or continuing to bear considerable liability risks from organ responsibility despite their absence.

From a dogmatic point of view, these are two claims which are connected in succession. The claims are such on revocation of the order and on assurance of reappointment. The claim for assurance of reappointment arises only if the managing director has asserted the claim of revocation of his order and the order has subsequently been revoked. These two claims in combination can be described as a claim to time-out.

The aim of the regulation is to strike an appropriate balance between the interests of the director in a temporary rest of the mandate and the interests of the company, the shareholders and the other interests of legal transactions.

2nd time-out procedure for managing directors

2.1. Request of the Managing Director

The time-out procedure is initiated by a request from the managing director. The application does not require any particular form. For better documentation, however, it is recommended to submit the application in writing. In principle, the application must be addressed to the responsible body of the GmbH for the removal.

An announcement of the time-out is not planned. Therefore, the request can in principle be made at any time if it is established that there will be a reason for time off during the period of recall. The application is therefore possible at the earliest, if the relevant life situation is foreseeable with certainty. In the case of the disease, the application is therefore only possible with the occurrence of the disease. Nevertheless, the time of application is limited by the organic fidelity obligation. This forbids the managing director to submit the application without the necessary advance.

2.2. Resolution of revocation and assurance of reappointment

Time off is granted by two shareholder resolutions. The revocation and the assurance are made simultaneously by shareholder resolution. The assurance is a debt obligation. Fulfillment occurs through the organic act of reappointment after expiration of time off. However, it can also be done by arranging the managing director on a temporary basis at the end of the time-out.

The revocation and the new order must be entered in the commercial register. However, the special character of the removal is not recognizable from the commercial register. Reappointment and recall cannot be registered at the same time. The registration of the reappointment is only possible after the reappointment has taken effect.

After expiration of the time-out, the managing director may be recalled in accordance with general rules or resign his office. In addition, the company may object to the reappointment claim that a final recall should be made or link the reappointment to a recall at the same time.

2.3 Consequences in case of breach of duty of the company

The GmbH can withdraw the assurance of the re-order. However, if this is done without an important reason, the company is liable for damages because it violates its obligations under the assurance. If, on the other hand, there is an important reason, such as a gross breach of duty by the managing director, the managing director is not entitled to compensation. However, the important reason cannot be identical to the reason for the time out. Something else only applies if new knowledge on the extent of the impairment is now available.

Rights and obligations of the Managing Director during time-out

The managing director is to be released from all duties during the time-out. However, the ban on competition continues to apply during the break. This is based on the prior fiduciary duty resulting from the promised reappointment. The ban on using the company’s business opportunities for its own purposes should also apply. The relationship of the managing director to the company can therefore be described as an organic special relationship, which is characterized by pre- and post-effective fidelity and care obligations.

Time off has no impact on the employment contract. In particular, the removal cannot be reinterpreted as an implied termination of the employment contract. Therefore, the employment contract remains in place. Nothing else shall apply only if it contains a tying clause linking its continuity to the continuity of the order. Then the managing director must be offered a corresponding new employment contract at the time of reappointment. It is recommended in the employment contract as a precautionary arrangement to make a possible time-out. In particular, it makes sense to regulate the suspension of contractual performance obligations. Remuneration entitlements for the period of time off shall be regulated separately.

Furthermore, the parties remain free to grant the managing director certain contractual rights for the period of time off, such as access to information, access to e-mails or access to the business premises. However, such agreements may involve liability risks. Therefore, it is recommended to use it only with restraint or to provide for liability exemptions for the managing director.

4th time off for managing directors in concrete situations

4.1 Time off for managing directors due to maternity leave

The managing director is entitled to time off when she is pregnant. This applies regardless of whether she is registered as female in the birth register. Relevant issues are pregnancy and delivery. According to § 38 (3) sentence 2 number 1 GmbHG, the term of protection of § 3 MuschG, which is linked to the release, is relevant for the duration of the time-out.

Pregnancy must be stated and proven as a reason for time-out in the request for time-out. The latter can be done by a medical certificate, the certificate of a midwife or maternity nurse. In addition, indicate the period of time off.

The right to time off exists only if another managing director is appointed. The relevant assessment period shall be the date of recall. Thus, even a company with several managing directors can refuse to grant time off if it is established that all other managing directors will leave at the time between application and coveted revocation. However, it would be untrue to wantonly bring about this state of affairs. On the other hand, the company is obliged to appoint another managing director to create the conditions for the removal claim.

4.2 Time-out for managing directors to care for relatives

4.2.1. Conditions

The obligation of proof also applies to parental leave and care. Proof of the need for care is usually to be provided by presenting a certificate of the nursing class or the medical service or a corresponding certificate of the private compulsory care insurance. The entitlement to time off also requires parental leave and care that another managing director is appointed

The managing director can claim a maximum of three months off. However, according to § 38 (3) sentence 3, the managing director may request a longer break than three months, twelve months forming an absolute upper limit. However, he is not entitled to this longer break. Rather, the decision is at the discretion of the competent institution. Despite the upper limit of twelve months, the managing director can of course be recalled and reappointed after more than twelve months. The significance of the upper limit is that the assurance of such a reappointment under § 134 BGB would be ineffective.

If the removal body decides to grant the request, the removal must take place within a reasonably short time. Upon revocation, the claim for reappointment arises. The competent institution may not deviate from the particulars of the application, so that the exact duration of the time-out is determined by the particulars of the application. The institution shall reject the application as a whole if the duration requested appears unreasonable in the interests of the company. Then the managing director has to decide whether he wants to request a shorter time off. Similarly, the recalling body may not subsequently shorten the duration of the time-out if the reasons for the time-out no longer exist.

4.2.2. Refusal of time off

The claim is weaker than in the case of maternity protection. The recalling body can refuse the revocation of the order for an important reason, § 38 (3) sentence 2 number 2 half sentence 2 GmbHG. Such a reason exists if the granting of the requested time-out is unreasonable for the company, taking into account all the circumstances. This includes, for example, if the application is made at an untimely time, because a large number of important decisions are pending and the absence of the managing director can cause harm to the company.

The removal body may, in the event of an important reason, refuse removal at its own discretion. However, the discretion should be reduced to zero in most cases, unless the important reason can be resolved in time. If the managing director considers the refusal to be unjustified, he can resign his office and demand the reappointment after expiration of the time-out or, alternatively, sue for revocation of the order and assurance of the reappointment. Provisional legal protection should also be considered.

4.3.Time off for managing directors in case of illness

4.3.1. Conditions

In the case of sick leave, the same rules apply as for parental leave and care. Illness means only a medically diagnosed disease. In addition, it must be a disease that makes it temporarily impossible for the managing director to fulfill his organic duties. Therefore, the disease must be sufficiently severe, but on the other hand it must not lead to a permanent incapacity for service. In the latter case, the managing director is not entitled to time off. Rather, he is obliged by his duty of care to resign his office.

The managing director must provide a medical certificate that he is or will be incapacitated as a result of his illness. In addition, he must provide proof that this incapacity is only temporary in nature. However, it is sufficient if the medical certificate confirms that the attainment of incapacity is to be expected.

Taking into account the maximum time limits, the managing director must assess for himself when he can return to service. The basis for this assessment is the individual medical prognosis or, if this is not possible, a general prognosis for the respective type of disease. In view of the duty of collegial cooperation between the company bodies, the responsible removal body may and must trust that the managing director has made the necessary assessment to the best of his knowledge and belief. It must therefore rely on the accuracy of the information.

It should also be noted that the length of time off with a new application can be extended if the sickness-related incapacity lasts longer than originally assumed. However, if the maximum period of three months is exceeded, the extension shall be at the discretion of the recalling body.

4.3.2. Information to be provided on the disease

With regard to the information in the application, the question arises whether the managing director must or should communicate the diagnosis. In particular, the right to respect for private life and data protection (Article 7, 8 of the EU Charter of Fundamental Rights) and the general right of personality must be observed (Art. 2 paragraph 1 of the GG in accordance with Art. 1 paragraph 1 of the GG).

In order to respect these fundamental rights, the disclosure obligation shall be limited to the information strictly necessary. As part of the proportionality assessment required, it should first be borne in mind that in some cases the disclosure cannot lead to the objective. This applies, for example, if the knowledge of the diagnosis is not sufficient to predict the likely course of the disease without medical expertise. Then disclosure is already not an appropriate means. In addition, an obligation to communicate the diagnosis would go beyond what is strictly necessary for the decision on time off. Therefore, the director may limit himself to stating within which period he is expected to regain his capacity. So he only has to specify the duration of the time-out. Any information that goes beyond this is voluntary. The managing director can therefore decide for himself to what extent he wants to disclose his privacy in order to influence any weighing or discretionary decisions of the removal body.