Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/4.3.1:4.3.1 Introduction

Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/4.3.1

4.3.1 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 oppression remedy (Austritt) is not enacted in the German statute pertaining to private companies with limited liability. In 1892, the German legislator was of the opinion that a shareholder has adequate ways to exit the company and deliberately refused to introduce further exit rights. In German literature, this has been seen as a misjudgement by the German legislator.1 The lack of an oppression remedy has been regarded as the greatest deficiency of the GmbHG.2

Nevertheless, the legislator did not have a final say on this subject. It is widely acknowledged that a shareholder can invoke this oppression remedy if an important reason (wichtiger Grund) to exit the company is present. Despite a legislative proposal to codify the oppression remedy in 1939 and, successively, by way of the draft bill of 1971/1973, it is never laid down in statute.3 However, the lack of a statutory oppression remedy has not appeared to be an obstacle for courts and legal authors to recognize the remedy outside of statute (praeter legem).

Already in 1953, the Supreme Court acknowledged the possibility of the oppression remedy, although this was ruled in an obiter dictum.4 The roots of the oppression remedy may be even older. With respect to the recognition of the oppression remedy, several legal authors5refer to the judgment of the Court of the German Empire (Reichsgericht) of the 7th of February 1930.6

Even so, it was not until the 16th of December 1991 that the Supreme Court expressly recognized the oppression remedy. On this day, the Supreme Court held:

"In principle, shareholders of a GmbH are granted the right to exit the company provided that an important reason is present (...). Being a basic principle of the law on associations, this right belongs to the mandatory and inalienable membership rights (...). It can be exercised in circumstances that make the continuation of the presence of the shareholder, who is willing to exit, in the company unacceptable (...)."7

In cases judged by lower courts, a comparable position is adopted.8 Furthermore, the existence of an exit right in the event of an important reason is practically undisputed in legal literature.9

If an important reason justifies the exit of a shareholder, he is entitled to exit the company and claim compensation. This entitlement simply arises when an important reason is present. No court order is required for the entitlement to arise. In order to qualify for compensation, the shareholder must notify the company. No specific form is required for this notification. By means of the notice, the shareholder secures a claim (Anspruch)10 to compensation in cash.

Next, the company is entitled to purchase or withdraw the shares of the shareholder involved, provided that this purchase or withdrawal is allowed according to the rules for the maintenance of the company's capital (Kapitalerhaltungsvorschriften). The company can also allow co-shareholders or even third parties to purchase the shares instead of purchasing or withdrawing the shares by the company itself. If the shareholder has not received compensation for his shares within a reasonable amount of time, he is allowed to invoke the winding-up remedy.11

Deze functie is alleen te gebruiken als je bent ingelogd.