4.3.6 Enforcement of the oppression remedy

In the event of an important reason to exit the GmbH, the shareholder is free to either remain within the company or to exit the company. While the oppression remedy is developed in case law, there is no specific court action to enforce the exit right. However, as will be seen below, legal proceedings may be used to enforce the exit right. The power to exit the company if there is an important reason is a unilateral power (Gestaltungsrecht) and does not depend on the cooperation of the company in order to arise.

According to the general opinion in literature, a unilateral declaration of resignation (Kndigung) by the shareholder directed to the company is sufficient to initiate an exit and to claim for compensation.1 No specific form is prescribed for this unilateral declaration, and the company can even be notified orally. Nevertheless, it is recommended to put this unilateral declaration unambiguously in writing and to request a notice of receipt from the company.2 The unilateral declaration as such does not lead to the exit of the shareholder concerned. It merely creates a personal claim (Anspruch)3 of the shareholder towards the company for the withdrawal or purchase of his shares and for compensation in cash.

Subsequently, the company has to award this claim. Although it is hard to state a specific period, the company must accomplish the exit of the shareholder in about six months. Special circumstances, such as difficulties in valuing the shares, may justify taking a longer period.4

There are three possible ways to award the exit claim. First, the company can choose to purchase the shares. The company can also opt for withdrawal of the shareholder's shares (Einziehung). Thirdly, the company can approve the purchase of the shares by the other shareholders of the company or by a third party.5 In the third situation, the other shareholders or third parties are free to accept or refuse the offered shares, whereas the shareholder solely has an exit claim against the GmbH. In the case of transfer of the shares to a co-shareholder or a third party, a transfer restriction clause contained in the articles of association applies.6

The purchase of own shares by the company is regulated by § 33 GmbHG. There are several capital maintenance rules that have to be observed in order for the GmbH to be able to purchase own shares. If a rule is infringed, the transfer of shares will be effective, but the company is obliged to reclaim the purchase price.7 First, a GmbH can only purchase own shares that are fully paid up.8 Moreover, the GmbH can only purchase shares if it is able to maintain a reserve in the amount equal to the shares that will be purchased. The company is bound to keep a reserve that neutralizes the purchase of own shares. This reserve has to be formed from the distributable reserves and can, therefore, not be formed at the expense of the share capital or the reserves that according to German law cannot be distributed.

The withdrawal of shares (Einziehung) by the company is subject to the rules of § 34 GmbHG. By means of withdrawal of the shares, the shares cease to exist. Moreover, whereas the withdrawal of shares does not affect the total amount of the share capital, withdrawal of shares has the effect that the nominal value of the remaining shares is increased accordingly. Withdrawal of shares is merely possible if the articles of association allow withdrawal. Nonetheless, it is acknowledged in case law that if there is an important reason to exit withdrawal is possible even if the articles of association do not allow withdrawal.9

Withdrawal is furthermore subject to the rule that either the articles of association have to include the conditions for withdrawal or the shareholder is required to consent to the withdrawal. In the case of exit, it is obvious that the shareholder consents to the exit.10 Additionally, the shares have to be fully paid-up. More-over, pursuant to § 46 No. 4 GmbHG a resolution of the general meeting of shareholders is required. Lastly, the cash compensation for the shares must be paid from the distributable reserves of the company and may not affect the share capital and the reserves that must be maintained onder German law.11

The aforementioned options to award the shareholder's exit claim all require the cooperation of the company. All the same, it is conceivable that the company refuses its assistance to the exit. First, a company may refuse cooperation because this would lead to an infringement of capital maintenance rules. Secondly, the company may refuse cooperation, because it is of the opinion that the important ground justifying the exit is not present. Thirdly, the company and the shareholder may agree on the shareholder's exit, but the two may hold opposing views about the valuation of the shares.

Let us start with the first situation. A shareholder faced with the impossibility of the purchase or the withdrawal of the shares by the company due to capital maintenance mies, may turn to the winding-up remedy to realize an exit.12 Another possible solution is to lower the share capital of the company, so that capital maintenance rules are complied with. However, it is questionable whether the laffer solution can be used. The decrease of the share capital involves a complex procedure and after the decrease, the share capital still has to amount to at least €25,000.13

In the second situation, the company refuses to cooperate with the exit of the shareholder. Whether and how the company has to be legally forced to facilitate the exit is highly debated. The standing view in legal literature refers to the winding-up remedy if it appears that the company does not wish to cooperate with the exit of a shareholder.14 One may doubt whether this measure of last resort is the most favourable solution. Moreover, it is likely that the winding-up remedy cannot be used by shareholders who hold less than 10% of the share capital of the company, as prescribed by § 61II GmbHG.15

Some legal authors are of the opinion that the shareholder is entitled to start court proceedings to obtain a payment order (Zahlungsklage).16 In their view, in the same proceedings the court has to assess whether the exit notice is valid and an important ground to exit is present.

Müller and Becker contest this view and point to the fact that the GmbH has a choice between alternative ways to award the claim, the three ways as described above. Therefore, the claim concerns a liability with a right of choice (Wahlschuld).17 The liability with a right of choice is governed by § 262 BGB. The company is not obliged to choose. The shareholder willing to exit can apply to the court for an order aimed at the company to comply in the alternative (Alternativverurteilung). If the GmbH is ordered to comply, the GmbH is obliged to choose. If the company does not make a choice, the choice can be made by the shareholder, as turns out from § 264 I BGB. This provision stipulates:

Therefore, once the exit claim can be executed and the company has not made a choice, the shareholder is entitled to choose in which way the exit is attained. Nevertheless, the shareholder has only two choices, whereas the order can only be aimed at the company and not at co-shareholders or third parties. Subsequently, further to § 894 ZPO, the choice can be executed if the judgment becomes irrevocable.

Schindler does not share the view of Müller and Becker. He rejects the assumption that a claim can be executed against the company without the consent of the company. He aims at the possibility of § 888 ZPO. By means of this provision, the GmbH may be forced by way of a judicially imposed penalty to make a choice between the different ways of awarding the claim. After a forced choice, an action for compensation for the loss of the shares can be started.19

Hülsmann also disagrees with Müller and Becker. He holds that fürness requires that if too much time has elapsed after the exit notice, the refusal of the company to cooperate with the exit, no longer bars the legai enforcement of the exit right. In his opinion, this would follow from § 162 I BGB.20 This provision stipulates:

The abovementioned debate clearly shows that the enforcement is a problematic aspect of the exit remedy.

In the third situation, merely the amount of compensation has to be determined, while the company has agreed on the exit of the shareholder. There is consensus in legal literature about how the determination of the compensation can be legally enforced. In these circumstances, the shareholder must start an action for a judgment requiring the company to pay compensation for his shares. By virtue of § 253II No. 2 ZPO, the petition for this action has to specify the amount of the compensation.22 In order to assess the amount of compensation, usually expert reports are used. When there are difficulties in determining the amount of compensation, caused by lack of information about the financial situation of the company, the shareholder may use of § 254 ZPO to obtain the missing information from the company. If the total amount of the compensation cannot be assessed on a short term, the shareholder has the option to receive a part of the sum, in the form of a partial action (Teilklage).