The shareholders’ meeting - It is imperative that the heirs are invited
The appointment of a managing director with sole power of representation following a death
In the case in question, a GmbH [German private limited company] had two managing directors and one of them died suddenly. He was also a managing director with sole power of representation. For such a case, the bylaws provided that after the certificate of inheritance had been produced by the heirs the remaining managing director could request that the shares of the deceased be transferred to him. Until this could be clarified the shareholder’s rights were supposed to be suspended with the exception of the right to draw profits. As the heirs were unknown, the remaining managing director himself held a shareholders’ meeting where he appointed himself as managing director with sole power of representation and notified the Commercial Register of the respective change. The registration court however rejected the entry.
Ruling - Even unknown heirs need to be invited
The seised court of appeals in Brandenburg, in its ruling of 2.1.2024 (case reference: 7 W 66/23) sided with the registration court and declared the shareholders’ resolution to be invalid because the heirs had not been invited to the meeting. The right to participate in a shareholders’ meeting is one of the shareholder’s inalienable rights and violating it results in the nullity of all the resolutions that were passed in the meeting. This will also be true if, according to the bylaws, the heirs have no shareholders’ rights and thus also no voting rights.
Likewise, it did not matter that the heirs were unknown. In such a case, a request should be made to a probate court (Nachlassgericht) for a curator of the estate (Nachlasspfleger) to be appointed and they should then be invited to the shareholders’ meeting. Prior to that, no effective resolutions can be passed.
Additional information
Normally, the managing directors convene the shareholders’ meeting. However, if there is no managing director available then shareholders who together hold at least 10% of the share capital may convene the shareholders’ meeting. In the case in question, the voting rights of the heirs would have been suspended even without the provision in the bylaws because their names had not been entered into the list of shareholders that is included in the Commercial Register. In relation to the GmbH, only those who are listed there are regarded as shareholders and are able to exercise shareholders’ rights. This presents a dilemma especially when the sole shareholding managing director dies because then there is no managing director available who is able to submit an amended list (cf. following article). Frequently, the only option is then to request the appointment of a temporary managing director.
Conclusion: Even though, in the bylaws, it is not possible to exclude the right of the heirs to participate in the shareholders’ meeting, it would nevertheless be advisable to include specific provisions in the bylaws on what should happen in the event of the death of a shareholder. For example, it would be legitimate and reasonable to mandate that the shareholders’ rights of several heirs have to be exercised by a joint representative. Processing problems can also be avoided by setting up appropriate powers of attorney for shareholders insofar as they remain in force even beyond death.