Compensation when leaving a German civil-law partnership
International Business Articles
By Thomas Schwab – German Attorney at Law at WINHELLER
When leaving a German civil-law partnership (Gesellschaft des bürgerlichen Rechts; “GbR”), the leaving partner has a legal entitlement to compensation. If the partnership is continued by the remaining partners, this claim for compensation is aiming against the partnership and not against the remaining partners.
Recently, the Federal Court of Justice, BGH, clarified this issue in its judgment on the compensation for a German attorney. The lawyer left a GbR and then came into conflict with the remaining partners.
Leaving partner asserts claim against partnership
In the course of the conflict, the parties involved mutually agreed on how to distribute the inventory and the orders. But, in addition, the leaving partner asserted a claim against the partnership based on the fact that one partner had withdrawn excessive amounts and that therefore the capital accounts had to be equalized. An appellate court first dismissed the claim reasoning that the conflict had to be settled among the partners and not between the partner and the continued GbR.
Calculating a compensation
The BGH decided differently: At least in the case that the GbR is continued, there is no room for a claim for compensation against the GbR, on the one hand, and a separate equalization claim among partners, on the other hand.
When calculating the amount of compensation, both the pro-rated value of the partnership and claims arising from the partners’ corporate relationship had to be taken into account. The latter included, e.g. claims to repayment of contributions, or non-distributed profits or, as in the case at hand, claims for repayment of excessive withdrawals.
Articles of association prevent conflict
According to German law, a GbR does not need written articles of association. However, even if a professional partnership consists of only two partners, it is always advisable, to lay down the fundamental principles of the partners’ relationship in an agreement. This includes a provision concerning compensation when leaving the partnership. Our lawyers specializing in German corporate law will be pleased to assist you in drawing up your articles of association.
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