Inspection of the Books and Records of a Limited Liability Company during the Corona Pandemic

If a shareholder exercises his or her rights to inspect the books and records of a limited liability company ("GmbH"), the company must provide the inspection in compliance with applicable hygiene and health regulations regarding the containment of the Corona pandemic.

Background

The object of the defendant GmbH is the management of its own assets. It has two shareholders, the applicant and her co-partner, who is also the sole managing director.

The applicant requested inspection of the GmbH's commercial books and business records, including correspondence and accounting vouchers for the years 2008 to 2019. In a legally binding order, the Frankfurt am Main Regional Court ordered the GmbH to grant the applicant such inspection.

On May 15, 2020, the parties met at the co-partner's residence, where the applicant - as permitted by the court - was accompanied by her attorneys. The co-partner referred to the business premises for inspection. The only business room available to the GmbH was a room of approx. 13m² in the co-partner's residential building, in which there was a desk, a computer table and a couch with another desk. In addition, the room was partially filled with more than ten moving boxes, in which the (unorganized) business documents of the GmbH were located.

After a short discussion, the content of which is disputed in detail, the representatives of the applicant stated that they would discontinue the inspection due to the conditions found. At the subsequent request of the applicant, the Frankfurt am Main Regional Court imposed a penalty payment of 5,000.00 Euros on the GmbH, or alternatively one day's imprisonment for each 250.00 Euros. The court stated that the claim for inspection in dispute had not been met.

The GmbH lodged an immediate appeal against this decision. In essence, the GmbH argued that it had satisfied the claim and that the Corona pandemic had only been a pretext. In addition, the co-partner had offered to move several boxes out of the business premises in order to create more space.

The Frankfurt/Main Regional Court did not uphold the appeal and referred the decision to the Frankfurt Higher Regional Court.

The decision of the OLG Frankfurt of 01.12.2020, Ref. 21 W 137/20

The Frankfurt Higher Regional Court dismissed the appeal as unfounded. The applicant and its representatives had rightly discontinued the inspection, as it had been unreasonable to inspect the documents in the 13 m² room.

It is true that, according to the applicable law, the inspection must generally take place on the business premises of the GmbH and the GmbH must only passively "tolerate" the inspection, i.e. not take any supporting measures itself. However, the inspection must be carried out at another location if there are compelling reasons for doing so. In this context, the burden on the company on the one hand and the shareholder's right to inspection on the other must be weighed against each other, taking into account the principle of proportionality.

In the case in dispute, the business premises had not been sufficient to comply with the hygiene and health regulations in force to contain the Corona pandemic. According to Section 1 (5) of the Hessian Corona Contact and Operating Restriction Ordinance, the recommendations of the Robert Koch Institute on hygiene must be observed for any encounters. The Robert Koch Institute recommends a minimum distance of 1.5 meters between people. This would not have been the case in the 13-square-meter business room even if the manager had moved out some boxes. Also, the wearing of a mouth-nose-protective covering was not sufficient. Because of the fact that the business documents to be viewed had not been arranged or prepared for years and that they were placed in far more than ten cardboard boxes and a filing cabinet, a longer inspection had to be assumed.

Because physical integrity was a high constitutionally protected good, the GmbH had no other room and no viable alternative hygiene concept had been developed (or even proposed), the GmbH would have had to rent another room and move the documents there for inspection.

Finally, according to the Higher Regional Court, in view of the recognizably inadequate circumstances, it was also not necessary for the applicant to refer in detail to the specific circumstances of unreasonableness, namely the failure to comply with hygiene rules with regard to the Corona pandemic, when refusing inspection.

Practical advice

The right to demand information from the GmbH or to inspect its books and records is one of the unshakeable, fundamental rights of a GmbH shareholder. It is standardized in Sec. 51a (1) of the German Limited Liability Companies Act (GmbHG); even the articles of association cannot deviate from this right (Sec. 51a (3) GmbHG). The shareholder's right to inspect the company's books and records is very comprehensive. For example, the shareholder has the unrestricted right to view all business documents, all business-related correspondence, all book entries, accounting records (prima notes), invoices, etc. In (digitalized) practice, the shareholder can ask the managing director to boot up the business PC, enter the password, and then look through the business documents.

However, the right of inspection is subject to certain limits. The more extensive it is requested, the earlier it must be announced. For example, obstructing the management, for example by spontaneously appearing with the request to comprehensively inspect certain documents, is inadmissible. The shareholder may make photocopies of the respective documents at his own expense.

In principle, the GmbH must only passively tolerate the inspection. In particular, it does not have to provide a photocopier or prepare or arrange the documents. Where inspection of electronic data is required (e.g. e-mails or bookings), the management must provide the corresponding EDP; printing out the data is not sufficient unless the shareholder agrees to this and accepts it as fulfillment. As the Frankfurt Higher Regional Court rightly recognizes, the inspection must generally take place on the business premises of the GmbH.

However, exceptions are to be made to the principles of passive acquiescence and inspection on the business premises if inspection would otherwise be made impossible. The interests of the GmbH must be weighed against the interests of the shareholder. For example, if a shareholder is disabled, the room must be accessible by wheelchair.

In the specific case, the Frankfurt Higher Regional Court weighed the interests of the parties against each other and recognized that, against the background of the applicable hygiene and health regulations for the containment of the Corona pandemic, the room made available by the GmbH was not sufficient to allow the inspection without hindrance. Incidentally, in the present case, the court was generous with regard to the omitted reminder here of the lack of hygiene protection on site and called an obligation to name the inadequate conditions prior to the abortion of the inspection an "unnecessary fuss". However, this should not be relied upon in practice. For this reason, the parties concerned are generally advised to give immediate and demonstrable notice of any "deficiencies" in the granting of inspection (whether with regard to place, time or scope) in any case.

This case once again illustrates the pitfalls that can arise when it comes to safeguarding the rights of GmbH shareholders in emerging disputes. The possible obligations of the GmbH to cooperate always depend on the details of the case to be assessed in each case. If the parties disagree on how the inspection is to be granted in concrete terms, it is advisable to obtain legal advice beforehand in order to avoid a penalty payment.