Representation of the limited liability company in cases against managing directors and shareholders

The claimant, a former managing director of a German limited liability company (GmbH), brought an action against the termination of his employment without notice or alternatively with notice. Regional Court Zweibrücken had initially dismissed the action as inadmissible, since the company sued had not been properly represented by its managing director. According to section 46 no. 8 German Limited Liability Companies Act, representation of the limited liability company in legal proceedings against the managing director is to be determined by the shareholders.

Higher Regional Court Zweibrücken now rejected this view: in actions brought by a limited liability company managing director or a former managing directors against the limited company, the company can be represented by the new managing director as long as the shareholders’ meeting has not exercised its power to appoint a special representative under section 46 no. 8 German Limited Liability Companies Act. Unlike in stock corporations (AGs), in which section 112 German Stock Corporation Act determines that the board members are represented vis-à-vis the company in and out of court by the supervisory board, section 46 no. 8 German Limited Liability Companies Act establishes only an authority to make resolutions by the shareholders’ meeting on the matter of who represents the company in cases against a managing director. Otherwise the company’s ability to act is limited beyond the intended purpose of section 46 no. 8 German Limited Liability Companies Act. The standard purpose is instead fulfilled by the fact that the shareholders’ meeting has the option, depending on the circumstances, of fulfilling the company’s interest in an impartial conduct of a case by appointing a suitable representative if it deems it necessary.