Dismissal of the GmbH managing director

The most important facts at a glance

• The managing director of a GmbH (German limited liability company) has a responsibility towards the shareholders based on the duties of a trustee to protect the interests of the GmbH in accordance with the statutory provisions and the articles of association. He is the custodian of third-party financial interests.
• The managing director is bound to the GmbH in two legal categories. Under company law, he is an organ of the company; under employment law, he has an employment relationship with the company. A distinction must be made between the employment relationship and the relationship as an executive body subject to different legal regulations.
• The board member relationship is terminated by dismissal or resignation. The employment relationship is terminated by resignation.
• Dismissal can generally occur at any time without giving reasons if the articles of association or rare other circumstances do not prevent this, cf. section 38 para. 1 GmbHG (German Limited Liability Companies Act) . Dismissal does not necessarily entail termination of the employment relationship.
• The dismissal process includes legal steps such as convening a shareholders’ meeting and entering the resolution in the commercial register.

The dismissal of managing directors of a GmbH is a complex process that must take into account various legal and organizational aspects. In this introduction, we provide an overview of the basics of GmbHs and management, as well as the reasons for the dismissal of a managing director.

When it comes to the dismissal of managing directors of a GmbH, it is essential to be aware of the legal process and possible consequences. Qualified legal advice can help you understand your rights and obligations and make an informed decision. We specialize in corporate law and will be happy to advise you on any questions relating to the dismissal of managing directors of a GmbH.

Basics of limited liability company (GmbHG) and its management

The managing director or, in the case of several managing directors, these together, is the legal representative of a GmbH. Its main task is to manage the company’s affairs as defined by the articles of association and the shareholders’ meeting and to make decisions on its behalf. This includes, in particular, performing management tasks, implementing business strategies, representing the GmbH vis-à-vis third parties, ensuring compliance with the legal requirements for the GmbH and its operations, and monitoring all operating activities.

The managing director is the custodian of third-party financial interests (the interests of the GmbH, the shareholders, and the creditors). From this point of view, he is subject to a responsibility towards the company derived from fiduciary law. As a rule, only the company can assert liability claims against the managing director.

Legal basis for appointment and dismissal

A managing director is usually appointed by resolution of the shareholders. The basis for the appointment can be found in the articles of association and the law (see Sections 46 No. 5, 47 et seq. GmbHG). The dismissal of a managing director also follows this law.

§ Section 38 para. 1 GmbHG stipulates that the dismissal can occur at any time without stating special reasons. The company’s articles of association may contain deviating provisions and, in particular, more stringent provisions, e.g., the requirement of good cause, Section 38 (2) GmbHG.

Overall, the various statutory and individual provisions in the articles of association must be observed in the event of a dismissal.

Reasons for dismissal

The dismissal of a managing director can be motivated by various reasons. As a rule, it is sufficient if you lose trust in the managing director.

Legal vs. business reasons

Legal and business reasons can play a role when dismissing a managing director. Legal reasons relate to breaches of duty and liability issues, while business reasons focus more on business results and management qualities. Some examples of legal and business reasons are

Legal reasons:

• Misappropriation of company funds
• Managing director liability for breach of duties of care
• Violations of insolvency law or tax law

Economic reasons:

• Decline in sales despite market/industry growth
• Changing business strategies that show no success
• Over-indebtedness or liquidity problems

Regardless of the reasons for the dismissal of a managing director, as a lawyer, we offer comprehensive support and advice on all questions of company law and guide you through the entire process of dismissing a managing director of a GmbH.

If the articles of association make use of the option to make the dismissal of the managing director dependent on the existence of good cause, this may be the case, for example, in the following cases:

• Breaches of duty: Breaches of contract or breaches of statutory provisions, e.g., breaches of competition law or data protection law
• Insufficient performance in terms of a decline in sales or earnings
• Personal reasons, e.g., illness or incompatibility with other members of the Management Board

It is important to note that the dismissal of a managing director must generally be carried out by a shareholders’ resolution.

Managing director dismissed – legal process.

The dismissal of a GmbH managing director is an integral part of company law and is based on various statutory provisions, in particular the German Limited Liability Companies Act (GmbHG). The shareholders’ meeting has the decision-making power and can dismiss the managing director by a majority vote (Section 38 GmbHG). A qualified majority vote is only required if the articles of association provide for such a regulation.
In cases in which the managing director is accused of serious misconduct, a court decision can temporarily remove the managing director until the shareholders’ meeting.

Necessary documents and formalities

The documents and formalities required for the dismissal of a managing director include

• Dismissal resolution: This should contain all relevant details, such as the reasons for the dismissal and the effective date.
• Termination of the employment contract: Dismissal alone is insufficient to terminate the employment relationship; the employment contract must also be terminated.
• Entry in the commercial register: The dismissal resolution must be submitted to and entered in the commercial register.

In general, we recommend seeking legal advice when dismissing a managing director of a GmbH in order to prevent possible shareholder disputes and legal consequences. We are at your disposal for all questions relating to company law and the dismissal of managing directors of a GmbH.

Legal and professional consequences

The dismissal of a managing director of a GmbH has legal and professional consequences for both the company and the managing director concerned. In employment law, the employment contract of the managing director also applies.
In the event of dismissal, questions often arise regarding claims for damages and liability on the part of the company against the managing director based on the fact that the managing director may have breached his official duties towards the GmbH (cf. Section 43 GmbHG). The managing director, on the other hand, is often interested in a discharge and general settlement agreement.

Avoidance of potential legal risks

In order to minimize potential legal risks when dismissing a managing director, there are several factors to consider. Here are some tips that we can offer you:

1. Check the legal basis: Ensure that the dismissal is carried out in accordance with the legal requirements of company law and the provisions of the Limited Liability Companies Act (GmbHG).
2. Compliance with the notice period: Ensure that the contractually agreed notice period is adhered to to avoid problems under labor law. If necessary, check linking clauses.
3. Convening a shareholders’ meeting: The dismissal of a managing director should be carried out by a resolution of the shareholders’ meeting to legally secure the decision.
4. Document the reasons: Document the reasons for the dismissal, especially if there is reasonable cause, to be well prepared in legal disputes.

We are at your disposal for all questions relating to the dismissal of managing directors of a GmbH and will provide you with competent and comprehensive advice. We help you minimize the legal and professional consequences and potential risks.

Advice offered by CTC.legal

We understand that the dismissal of a GmbH managing director is a complex and often delicate situation. Therefore, we take the time to understand our client’s individual needs and requirements. Here are some of the areas in which we offer support to our clients:

• Legal basis: We help our clients understand the legal basis and requirements for dismissing a managing director in a GmbH. We clarify relevant laws, such as Section 38 GmbHG, and explain their impact on the company and the managing director.
• Strategic advice: When planning a dismissal, we advise our clients on the best course of action to make the process as smooth and effective as possible. In doing so, we take into account factors such as the size of the company, the influence of the managing director, and possible legal consequences.
• Contractual aspects: We assist our clients in negotiating and drafting the termination of the managing director’s contract. In doing so, we ensure that the legal requirements and entrepreneurial interests are safeguarded and that a fair agreement is reached for both parties.
• Representation in legal disputes: If legal disputes arise concerning the dismissal of a managing director, we represent our client’s interests in court and work to find a satisfactory solution.
  Compliance with legal requirements and the effective implementation of business decisions are crucial to the success of a limited liability company. ctc.legal is proud to offer our clients professional support and customized solutions.

Frequently asked questions

1. How is the dismissal of a managing director entered into the commercial register?
   The dismissal of a managing director of a GmbH must be entered in the commercial register. To this end, we must pass a corresponding resolution at the shareholders’ meeting and then register this for entry in the commercial register via the notary. Once the application has been notarized, the resolution is submitted to the competent registry court, which makes the entry.
2. What requirements must be met for a dismissal to be effective?
   For the dismissal of a managing director of a GmbH to be effective, specific statutory requirements must be met. As a rule, this includes establishing a good cause. The cause may include, for example, a breach of duty, misconduct under criminal law, or poor financial performance by the managing director.
3. What form must the termination of a managing director take?
   The termination of a managing director should be in writing and approved by the relevant shareholders’ meeting. It is essential to observe the grounds and deadlines for termination as well as the provisions of employment law.
4. What special features apply to dismissing a GmbH & Co. KG managing director?
   When dismissing a managing director of a GmbH & Co. KG, the same rules apply to a GmbH. However, it must also be noted here that the limited partners also have a say in the dismissal.
5. What is the legal situation when a managing director is dismissed due to illness?
   A dismissal due to illness is generally only permissible if the disease of the managing director leads to a significant impairment of the company. The interests of the managing director must also be taken into account. In each case, a precise examination of the individual circumstances is required.