Excluding a shareholder: why the articles of association decide

When cooperation within a GmbH ends, the first question is rarely a legal one: who leaves, and at what price? The second question is all the more a legal one; the answer is usually already set out in the articles of association, or it is missing from them.

Without a provision: the action for exclusion

If there is no contractual basis, apart from the statutory special cases (forfeiture of the share for an unpaid capital contribution under § 66 GmbHG, and the squeeze-out by a principal shareholder holding at least 90 per cent under the GesAusG) the only route is exclusion for good cause by court action. That is a lengthy route with high requirements for reasoning and evidence. What is required is conduct that makes it unreasonable for the other shareholders to continue the shareholder relationship. Mere personal rifts or differing strategic views are not enough.

With a provision: the call option

Robust articles of association deal with the trigger events, the valuation and the payment. The trigger events include a shareholder's insolvency, death, a serious breach of duty, loss of a required professional licence and a change of control at a corporate shareholder. On valuation they lay down the method and the reference date, who appoints the expert and whether there is a discount for the trigger event. On payment they settle whether it is made as a lump sum or in instalments, what security is given and what interest accrues.

The practical point

These clauses cost little effort at formation and, if missing, a great deal of money in a conflict. Anyone who only negotiates them once a dispute has arisen negotiates from the weaker position and usually under time pressure, because the business keeps running.