Appointment by the court of a chairman of a shareholders' meeting

If there are reliable indications that a chairman of the meeting will not chair a general meeting in accordance with the articles of association, but will instead lead it in a biased and partisan manner, the court can appoint a neutral chairman of the meeting.

Facts

The decision of the Düsseldorf Higher Regional Court was based on the fact that there were concerns about the objectivity of the chairman of the general meeting of a stock corporation, who had been appointed in accordance with the articles of association. The content of the decision concerned the exercise of claims for damages. The lack of impartiality was feared because in the past (2017) the chairman of the meeting had taken into account votes of the majority shareholder in a decision concerning the same topic despite a voting ban. The plaintiff was of the opinion that there was therefore also a risk of biased and partisan management of the actual general meeting by this very chairman of the meeting. Therefore, the court should appoint a substitute chairman of the meeting. The local court appealed to rejected this request. The plaintiff objected to this.

The decision of the OLG Düsseldorf of June 21, 2023 (3 Wx 83/23)

The complaint was successful. In the opinion of the OLG Düsseldorf, the requirements for the appointment of a neutral chairman of the general meeting by the court were met. Furthermore, the plaintiff did not require prior court authorization to initiate a shareholders' general meeting.

In the opinion of the court, there were concrete indications in the present case which, from the perspective of the minority shareholder involved, gave reason to fear that the chairman of the shareholders' meeting appointed in accordance with the articles of association would not conduct the shareholders' meeting properly and impartially. This is because the chairman of the shareholders' meeting had already previously disregarded voting bans and thus helped the interests of a certain shareholder to be successful. This gave reason to doubt that the chairman of the shareholders' meeting would act impartially and in accordance with the law in the present case. Furthermore, the court appointment of a chairman of the meeting was not precluded by the fact that the shareholder concerned only held a small stake (here: 0.04%).

Practical tips

The shareholders' meeting is the central decision-making body of companies. The shareholders take the fundamental decisions for the company's business practices and activities at this meeting. This applies regardless of whether the shareholders or a single shareholders are also managing directors of the comapny or the company is managed by a third party.

The majority principle generally applies to companies: Is the person's shareholding in the company is lager, then its decision-making power within the company is also higher and therefore its influence on the company's activities is greater.

However, to ensure that the majority shareholders do not have unlimited power at the disadvantage of the other shareholders, there are also mandatory statutory protection mechanisms in addition to the structure of the articles of association.

For example, minority shareholders have the right to initiate a shareholders' meeting in certain cases. They can also specify individual meeting agenda topics. Furthermore, they have a right to information about the company's matters and the right to inspect the books in order to exercise and enforce their shareholder rights.

Furthermore, the majority shareholder's power may be limited by the general corporate duty of loyalty. According to this, the shareholders must show mutual consideration for the interests of the company and the other shareholders. This applies to both the majority and minority shareholders. However, proving a breach of the general corporate duty of loyalty is often difficult.

In practice, the articles of association/partnership agreement allow for needs-oriented structures. These depend on the needs of the shareholders in each individual case. Individual shareholders, regardless of whether they are majority or minority shareholders, can be granted special rights and/or special minority rights. Options are, for example, (i) veto rights against certain decisions in the shareholders' meeting, (ii) multiple voting rights in certain matters, (iii) maximum voting rights, (iv) blocking minorities and (v) special rights to appoint certain officers.

Whether and which types of contractual arrangements should be used depends on the interests and needs of the shareholders in each individual case. The shareholders should consider the options when drafting the articles of association of the company/partnership for the first time as well as for subsequent amendments. The aim should always be to optimise consideration of the respective needs and interests of the shareholders and the company/partnership without compromising the ability to function.