Company law: Duty of loyalty in the case of a shareholder's action for the company (actio pro socio)

If a shareholder files claims of the company against a co-shareholder in his own name but in favor of the company (so-called actio pro socio), he must take into account the principles of the duty of loyalty under company law.

Background

The plaintiff was – besides the defendant – one of two limited partners in a German limited partnership (Kommanditgesellschaft), which initially had a liable capital of EUR 10,000 entered in the commercial register. After the company's liable capital had been increased to EUR 200,000, the defendant did not pay the contribution of EUR 95,000 attributable to him. As a result, not only the company itself, but also the plaintiff filed a claim against the defendant for payment of the outstanding contribution to the Company by way of the so-called actio pro socio.

The company's action was upheld in all instances. The plaintiff's action - after it had been dismissed by the Regional Court - was successful at the Court of Appeal; the defendant appealed against this with its appeal to the Federal Court of Justice (BGH).

The judgment of the BGH of 22.01.2019, Az. II ZR 143/17

The BGH ruled that the Regional Court had correctly dismissed the plaintiff's claim. The court justified this by stating that the plaintiff's action against the defendant by way of actio pro socio was not admissible due to a breach of its duty of loyalty under company law as the company itself had already sued the defendant and therefore - for reasons of cost alone - there was no reason for actio pro socio by the plaintiff.

The actio pro socio (shareholder action) - a possibility of action with pitfalls

If a company has claims against one of its shareholders arising from the company relationship (e.g. for the payment of contributions; so-called social claims (Sozialansprüche)) and the shareholder concerned does not meet these social claims, often the company needs a judicial assertion of the social claims to protect its rights. Usually, the managing director(s) or managing shareholder(s) is/are responsible to claim the social claims in court.

However, difficulties arise if the competent corporate body refuses to assert the social claims (e.g. because the claim is directed against them or an affiliated person). In these cases, the company regularly has claims for damages against the company bodies acting in breach of their duties or the possibility of dismissing them for important reasons. However, often this does not help the other shareholders because they neither have the majority required to dismiss the managing director / managing shareholder nor the necessary management and representation authority to assert claims for damages against them. In many cases, only the action by the other shareholders themselves (the actio pro socio) remains to protect the rights of the other shareholders.

The actio pro socio (shareholder action), which occurs above all in partnerships and limited liability companies, is the right of every shareholder to assert social claims of the company in his own name (but in favor of the company). The actio pro socio is an exception from the articles of association according to which only the managing directors or managing partners can represent the company externally. The actio pro socio therefore is only permissible under narrow conditions, namely if (i) it concerns the assertion of social claims, (ii) the plaintiff is a shareholder of the company who is not entitled to represent the company and (iii) the actio pro socio is not excluded (e.g. due to the duty of loyalty of the plaintiff shareholders under company law). In particular, the question of whether or when the actio pro socio violates the duty of loyalty often stands in dispute between the concerned parties. Thus, the actio pro socio is excluded if the responsible corporate body correctly refuses the assertion of the social claim (e.g. because a set-off counterclaim exists) or if the social claim is sued directly by way of the actio pro socio without the responsible corporate body having been requested to assert it in advance. A similar aspect has now also been decided by the BGH in its judgement of 22 January 2019: if the company itself sues for the social claim, there is no room for an actio pro socio - because the sued shareholder would otherwise (if the action is successful) be burdened with a double cost without reason. This would violate the duty of loyalty.

The actio pro socio should be kept in mind by minority shareholders who are not authorized to manage and represent the company. However, it must be assessed carefully in each individual case whether it is really permissible and promising. Accordingly, an actio pro socio should only be initiated if there is actually no other possibility (in particular an action by the company itself) to enforce the justified social claims. In any case, at first the responsible company organ should be requested to assert the social claims; moreover, a shareholder resolution may be necessary in addition before proceedings can be brought in the way of the actio pro socio (particularly with the GmbH in the cases of Section 46 No. 8 of the German Limited Liability Company Act) .