Interim legal protection against the filing of a new shareholder list

GmbH shareholders can defend themselves against the filing of a new shareholder list after the redemption of their shares and thereby secure their legal position by means of interim legal protection. This can in particular be important in startup constellations as a decision of the Munich Higher Regional Court has shown.

Background: Loss of shareholder rights by submission of a new shareholder list

Only persons who are registered in the list of shareholders electronically deposited with the commercial register are deemed to be shareholders of a German limited liability company (GmbH). Only those persons respectively are authorized to exercise shareholder rights such as voting, participation, speaking and inspection rights (Sections 16, 40 of the Limited Liability Companies Act (GmbHG), so called legitimating effect of the shareholder list). The legitimating effect of the shareholder list even applies if the list of shareholders is incorrect.

For this reason, it is important to act quickly if a shareholder is (wrongly) threatened with deletion from the list of shareholders. This risk exists in particular in the case of shareholder disputes. In such cases, often shareholder resolutions are passed to exclude shareholders from the GmbH or to redeem or compulsorily assign their shares.  Although the shareholder concerned can (and usually will) file an action for rescission or nullity against such resolutions, the court decision can take months or even years. If a new list of shareholders is filed with the electronic commercial register during this period, the shareholder effectively loses his shareholder rights for a longer period because of the legitimating effect of the shareholder list.

Protection of shareholder rights by interim legal protection

In order to avoid the loss of rights by the submission of a new shareholder list to the commercial register, the shareholder can take action against the GmbH by way of interim legal protection. Thereby, he can achieve that no new shareholder list can be submitted to the commercial register for the time being or that a submitted shareholder list is corrected.

An interim injunction to secure the shareholder’s legal position, however, will only be issued if the shareholder convinces the court that the resolution to redeem or compulsorily assign his shares is probably invalid (so called claim for injunction) and that the filing of an amended list of shareholders would result in significant disadvantages for him and that he therefore is unable to await the outcome of the main legal proceedings (so called reason for injunction).

Munich Higher Regional Court of May 18, 2021 (Case No. 7 W 718/21): Reason for injunction in startup constellations

In the previous years, most courts considered the general risk of losing the authority to exercise shareholder rights due to the legitimating effect of the shareholder list as sufficient to assume a reason for injunction. When they also considered the share redemption or assignment to be unlawful, they mostly granted the concerned shareholders interim legal protection against the filing of a new list of shareholders.

The Munich Higher Regional Court (Oberlandesgericht, "OLG") Munich in a new judgement as of May 18, 2021 now paid attention to the special situation of startups. In the underlying case, a shareholder’s shares on a startup GmbH had been redeemed against his will and the shareholder had therefore filed an action for interim relief against the redemption of its shares. The OLG Munich assumed a reason for injunction, i.e. the particular urgency of its decision on the submission of the new shareholder list. The pointed out that in the starting phase of startup companies important decisions usually are made very in rapid order and that the framework conditions are constantly changing for such new enterprises. It was in particular for these cases that the court considered it necessary to be able to prevent the filing of a new list of shareholders to the commercial register to prevent being cut off from the dynamic development of the startup company and all shareholder rights associated therewith for months or years.

Practical advice: Interim legal protection as chance to secure shareholder rights

Shareholders that are threatened with exclusion from the company can defend themselves by means of interim legal protection. However, an application for interim legal protection must be carefully drafted because usually – since the court sometimes decides even without an oral hearing – there is no opportunity to improve the argumentation later. Both the claim for injunction and the reason for injunction must therefore be presented directly and credibly in the application for interim legal protection. In start-up constellations, the decision of the Munich Higher Regional Court thereby may constitute a good argument for issuing an interim injunction and strengthen the applicant’s legal position.