Shareholder disputes in the GmbH and other legal forms
As long as there is hair, people will lie in it.”
This is how Heinz Erhard once aptly put it. As long as people set up companies together, there will also be disputes between shareholders.
If shareholders argue, it can very quickly become expensive for the parties involved and the company. A lot of time and energy is spent on the conflict instead of on the day-to-day business. The time-consuming and cost-intensive escalation of a dispute should therefore be avoided at all costs.
As in a divorce, emotions and economic interests play a decisive role in disputes between shareholders. It can become particularly explosive when it comes to family companies and not only the company but also the family, with all its emotions, sits around the table at every shareholders’ meeting.
Clear rules are helpful to avoid disputes from the outset. A well-drafted partnership agreement, rules of procedure for the managing directors or accompanying shareholder agreements can avoid a lot of disputes and costs. It is therefore advisable to consult a lawyer specialising in company law before the company is founded. If a dispute develops, professional help should also be sought at an early stage. The first step can be a consultation with a specialist corporate lawyer to weigh up the legal options and discuss the best strategic course of action.
The complexity of shareholder disputes
Shareholder disputes are a sensitive issue in the corporate environment that can have a serious impact on management and operational decisions. They occur in various company forms, from the GbR, the KG to the GmbH and the Aktiengesellschaft, and can trigger a number of conflicts that have the potential to seriously destabilise the company.
A shareholder dispute can have a significant impact on the management of a company. Depending on the structure and contractual agreements within an organisation, disputes between shareholders can lead to important decisions being blocked or delayed. In extreme cases, it can even lead to the dismissal of the managing director, which can put the company in a difficult situation.
The role and influence of a shareholder can vary greatly depending on whether it is a majority or minority shareholder. While majority shareholders tend to have more control over operational decisions, minority shareholders often face the challenge of protecting their interests and rights. This can lead to conflicts and disputes.
In companies in which two shareholders each own 50% of the shares, a particularly tricky situation arises. Neither of the two shareholders has a majority, which is why every decision must be made by mutual agreement. In such constellations, deadlocks can occur that can only be resolved through forward-looking contractual arrangements or court decisions.
Shareholder disputes in family companies are particularly explosive. In addition to business interests, emotional and family factors often play a role here, further complicating the situation. In these cases, the management is required to find a balance between the various interests.
Overall, shareholder disputes require a high degree of sensitivity, strategic thinking and legal expertise. They are rarely isolated incidents and often have far-reaching consequences for the management, the shareholders and ultimately the entire company. It is therefore essential to seek professional help at the first sign of conflict in order to avoid escalation and find sustainable solutions.
Why a shareholder dispute arises
A shareholder dispute can arise for a variety of reasons and causes. These disagreements are often the result of unclear agreements or breaches of agreements that have been made. A better understanding of the possible pitfalls and basic building blocks of a conflict can help to find solutions.
A common reason for disputes between shareholders is differences of opinion regarding management or strategic decisions. Differences in the vision and direction of the company can lead to deeper conflicts that can jeopardise the partnership and the company as a whole.
There are certain factors that often contribute to the emergence of shareholder conflicts. These include unclear or incomplete articles of association, differing expectations regarding the company’s returns or growth and personal differences between the co-shareholders.
Breaches of agreements or disloyal behaviour can be a reason for a shareholder dispute. This can range from the violation of a non-competition clause to financial irregularities. Such violations can shake the trust between the business partners and lead to a rift.
Avoiding shareholder disputes is just as important as resolving existing conflicts. Transparency, clear agreements and regular communication can help to prevent conflicts from arising in the first place.
Our services in corporate law
Decisions in the company are made by the shareholders’ meeting. Shareholders’ meetings must be carried out precisely in terms of form and content. Otherwise, the resolutions passed may be invalid. We prepare the meeting and support you, regardless of whether you want to bring about or prevent a resolution.
If there are differences of opinion between the shareholders and the management, this is particularly sensitive if one of the shareholders also acts as managing director. We provide you with comprehensive advice and enforce your rights – regardless of whether you are in the role of managing director or you are on the other side.
If the managing director has caused damage to the company through a breach of duty, we will support you in enforcing these claims.
If shareholder resolutions have been passed that run counter to your interests, there is often only the option of bringing these resolutions to an end by way of an action for annulment and avoidance. Whether you want to take action against the resolutions of your co-shareholders or you have to defend yourself against the attacks of your co-shareholders – we will thoroughly examine all points of contact for the successful enforcement of your rights and will be at your side with advice and assistance.
In the event of serious breaches of duty, it is possible to exclude one or more shareholders from the company. This can only be done against the will of the person concerned by means of a so-called exclusion action. We provide you with comprehensive advice on the prospects of success and the tactical procedure in such cases and represent your legal interests vis-à-vis the co-shareholders and in court.
Knowledge is power. If the company or the shareholders withhold the information necessary for your decision, we will insist on the right to information to which you are entitled as a shareholder and, if necessary, enforce this right.
Or vice versa, if your co-shareholders approach you with claims for information, we will examine these carefully, advise you comprehensively and agree the strategy with you.
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What rights do shareholders have?
In the context of a shareholder dispute, understanding the rights of a shareholder is of central importance. These rights are governed by company law and provide the framework for the parties involved to assert their interests. They vary depending on the type of company and, in the best case, are set out in the respective articles of association. The rights of minority shareholders who are faced with a dominant majority shareholder always play a special role.
Basic rights of every shareholder
The basic rights of a shareholder include information rights, voting rights at shareholder meetings and the right to profit participation. These rights are set out in the law and, at best, in the articles of association.
Rights in special dispute situations
In a shareholder dispute between GmbH shareholders, for example, minority shareholders can make use of additional rights if they hold at least 10% of the share capital. For example, they can demand that a shareholders’ meeting be convened and that certain resolutions be placed on the agenda.
Minority shareholders can also have a managing director dismissed or, in extreme cases, have the co-shareholder expelled from the company. However, it is important to make provisions for such situations in the articles of association or shareholders’ agreements.
Rights depending on the type of company
It is important to note that the rights of a shareholder can vary depending on the type of company and are organised differently by law…
Company law as a set of rules
Company law serves as a general set of rules that defines the rights and obligations of shareholders. In the event of disputes, it provides the legal basis for enforcing the rights of a shareholder. Further shareholder rights can be contractually agreed. Here it is advisable to seek legal advice in order to effectively represent your own interests.
Knowing your own rights as a shareholder is essential in the event of a dispute. It provides the basis for a fair dispute and enables the parties involved to effectively defend their positions. For detailed advice and support in complex disputes, it is advisable to consult a corporate lawyer.
The partnership agreement as the key to avoiding shareholder disputes
Share and company shares
The distribution of business and company shares is an important aspect of the articles of association. It determines what influence a shareholder has on decision-making and management. This can lay the foundations for future disputes, especially if the shares are not clearly defined or are unevenly distributed.
Regulation of rights and obligations
The articles of association should contain detailed provisions on various aspects of the company and shareholder relationships. These include, for example, provisions on the distribution of profits, management and the rights of the shareholders in the event of the dissolution of the company or the withdrawal of a shareholder.
Special regulations
It is also advisable to include special provisions for exceptional cases or special situations in the articles of association or a shareholders’ agreement. These could be scenarios that involve a 50-50 split of company shares or regulations for dealing with minority and majority shareholders.
Succession arrangements in the event of the death of a shareholder are also very important. Should the heirs then become shareholders? Or should they leave and receive a settlement in return?
By setting out such provisions in the articles of association or a shareholders’ agreement, you create a solid basis for avoiding or at least effectively handling shareholder disputes. It is therefore advisable to seek legal advice when drafting the articles of association in order to cover all eventualities.
The articles of association or a shareholders’ agreement is therefore an important instrument that not only regulates the structure and processes within the company, but also represents a decisive element in the avoidance and resolution of shareholder conflicts.
Managing director liability in the context of shareholder disputes
In the context of shareholder disputes, the position of the managing director of a GmbH plays a decisive role. Not only is the managing director responsible for the operational management of the company, but he or she is often also at the centre of disputes between the shareholders.
The position of managing director entails a number of duties and responsibilities, the disregard of which can lead to managing director liability. These include the duty of proper management and the duty of loyalty to the company and its shareholders. In the event of a shareholder dispute, the managing director must take particular care to remain neutral and keep the interests of the company in mind.
Managing directors must be aware that their decisions and actions will be scrutinised, especially in times of shareholder disputes. Wrong decisions or taking sides could not only escalate the dispute further, but also lead to personal liability for the managing director. A managing director who is not a shareholder at the same time will not be willing to participate in such a situation in the long term.
Shareholder dispute in a limited liability company controlled on a parity basis
A shareholder dispute in a GmbH can already be complicated, but as already mentioned, the dynamics change significantly if it is a GmbH in which the shareholders each hold 50% of the shares (the 50-50 GmbH). In such a constellation, both shareholders hold exactly the same shares and usually have equal voting rights. This can lead to a stalemate situation that can significantly hinder the management of the company.
Stalemate situations
Stalemate situations are particularly tricky in a 50-50 GmbH. As both shareholders have the same decision-making power, neither side can act without the consent of the other. These stalemate situations can lead to a blockade in company management and require special measures to resolve.
Measures for the solution
In a 50-50 GmbH, it is essential to make forward-looking arrangements in the event of a shareholder dispute. Arbitration proceedings or mediation can be defined as possible solutions. Sometimes it even makes sense to call in an external consultant to help resolve conflicts.
Solutions and mediation
Shareholder disputes can have a significant impact on the climate in companies and can even lead to financial damage. Effective conflict resolution is therefore crucial. There are various approaches that can be taken by the parties involved to resolve disputes.
Mediation is a frequently used method for settling disputes between shareholders and managing directors. A neutral third party guides the conflicting parties to find a solution together. The advantage of mediation is that it is often less time-consuming and costly than legal disputes.
In order to minimise the risks of an escalating shareholder dispute, it is important to identify and avoid potential pitfalls in advance. This includes, for example, clearly defining the roles and responsibilities of the shareholders and the managing director.
If all other approaches fail, the only option is often to separate from each other. In the best case scenario, an agreement is reached on a dispute. Otherwise, the exclusion or cancellation of a shareholder is the last option. However, this is associated with numerous legal hurdles and should only be considered as a last resort.
The managing director plays a particularly important role in a dispute between the shareholders. They must protect the interests of the company and must not act in a partisan manner, which can make the situation even more complicated.
Resolving shareholder disputes requires tact, legal expertise and often external help.
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Separation from a shareholder
The intended separation of a shareholder who has become disagreeable is often a difficult and conflict-laden process that should be handled with great care, especially in a GmbH. This is the last resort when shareholder disputes can no longer be resolved. Depending on the type of company, there are different legal means of dismissing a shareholder from the company. From a strictly legal point of view, however, termination is not the right way to remove a co-partner from the company against their will.
An agreement should always be favoured, even in the most difficult situations. For example, the co-partner’s shares can be bought out or you can consider selling the entire company to a third party. A legal dispute should always be the last resort.
The formal exclusion of a shareholder is only possible under certain conditions and in accordance with the articles of association and statutory regulations. Such an exclusion procedure must be decided at the shareholders’ meeting and must be enforced in court in certain cases.
The cancellation of shares is another option for removing a GmbH shareholder from the company. However, this measure is strictly regulated and only possible if there is good cause. Another prerequisite is that the redemption is provided for in the articles of association.
If the shareholder in dispute is also a managing director of the GmbH, dismissal from the position of managing director may be considered. The dismissal resolution must be passed at the shareholders’ meeting.
Severance pay, claims for damages and taxes
A shareholder dispute in a GmbH can have considerable financial consequences that go far beyond the immediate conflict. Especially in the event of a separation from a shareholder, all parties involved should consider the associated financial aspects.
Compensation
A severance payment is often due when a shareholder leaves the GmbH. The amount of the settlement is based on the market value of the share. However, the law does not prescribe a valuation method for determining the market value. There can and should be provisions on this in the articles of association. The severance payment can represent a considerable financial burden for the company. The articles of association can also stipulate that a settlement be made below the market value.
Taxes
The departure of a shareholder and the associated financial transactions can have tax implications, both for the GmbH and for the departing shareholder.
Assistance with other conflicts between shareholders
Regardless of the nature of the conflict between you as a shareholder and your co-partners – we are always there for you. With more than 40 years of experience as lawyers specialising in corporate law, we can provide you with comprehensive and correct advice and help you to protect your rights.
