The working relationship with a managing director can change for a variety of reasons. Particularly in the event of disputes between shareholders and the management, the question quickly arises as to whether and how a managing director revoked can be realised.
A distinction must be made between dismissal from office as a director of the GmbH and the existing Managing Director’s Employment Contract to distinguish between them. As a general rule, dismissal does not automatically terminate the employment contract. It is therefore crucial for companies to follow a structured approach.
What does the dismissal of a managing director entail?
The dismissal brings an end to the Organ position of the managing director. As a result, he is, in principle, no longer the managing director of the GmbH and loses his power of representation on behalf of the company.
Under section 38 of the German Limited Liability Companies Act (GmbHG), the appointment of a managing director is, in principle, revocable at any time. However, the articles of association may stipulate that dismissal is only possible where there are valid grounds.
The decision on the appointment and removal of directors generally rests with the shareholders. Section 46 of the German Limited Liability Companies Act (GmbHG) expressly states that the appointment and removal of directors is the responsibility of the shareholders.
Ordinary dismissal or dismissal on serious grounds?
In many limited liability companies (GmbHs), a ordinary dismissal without specific cause possible. The first crucial step is to examine the articles of association: these may restrict the possibility of removal or stipulate a specific quorum.
The situation may be different if the articles of association stipulate that dismissal is subject to a valid reason . The Act specifically cites gross breaches of duty or an inability to manage the business properly as key grounds for dismissal.
Particularly in the case of dismissal for good cause, the specific facts of the case should be carefully documented. In its judicial review, the Federal Court of Justice focuses on whether the good cause actually existed at the time the resolution was passed.
What happens to the employment contract?
A common mistake is to, Dismissal and termination of the employment contract are to be regarded as equivalent.
The removal from office initially affects only the position on the board. The managing director’s employment contract, however, may remain in force. Section 38 of the German Limited Liability Companies Act (GmbHG) expressly states that removal from office does not affect any claims arising from existing contracts.
If the contractual relationship is also to be terminated, a separate notice of termination or other termination of the contract of employment to examine. In particular, notice periods, contract terms, entitlement to remuneration and, where applicable, specific contractual provisions may be relevant.
The Federal Court of Justice also distinguishes between the relationship within a group of companies and the managing director’s employment relationship.
What are the key steps to follow when dismissing a director?
Prepare a shareholders’ resolution
First of all, it should be checked whether, who is responsible for the removal from office and what provisions are set out in the articles of association. These include, in particular, the notice of the meeting, the agenda, the required majority and any restrictions on voting.
Particular issues may arise in the case of shareholder-managing directors. The Federal Court of Justice (BGH), for example, distinguishes between ordinary dismissal and dismissal for good cause.
Implementing the resolution and the commercial register
Once the dismissal has taken effect, the change must be registered in the Commercial Register. Section 39 of the Limited Liability Companies Act (GmbHG) stipulates that both changes to the identity of the managing directors and the termination of their power of representation must be registered.
This is not merely a formality: as long as the amendment has not yet been registered, parties to legal transactions may, under certain conditions, rely on the existing entry in the commercial register. The Federal Court of Justice (BGH) has expressly emphasised this.
Practical tip: Review the termination and the contract together
Before dismissing a director, companies should therefore not only check that the requirements under company law are met. Articles of Association, shareholders’ resolutions, managing director’s contract of employment and the Commercial Register should be regarded as a single, coherent process.
Particularly in the case of shareholder-managing directors or where conflicts already exist, an incorrect resolution can have significant consequences. Careful preparation helps to avoid subsequent disputes regarding the validity of the dismissal, claims for remuneration or the power of representation.
Conclusion
The Dismissal of a managing director Whilst this is, in principle, possible under company law, it should not be confused with the termination of an employment contract. The decisive factors are the provisions of the articles of association, a valid resolution by the shareholders and the subsequent correct registration in the Commercial Register.
Anyone who clearly distinguishes between these steps whilst ensuring they are coordinated will create a solid foundation for the future management of the company.
If you have any questions on this or other topics, please contact us - we will be happy to advise you.
Go to the contact form