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By Thomas Schwab, Esq.
WINHELLER Attorneys at Law & Tax Advisors
Frankfurt, Germany

The managing director of a limited liability company under German law (GmbH) can resign from office at any time, without notice and for no particular reason, unless otherwise provided in the articles of association. However, resigning at an inopportune time, e.g. when the company is in a crisis, is not permitted. In such case, the company might be entitled to damages for abuse of law by the managing director.

Exception: Outside Managing Director

Bamberg Higher Regional Court recently decided and clarified that the above principle of abuse of law does not apply to an outside managing director, who, neither directly nor indirectly, holds shares in the company. In other words: only a managing shareholder, who is the sole managing director and shareholder, resigns from office at an inopportune time, and, in his capacity as sole shareholder, fails to appoint a new managing director, may be found to have committed an abuse of law.

Capacity to Act Must Be Given

In the interest of legal relations, a company’s capacity to act is required, especially in a crisis. But a company is still able to act after an outside managing director has resigned from office and the shareholders have appointed a new managing director.

However, the outside managing director’s option to resign from office at any time may not be in the interest of the company. Our experienced attorneys will be pleased to assist you in drafting your articles of association so as to take appropriate precautions.