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When is the judicial appointment of an emergency interim managing director necessary? 

The judicial appointment of an emergency interim managing director can only be considered as ultima ratio in case there are no other options available to eliminate the lack of managing directors of a limited liability company.

The decision of the Karlsruhe Higher Regional Court of 27.4.2022 (1 W 71/21)

A German limited liability company (Gesellschaft mit beschränkter Haftung, "GmbH") originally had four shareholders. However, one of the shareholders, who was also the sole managing director of the GmbH, died for about 2 years ago. A dispute arose about the question who his legal heir is. In addition, one of the shareholders is legally incompetent due to dementia. Therefore, one of the other shareholders applied to the competent local court for the appointment of himself or alternatively the third remaining shareholder as emergency interim managing director of the GmbH. However, the local court rejected this request, arguing that the requirements of an urgent case within the meaning of Section 29 of the German Civil Code (Bürgerliches Gesetzbuch, "BGB") (applied mutatits mutandis) are not met. In particular, the appointment of a legal guardian for the shareholder who is legally incompetent would allow this shareholder to exercise her voting rights, making the appointment of a new managing director possible.

The shareholder who applied for the appointment of an emergency interim managing director filed an appeal, and the Higher Regional Court Karlsruhe (Oberlandesgericht, "OLG") decided that the judicial appointment of an emergency interim managing director was indeed necessary in the present case. Upon request, the competent register court at the registered office of the company may appoint an emergency interim managing director as ultima ratio in urgent cases, if a GmbH has no managing director for legal or factual reasons and the shareholders' meeting is not able to appoint a managing director within a reasonable period of time. An urgent case is only deemed to exist if damage to the company or one of the parties involved threatens or a measure that is immediately required cannot be taken without the appointment of a managing director.

According to the OLG, the above-mentioned requirements are met. After the death of the sole managing director, no managing director competent to act for the GmbH existed. In addition, the shareholders' meeting was not able to appoint a new managing director who could have filed an updated list of shareholders with the commercial register. The summoning of the shareholders' meeting was not possible because the deceased managing director was still listed as a shareholder in the list of shareholders and his heirs were not known. To wait for the result of a possible certificate of inheritance procedure was no option in the present case. The GmbH did not have a managing director competent to act for about two years and the company had to fulfill its legal obligations, such as the publication of annual financial statements. Otherwise, considerable damage to the GmbH would have threatened.

Practical advice

The decision of the OLG is convincing against the background of the long duration of the company's lack of a managing director and the fact that the heirs were not known.

However, the shareholders' meeting is able to appoint a new managing director in certain cases in the event of the death of the sole managing shareholder. If the heirs are identified by certificate of inheritance, in practice, basically, it will be accepted by the register courts pursuant to Section 16 (1) Sentence 2 of the German Limited Liability Companies Act (GmbHG) (applied mutatis mutandis) that the heirs already participate in the resolution on the appointment of a new managing director. For this purpose, however, the new list of shareholders must then be filed with the commercial register without undue delay and the corresponding certificate of inheritance must be presented.

In practice, there is a risk that an emergency interim managing director will have to be appointed, in particular in limited liability companies with sole proprietorship and only one managing director. Preventive measures should be taken at an early stage. For example, a power of attorney to represent the company in the shareholders' meeting valid post mortem can be granted. Elderly shareholder-managing directors should also consider appointing a second managing director as a precautionary measure, possibly with joint power of representation, or to transfer the shares in the GmbH to their future heirs during their lifetime. It is recommended to concert the right course of action with legal and tax advisors at an early stage.

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