Invalidity of resolutions of the shareholders' meeting in case of summons deficiencies

There is little that is as frequently and intensively disputed in corporate practice as the resolutions of the shareholders' meeting of a German limited liability company (GmbH). This makes it all the more important not to offer a target for quarreling shareholders in the context of convening and holding a shareholders' meeting. The Munich Higher Regional Court (OLG München) (judgment of January 9, 2019 - 7 U 1509/18) has now expressed its opinion not only on the interpretation of a widespread standard clause regarding the chairmanship of the meeting, but also on the concretization of agenda items and the legal consequences of an improper announcement:

Apart from the convening of a shareholders' meeting, the organization and procedure of a GmbH shareholders' meeting are not regulated by law. This is unproblematic as long as all shareholders are interested in an amicable cooperation. In these cases, there is usually no need for a chairman to intervene in the meeting, especially if there is a manageable number of shareholders.

If, however, the circle of shareholders shows hardened fronts, a formation of groups or conflicting family lines, from the point of view of all participants there is a considerable interest in an effective management of the meeting. Many articles of association therefore contain provisions on the election or determinability of a chairperson. Often, the requirement is that this should be the longest serving managing director.

The OLG Munich interpreted a corresponding clause in the context of a resolution challenge now to the effect that it refers to the longest serving managing director present in the meeting. An interpretation sticking to the wording would lead not only to an aggravation of the execution of shareholders' meetings, but would give a blockade possibility into the hand to that shareholder base having the longest serving managing director on their side.

Also in dispute in the decided case was a shareholders' resolution on the discharge of the management with regard to a sale of the shares of a subsidiary. In the invitation to the shareholders' meeting, the subject of the resolution was merely the confirmation of an approval resolution which had already been passed in the circulation procedure - ineffectively - but not the discharge of the managing directors for the execution of the transaction. The OLG Munich has assumed a violation of Section 51 para. 2 GmbHG (German Act on Limited Liability Companies), according to which the purpose of the meeting is to be announced at the time when the meeting is convened.

According to the OLG Munich, the announced agenda must sufficiently concretize the items to be resolved, whereby neither a precise wording of the motions for resolution nor a statement of reasons is required. In order to satisfy the protective purpose of Section 51 para. 2 GmbHG - protection of all shareholders from surprise and overpowering - it is sufficient to make it clear what is meant so that a general wording or reference to earlier meetings can also be adequate. However, the recipient must always be able to get such an accurate picture that he/she knows what is to be negotiated and decided upon and can prepare for it.

Finally, it is noteworthy in this context that the OLG Munich does not regard the decision as "only" contestable, but as null and void, due to the violation of Section 51 para. 2 GmbHG, and thus expressly opposes the prevailing opinion in the literature.

Note

A clause according to which the longest serving managing director is to chair the shareholders' meeting can be found in this or a similar way in numerous articles of association. The interpretation of the OLG Munich that this refers to the longest serving managing director present is very comprehensible and to be welcomed without reservation.

The decision also makes clear how important it is to carefully formulate the items to be resolved in the invitation to a shareholders' meeting. Although neither a precise wording of the motions for resolution nor a statement of reasons are necessary, in order to protect against surprise under Section 51 GmbHG it is not sufficient to completely omit one aspect and only address it at the meeting and then vote on it. In the event of disregard, there is now a threat not "only" of the resolution in question being contestable within a certain period of time, but also of its nullity.

Conclusion: In order to avoid disputes over resolution defects, care should be taken not only during the holding of a shareholders' meeting, but also at the time of its convocation.