Cologne Higher Regional Court rules on the competence of the chairman of a German limited liability company’s (GmbH) partners’ meeting to pass resolutions

The plaintiff is one of three partners in a GmbH. The other partners had elected one of them as chairman of a partners’ meeting and assigned to him the authority to adopt resolutions. The plaintiff voted against the proposed resolution. Subsequently, the meeting voted on the 2018 annual financial statements. Again, the other partners voted in favor and the plaintiff against the proposed resolution. Subsequently, the resolution was adopted by the chairman by stating the voting result. 

The plaintiff filed an action for annulment against these resolutions – among other things, arguing that the authority to adopt resolutions can only be assigned to a meeting’s chairperson by unanimous resolution or by the articles of association. The plaintiff was already unsuccessful with this point in the lower court – and now also failed with his appeal before the Higher Regional Court.

Cologne Higher Regional Court’s decision

The Cologne Higher Regional Court did not share the plaintiff’s legal opinion. It supported the opposing view, according to which the competence to adopt resolutions could be assigned to the meeting’s chairman also by a simple majority.

The 18th Civil Senate justified its decision with the fact that a resolution’s adoption by the chairman of the meeting initially only had a declaratory meaning, i.e., “that a certain voting result and thus the acceptance or rejection of the proposed resolution is determined as fact”. Such determination, however, does not mean that it was rightly made and that the vote actually had the recorded result. Clarifying such fact in case of a dispute was rather the responsibility of the courts. 

Furthermore, for the minority partner, the resolution’s adoption – also by a meeting’s chairman who has been elected by simple majority – had the advantage that such partner knew, right from the start, that he could defend himself against the resolution by filing an action for such resolution’s annulment and did not have to file an action “at random” against any possibly adopted resolutions. Such adoption does not result in any disadvantage either because, in the event of a dispute due to a missing adoption of a resolution, filing an action is also the only remedy in order to clarify the dispute. The Senate further states that the opposing opinion, according to which the partners’ meeting had the authority to adopt resolutions, was wrong because in case of a dispute the declaratory resolution also had to be adopted. The latter then also requires adoption, etc.

Evaluation and classification

The Senate’s argumentation is stringent and consistently shows the opposing opinion’s weaknesses. Therefore, the decision is to be welcomed. Above all, it results in an increased degree of legal certainty in practice. This is due to the fact that contestable resolutions must generally be challenged within one month by filing an action for annulment. If this is not done, the resolution becomes final. In this case, managing directors in particular have the security of being able to carry out actions without having to fear further consequences. If, in contrast, the resolution has not been adopted, such error generally results in the resolution’s nullity. Particularly if the resolution’s content or outcome is disputed between the partners, any actions by the managing director to implement the resolution are on shaky ground.

However, the ruling does not finally resolve the long-standing dispute in the literature. This is because the Cologne Higher Regional Court also justifies its decision with a passage from the articles of association, according to which the period for filing an action is linked to the shareholder resolution’s (copy) dispatch or handover. In the court’s opinion, this implied that there must be someone adopting the resolution. At the same time, the articles of association provided that a chairman had to be elected for a meeting and that resolutions, unless otherwise provided for, will be passed with a simple majority. As the Higher Regional Court, as already explained, denies the shareholders’ meeting’s authority to adopt resolutions, it was logical that the competence to adopt resolutions had to be assigned to the meeting’s chairman.

An appeal has been allowed against the decision with regard to the competence to pass resolutions. Further developments therefore remain to be seen.

A big thank you for contributing to the article goes to Alexander Schmidt, research associate at Baker Tilly.