Attorneys for German Corporate Law in Koblenz

Facts: The plaintiff (shareholder with a 10% stake) took action against a multitude of annual general meeting resolutions of a German AG (stock corporation) (defendant 1). The AG was already in liquidation. The managing director of the plaintiff and the main shareholder/board member of the defendant were in dispute. The plaintiff demanded 8 million euros in settlement negotiations to end the dispute, although her block of shares was objectively worth only a fraction (approx. 40,000 euros). She primarily complained about formal errors (e.g., wrong envelope for invitation) and blocked the liquidation of the company through the actions for annulment.

Key Norms:

• Sec. 246 AktG: Action for annulment (Right of the shareholder to take action against defective resolutions; here used abusively).
• Sec. 242 BGB: Good faith (Limit for the exercise of rights; abuse of rights if the right to sue is instrumentalized for extraneous, self-serving purposes).

Decision: The German Higher Regional Court (OLG) Koblenz dismissed the appeal and confirmed the dismissal of the lawsuit. The court classified the plaintiff's approach as abusive of rights. Indicators for the abuse were: 1. Extraneous motives: Personal vendettas and excessive financial demands (8 million euros vs. real value). 2. Intent to harm: Deliberate blockade of the liquidation to bleed the company dry ("nuisance value" of the lawsuits). 3. Conduct of litigation: Focus on purely formal defects (e.g., register sign in the company name) instead of substantive engagement. Anyone who instrumentalizes the right to challenge in order to harm the company or extort unjustified payments acts contrary to good faith. The lawsuit is then unfounded (for annulment) or inadmissible (for declaration of nullity).

Conclusion: Actions for annulment serve to control legality, not extortion. If a shareholder is obviously only out to harm the company or to have the waiver of the lawsuit bought off ("predatory shareholder"), they can be denied legal protection due to abuse of rights.

Facts: The insolvency administrator of a car dealership sued three former managing directors for damages. As part of a risky business model (vehicle imports), the managing directors had made substantial advance payments to a newly founded supply company (which turned out to be a Ponzi scheme) without securing these advance payments (e.g., through guarantees). The money was lost. The special feature: At the time of the payments, Defendants 1) and 2) were simultaneously the sole shareholders of the GmbH. Defendant 3) was a later external managing director.

Key Norms:

• Sec. 43 Para. 2 GmbHG: Internal liability (Damages in case of a breach of the duty of care). The protective purpose is the company assets, not the assets of the creditors.
• Sec. 64 GmbHG (old version, today Sec. 15b InsO): Prohibition on payments after insolvency maturity (Liability for payments made after the occurrence of insolvency/overindebtedness).

Decision: The OLG Koblenz differentiated strongly: 1. No liability of the shareholder-managing directors (Def. 1 & 2): Although the business was highly risky and contrary to duty (breach of duty of care). However, since they were simultaneously sole shareholders and acted consensually, they are not liable to the GmbH under Sec. 43 GmbHG. Anyone who damages their own company assets does not have to pay themselves damages (as long as no explicit liability for the destruction of existence applies). 2. Liability of the external managing director (Def. 3): He is not liable under Sec. 43 GmbHG for the continuation of the risky business, as he acted on the instructions/with the approval of the shareholders. However, he is liable under Sec. 64 GmbHG for payments (approx. 38,000 €) that he made after the insolvency maturity of the company had occurred. He should have recognized the supplier's insolvency and stopped payments.

Conclusion: Shareholder-managing directors often enjoy a liability privilege in internal relationships in the event of wrong decisions ("consent of all shareholders"). However, this privilege ends abruptly as soon as the company is mature for insolvency; then the strict liability for mass-depleting payments to protect the creditors applies.

Facts: The plaintiff, a bank in the legal form of a German GmbH with its registered office in Koblenz at the time, sued its former managing director for damages. It involved several failed credit engagements in the millions (including real estate financing in Halle and commission pre-financing for an AG in Essen). The managing director was accused of having granted loans without adequate collateral checks, exceeding competence limits, and insufficiently or not at all informing the supervisory bodies (Supervisory Board, Credit Committee of the parent company in Istanbul). The defendant cited a discharge granted to him and argued that he was allowed to rely on the preparatory work of the specialist departments.

Key Norms:

• Sec. 43 Para. 2 GmbHG: Liability of the managing director (Obligation to pay damages in the event of a breach of the diligence of an ordinary businessman).
• Sec. 93 AktG (analogous): Reversal of the burden of proof (The managing director must demonstrate and prove that he acted carefully, not the company the opposite).
• Sec. 46 GmbHG: Duties of the shareholders (Relevant here for the effect of resolutions of discharge).

Decision: The German Higher Regional Court (OLG) Koblenz ordered the ex-managing director in principle to pay damages (limited to approx. 5.1 million euros). The court established strict principles: 1. No discretion regarding information: When a managing director prepares decisions for control bodies (Supervisory Board), he has no entrepreneurial leeway ("Business Judgment Rule" does not apply here). He must inform completely and truthfully. Concealing risks (e.g., lack of intrinsic value of land charges) is a breach of duty. 2. Exceeding competence: Granting loans without the internally prescribed approval of the Supervisory Board is per se a breach of duty that offers no possibility of exculpation. 3. Invalid discharge: The discharge originally granted to the defendant did not help him, as these resolutions had been legally declared null and void in a separate proceeding. This nullity also takes effect against the managing director, even if he was not a party to that trial.

Conclusion: Bank managing directors are personally liable if they disregard committee reservations or inform committees incompletely. They cannot rely generally on the preparatory work of employees if obvious risks (e.g., prior encumbrances visible in the land register) are ignored. There is no claim against the company to conclude D&O insurance.

Facts: The plaintiff, a German GmbH, demanded damages from its former managing director (defendant). The defendant had withdrawn 150,000 DM from the plaintiff's fixed-term deposit account and transferred it to another company in which the plaintiff held a stake and of which he was also the managing director. The payment was allegedly supposed to be for open invoices. At the time of the transfer, however, these invoices did not yet exist, or rather, the claims were not yet due due to a lack of invoicing. The defendant acted arbitrarily in a conflict situation between the shareholders.

Key Norms:

• Sec. 43 Para. 1 GmbHG: Duty of care (Obligation of the managing director to apply the diligence of an ordinary businessman).
• Sec. 43 Para. 2 GmbHG: Liability (Managing directors are personally liable to the company for damages caused by the breach of their duties of care).

Decision: The German Higher Regional Court (OLG) Koblenz decided in principle in favor of the plaintiff. The court found that the servicing of claims not due constitutes a breach of duty. An ordinary businessman does not pay before maturity, especially not in a conflict situation, as this withdraws liquidity and interest from the company. The managing director bears the burden of proof that he acted carefully. Since he could not prove that the claims were due at the time of payment, he is liable for the damage incurred (at least the interest damage).

Conclusion: Managing directors must strictly ensure they only settle claims that are due and checked. Hasty payments, especially to related companies or in conflict situations, lead to personal liability under Sec. 43 Para. 2 GmbHG.

Facts: The managing director of a German GmbH (later deceased) caused a severe accident with his fully comprehensively insured company car (Jaguar X) on the A 48 near Koblenz. He was driving at excessive speed (at least 170 km/h) and was talking on a mobile phone. In a curve, he had to brake because of another vehicle, skidded, and crashed into the guardrail. The comprehensive insurance only paid half the damage (approx. 29,000 DM) due to gross negligence. The GmbH demanded the remaining amount from the widow (heir) of the managing director.

Key Norms:

• Sec. 43 GmbHG: Duty of care and liability (Managing directors are liable for damages they cause to the company through a breach of duty).
• Employment law principles (analogous): In the case of hazard-prone work (like driving), employees often only have limited liability; whether this also applies to managing directors was left open by the court, since gross negligence was present here anyway.

Decision: The German Higher Regional Court (OLG) Koblenz ordered the heir to pay damages. The court evaluated the managing director's behavior as grossly negligent. Anyone who talks on the phone at a speed of 170 to 220 km/h and thereby loses control in a curve violates the care required in traffic to a particularly severe degree. Even if one were to apply liability-limiting principles for employees to managing directors, they do not help in the case of gross negligence. Since the damage was not fully covered by the comprehensive insurance due to the misconduct, the managing director (or his heir) must be personally liable for the difference.

Conclusion: Managing directors are liable to their GmbH for accident damage to the company car if they cause it with gross negligence (e.g., by phoning while speeding). Fully comprehensive insurance only protects internally insofar as it actually settles the damage.

Facts: Two tax consultants (Def. 1 and 2) were shareholder-managing directors of a tax consultancy GmbH (G) in Koblenz. The GmbH was performing poorly economically. Following failed negotiations with the co-shareholder (plaintiff), both managing directors resigned from their office without notice and surprisingly. One of the two (Def. 2) simultaneously opened a new practice in the immediate vicinity, locked the GmbH premises, and took client files, staff, and inventory. The GmbH thereby became incapacitated and lost its client base. The plaintiff demanded damages on behalf of the GmbH.

Key Norms:

• Sec. 43 GmbHG: Liability of the managing directors (Breach of the diligence of an ordinary businessman).
• Sec. 826 BGB: Immoral intentional damage (The deliberate "bleeding dry" of the company and the appropriation of the business operations).
• Resignation from office at an untimely moment: A managing director may not resign from their office if this leaves the company leaderless and damages it, even in a crisis.

Decision: The German Higher Regional Court (OLG) Koblenz ordered both managing directors as joint and several debtors to pay 80,000 DM in damages to the GmbH. The court found: 1. Invalid resignation: An economic crisis or internal disputes are not an "important reason" for a resignation without notice at an untimely moment. The managing directors should have remained in office until a successor or an insolvency administrator was appointed. 2. Breach of duty of loyalty: The coordinated action (resignation, closing of the premises, taking of clients) deprived the GmbH of its livelihood. This was an intentional breach of duty and an immoral damage. 3. Damage: The damage consists of the value of the lost client base, which the GmbH could have sold in the event of a proper winding up.

Conclusion: Managing directors may not simply "abandon" a struggling GmbH and appropriate its assets (here: clients). Such a "cold liquidation" leads to full personal liability for the company value.

Facts: The insolvency administrator of a shipping fund (GmbH & Co. KG) sued a limited partner for the repayment of profit distributions in the amount of 31,000 euros. The limited partner had received distributions in the years before the insolvency, although his contribution had been partially returned (liability under Sec. 172 Para. 4 HGB). The insolvency administrator relied generally on the claims registered in the insolvency table (totaling approx. 18.9 million euros) and merely submitted excerpts from the table without concretely naming which exact creditor claim is being asserted with the lawsuit.

Key Norms:

• Sec. 171 Para. 2 HGB: Collection authority of the insolvency administrator (He asserts the right of the creditors against the limited partner, not a right of the company itself).
• Sec. 253 ZPO: Specificity of the lawsuit (The subject matter of the dispute must be designated so precisely that it is identifiable and the legal force effect is clear).

Decision: The German Regional Court (LG) Koblenz dismissed the lawsuit as inadmissible. The court clarified: The insolvency administrator is only a party acting in representative capacity (Prozessstandschafter) for the individual creditors regarding liability under Sec. 171 HGB. He does not collect an abstract "estate claim", but rather concrete claims of third parties. Therefore, he must state exactly in the lawsuit which concrete creditor claim he is asserting (creditor, reason, amount) and in which order these are to be examined if the sum of the lawsuit is lower than the total debts. A blanket reference to the insolvency table ("Here are debts of 18 million, pay 31,000") is not sufficient, as it otherwise remains unclear which claim is extinguished by the payment.

Conclusion: Insolvency administrators must name "horse and rider" when bringing lawsuits against limited partners for the return of contributions. They must concretize and individualize the underlying creditor claims; a mere reference to the table total does not satisfy the requirements for an admissible lawsuit.

Facts: A shareholder departed from a German GmbH in the Koblenz district at the end of the year. The articles of association stipulated that the severance pay should be based on a "settlement balance sheet" which was supposed to reflect the "true economic value" (incl. hidden reserves and goodwill). The GmbH (represented by the remaining managing director) refused to prepare this special balance sheet. It argued that the contract did not explicitly regulate who had to prepare the balance sheet, and merely presented the normal annual balance sheet. The departed shareholder sued for the preparation of the settlement balance sheet.

Key Norms:

• Sec. 34 GmbHG: (Content of the balance sheet, here in conjunction with the accounting duties of the managing directors).
• Articles of Association: Specific regulation for the calculation of severance pay ("true economic value").

Decision: The German Regional Court (LG) Koblenz ruled in favor of the lawsuit and ordered the GmbH to prepare the balance sheet. The court justified this as follows: 1. Responsibility: Even if the contract is silent, the preparation of balance sheets inherently falls to the management, as it has the accounting duty. A departed shareholder has neither access to the data nor the legal possibility to draw up a balance sheet. 2. Prerequisite for maturity: Since the maturity of the severance pay depended on the establishment of this balance sheet according to the contract, the ex-shareholder has an actionable claim for its preparation. He cannot be referred to estimating his claim himself. 3. Insufficient annual balance sheet: The normal commercial balance sheet is not sufficient because it does not show hidden reserves and the intangible company value (goodwill), which were contractually decisive for the severance pay.

Conclusion: If the articles of association provide for a settlement balance sheet, the GmbH is obliged to actively prepare it. It cannot fob off the departed shareholder with the regular annual balance sheet if this does not fully reflect the actual company value.