Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/4.4.1:4.4.1 Introduction

Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/4.4.1

4.4.1 Introduction

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

The law governing the GmbH offers a significant range of appraisal rights. Almost all of the appraisal rights are found in a special statute regarding the reorganization of entities (Rechtsträger).1 This statute is named the Reorganization Act (Umwandlungsgesetz or UmwG) and is of a quite recent date, having been introduced in 1994.2 The UmwG includes rules for the following four ways to transform an entity:

1. legal merger (Verschmelzung);

2. legal demerger (Spaltung);

3. asset transfer (Vermögensübertragung);

4. conversion into another legal form (Formwechsel).3

All four types of reorganization are at the disposal of the GmbH and of the AG. In addition, depending on the type of reorganization, the UmwG also applies to a range of other entities such as the KG, the OHG, the partnership onder civil law (Gesellschaft des bürgerlichen Rechts) and the registered association (eingetragene Verein). The UmwG clarifies which type of reorganization can be used with which type of entities.4

The Reorganization Act offers shareholders in a GmbH an appraisal right in all four situations of reorganization. The shareholder obtains the possibility to sell his shares and to receive cash compensation in return (Barabfindung). As will be seen below, the appraisal right is subject to certain conditions. Additionally, a shareholder that qualifies for the appraisal right receives the possibility to sell his shares to a third party, without being confronted with restrictions on the transfer of his shares.

The appraisal rights embodied in the Reorganization Act afford protection to the minority shareholder. The idea behind the appraisal rights in the UmwG appears from its legislative history. Lutter and Grunewald submit that:

"(...) regardless of the legal form of the entities involved, the legislator was of the opinion that a member cannot be expected to acquire a membership with a changed position of rights and obligations against his-will."5

Moreover, the appraisal rights form a counterweight to the powers of the majority shareholder. The interest of the majority shareholder may well coincide with the interest of the company. According to Semmler and Stengel, the appraisal right may balance the interests of the minority shareholder and the interests of the entity itself:

"Therefore, the appraisal right can be seen as a successful balance of interests between optimal protection of the individual and the interest of the company in the implementation of certain measures. It has a "valve function" and shows up as expression of the universal interaction of exit and voice."6

The appraisal rights contained in the UmwG have a mandatory nature. The appraisal right can neither be contractually excluded, nor contractually restricted.7

In what situation the appraisal rights of the UmwG arise will be described in § 4.4.2 up to and including § 4.4.6. Subsequently, the enforcement of the appraisal right will be dealt with in § 4.4.7. How the shares are valued when using the appraisal rights is explained in § 4.4.8. One of the appraisal rights is found in § 27 GmbHG. This appraisal right plays an insignificant role in practice. It is briefly described in § 4.4.10.

Deze functie is alleen te gebruiken als je bent ingelogd.