In the world of limited liability companies (GmbH), conflicts among shareholders can lead to the redemption of shares. Such a redemption can effectively exclude the shareholder concerned from the company. As this process has far-reaching consequences for both the company and the individual shareholder, it is important to understand it thoroughly and act accordingly.
When and how does the redemption of shares take place?
A redemption of shares is normally decided at the shareholders' meeting. However, this resolution is only legally unassailable if all legal and statutory requirements are met. In the event of an effective redemption, the shareholder concerned has a claim for compensation against the company.
Under German law, such a redemption is only permissible if it is allowed in the articles of association of the GmbH. Without such a clause in the articles of association, a shareholder can only be excluded by judicial means. This can be a lengthy and expensive process. It is therefore advisable to include a redemption clause in the memorandum and articles of association already when the company is formed.
Who makes the decision on redemption?
The general meeting of shareholders decides on the redemption of shares. As a rule, a simple majority decision is required, unless the articles of association of the GmbH provide otherwise. The shareholder concerned is usually excluded from the vote to avoid conflicts of interest.
Sometimes the power to decide on the redemption of shares can be transferred to other organs of the company, such as the supervisory board or the management board. However, this must be expressly regulated in the articles of association of the GmbH.
Are reasons for redemption required?
The compulsory redemption of shares against the will of the shareholder concerned is only permissible if an objective reason is laid down in the articles of association. Arbitrary reasons are not permissible. Factual reasons could be, for example, the termination of an employment relationship between the company and the shareholder or the loss of the position as managing director.
When does the redemption take effect?
The redemption becomes effective as soon as the resolution has been passed and communicated to the shareholder concerned. A successful challenge to the resolution on the grounds of defects or the absence of a resolution will result in the redemption being ineffective and the affected shareholder retaining his position.
It is important to note that the payment of a settlement is not required to make the redemption effective. However, if it is clear that the compensation cannot be paid out of the GmbH's free assets and this would violate the principles of equity preservation, the redemption resolution may be considered void.
Liability risks and the whereabouts of the redeemed shares
After the redemption of the shares, there is a personal liability risk for the remaining shareholders if the GmbH cannot pay the compensation of the excluded shareholder.
The redeemed shares are in principle "destroyed", but can be recreated by a shareholders' resolution and distributed among the remaining shareholders. In contrast to the classic share purchase agreement, notary fees can be saved and tax advantages achieved in this case, as the settlement payment is made by the GmbH.
The role of the list of shareholders
After the shares have been redeemed, attempts are often made to remove the shareholder concerned from the list of shareholders. If successfully carried out, the affected shareholder loses his rights vis-Ã -vis the GmbH. Therefore, a "battle for the list of shareholders" can often ensue.
How we can support you
The process of withdrawing shares is complex and legally demanding. If required, we are at your disposal to guide you through this process and protect your interests. Contact us without obligation by phone, email or use our contact form.