4.3.3 Dogmatic foundation

One of the most fiercely debated aspects of the oppression remedy is its dogmatic foundation. This is probably caused by the lack of a statutory provision regarding the oppression remedy. The leading opinion, introduced by Schok, bases the oppression remedy on a general axiom resulting from the analogy with long-term contracts (Dauerschuldverhältnisse).1 Two examples of the termination of a long-term contract are the termination of a contract of employment (§ 626 BGB) and the resignation from a partnership under civil law (Gesellschaft des bürgerlichen Rechts).2 In both examples, termination of the contract is possible when the termination is justified by an important reason.

In 1953, the view of Schok was adopted by the Supreme Court. The Court observed that all long-term contracts have several features in common. Longterm contracts may have a major impact on the lives of the persons involved or entail a mutual intertwining of interests and the personal cooperation, good understanding or untroubled mutual trust between the contractors. The Court observed that all long-term contracts are subject to termination when an important ground justifies termination.3 Analogously, the Court recognized the option for a shareholder to resign from the company:

With respect to the oppression remedy, the Supreme Court made a distinction between the public limited company and the private limited company. The Court considered that there is less need for application of the oppression remedy in the law on AGs. The Court considered that the relationship between the shareholder and an AG usually has the character of an investment, that the shares in an AG can be sold more easily, and that, compared with the GmbH, the relationship of mutual trust between the shareholders is usually less important in an AG.

Becker criticizes the analogy with long-term contracts.5 He points out that this opinion is based on specific sections concerning dissimilar long-term contracts, and argues that these specific sections cannot provide a general axiom. He prefers to found the oppression remedy on a more general applicable provision. He suggests basing the oppression remedy on § 39 BGB, a section that can be found in the part of the BGB that is concerned with general provisions pertaining to legal persons. The provision of § 39 I BGB stipulates:

This mandatory provision allocates an unconditional exit right of members of an association (Verein).7 In German law, the association is considered as the prototype of legal persons, such as the GmbH and the AG. Becker pleads for an extensive interpretation of the exit right of § 39 BGB. In his view, an extensive interpretation could imply that the shareholder of a GmbH has an exit right, though with the difference that an important reason justifying the exit is required. Moreover, in contrast to the exit right with respect to associations, a GmbH has to provide compensation for the loss of shares resulting from the exit. This view seems to be shared by the Supreme Court in its above-cited judgment of the 16^th of December 1991.

Muller shares the criticism of Becker, but favours another foundation of the oppression remedy.8 He bases this remedy on the duty of loyalty (gesellschaftrechtliche Treuepflicht). In German private limited company law, the duty of loyalty is applicable between the shareholders and the company and between the shareholders inter se.9 This duty of loyalty brings along that a shareholder has to take the interests of the company into account and has to prevent the company from any damage. For instance, shareholders have to withdraw from taking up corporate opportunities of the company.10 For the company, the duty of loyalty implies taking the interests of the individual shareholders into account.11 According to Miller, the duty of loyalty also brings along that the company is obliged to enable the exit of a shareholder and to provide a reasonable compensation, if it is no longer reasonable to keep him locked in the company.

For his part, Schindler disapproves of the opinions of Becker and Mller. Schindler has a preference for the authoritative opinion on the analogy with long-term contracts that can be terminated if there is an important reason. His criticism of Becker is that § 39 BGB contains a specific section that is tailored to the needs of the association. He points to the fact that the legislator did not choose to confine this exit right to circumstances where there is an important reason.12

As opposed to the analysis of Miller, Schindler holds that the basis of the duty of loyalty is too small to found the oppression remedy. He holds that case law concerning the oppression remedy has made out that not only important reasons stemming from the company's affürs, but even important reasons stemming from the personal affürs may lead to application of the oppression remedy.13 As these personal reasons fall outside the scope of the duty of loyalty, as Mller puts, this duty cannot be suitable to form the foundation of the oppression remedy. Moreover, in the opinion of Schindler the duty of loyalty is not less vague than the analogy with long-term contracts.14

As a final point, Schindler does not intend to exclude the role of the duty of loyalty when applying the oppression remedy. He states that the duty of loyalty can perform a role with respect to answering the question whether continuation of the shareholding is reasonable and the question whether less far-reaching solutions that solve the existing problems have to be attained.15 The extent to which the duty of loyalty can perform a role when applying the oppression remedy, depends on the extent to which the association is based on personal cooperation. This is described by Müller in the following way: