Can a CEO be fired

Can a GmbH managing director be recalled and terminated at any time?

Tips for medium-sized companies
A GmbH managing director can quickly lose his post at the top. But then he did not necessarily leave the company. Because dismissal and termination are two different things. Part seven of our series.

The GmbH managing director has to manage the company with the care of a prudent businessman for the benefit of the company and to observe all laws, the articles of association and all instructions of the shareholders' meeting. Especially as an external managing director, i.e. a dependent employee without own shares in the company, one is always in a particular area of ​​tension. On the one hand there are the expectations of the owners, i.e. the shareholders' meeting, on the other hand their own subjective conviction of what is best for the benefit of society. In addition, all objective legal requirements, the articles of association and all contracts and agreements concluded by the GmbH with suppliers, business partners and customers must be observed.

You will find an overview of all parts of the "Tips for medium-sized GmbH" series in this overview.

The GmbH managing director as an organ of the GmbH and as an employee of the GmbH

The GmbH managing director is linked to the GmbH for which he works in two ways. On the one hand, he is the central acting body of the company and, on the other hand, an employee with a managing director employment contract with the GmbH as his employer. Due to this double connection, parallel processes take place at the beginning and at the end of the activity as managing director, which can also be at different times.

Beginning and end of the position of the managing director of the GmbH

The activity as an organ of the company begins with the appointment by the shareholders' meeting by means of an appointment resolution. The executive position can be transferred to the managing director for a limited or unlimited period and must be entered in the commercial register. With the expiry of the agreed duration in the case of a time limit, the executive relationship ends without the need for notice. According to the law, the position of the managing director can be terminated by the shareholders' meeting independently of this at any time without giving reasons by means of a dismissal resolution. The dismissal must be communicated to the managing director and takes effect immediately upon receipt. In addition, an entry of the dismissal in the commercial register is required.

There is an exception to the dismissal at any time if it is regulated in the articles of association that a revocation of the appointment that is not based on the agreed term of office and therefore unexpected at any time is only effective if there are important reasons. This can be, for example, a gross breach of duty or the inability to conduct business properly.

Gross breach of duty leads to dismissal

Examples of a gross breach of duty are, depending on the circumstances of the specific situation, typically criminal offenses such as fraud, embezzlement, acceptance or offer of bribes, tax evasion (regardless of whether private or in the case of the GmbH), willful false information to the shareholders, an abuse of power of representation Violation of the non-competition clause, multiple disregard of legally correct and for the company harmless instructions of the shareholders, deliberate legal violations in the accounting and accounting measures of the GmbH, physical attacks with physical injuries against shareholders or against other personnel of the GmbH, unjustified defamation and defamation against Co-partner or the conclusion of business deals of the GmbH, which lead to a personal enrichment of the managing director. An important reason is also present if such a serious and lasting rift has developed between the shareholders' meeting and the management that a profound disruption can be affirmed.

Dismissed due to inability to properly conduct business

An inability to properly manage the business, which can lead to dismissal, can usually be assumed, depending on the specific circumstances, if the managing director does not have the necessary expertise to run the business, if he is addicted to alcoholism, drug addiction, drug use or gambling addiction, if he gets into serious financial collapse privately and business-damaging consequences are to be feared or if the managing director has to serve a custodial sentence.

Beginning and end of the employment contract for the managing director of the GmbH

The employment contract offers the managing director more comprehensive protection than the position on a body, because the employment contract and the law regulate clear, regular notice periods of several months. An extraordinary termination for an important reason can be pronounced, but has no legal validity if the legal or contractual requirements are not met.

 

You can find more articles on the subject of termination on our topic page.

On the above-mentioned occasions to terminate the position of governor for an important reason, an extraordinary termination within two weeks of knowledge of the circumstances is usually justified in the event of a serious extent and in particular if the relationship of trust is destroyed by the incident. Other extraordinary reasons for termination can in individual cases be, for example, a massive overstepping of competencies, the sustained refusal to provide important information to the shareholders or the supervisory board, culpable delay in bankruptcy at the GmbH or an unjustified resignation from office.

Checklist: Dismissal and extraordinary termination - what questions should the managing director of the GmbH ask?

  • Is there a formally effective shareholder resolution on the dismissal?
  • Was the notice of termination formally and effectively communicated by the shareholders' meeting? There is a right of rejection if the representative of the shareholders cannot present a legitimizing power of attorney.
  • Is the dismissal materially effective? This is not the case if the articles of association make the effectiveness of the termination dependent on the existence of special reasons for dismissal. These include, for example, a gross breach of duty, the inability to conduct business properly or the like. If there is no such reason, an action for annulment is possible against the decision to dismiss.
  • Has the managing director employment contract been effectively terminated?
  • Was the real notice of termination effectively received by the managing director from the correct declaration of termination?
  • In the event of extraordinary termination without notice: Is there an “important reason” so that the management of the managing director of the GmbH and its shareholders cannot be expected to continue, taking into account all the circumstances of the individual case and weighing the interests of both parties to the contract? If not: Submit a declaratory action that the managing director's employment relationship will continue.
  • If the remuneration is not paid: Claim the remuneration in the documentary process from the employment contract, this is the quickest way.
  • If there are doubts about the legality of the dismissal and / or the termination, the managing director concerned should consult a lawyer, seek advice and let the lawyer negotiate the continuation of the employment relationship (possibly with a different function in the company) or a termination agreement with a high severance payment.

 

Dr. Babette Gäbhard, lawyer and specialist lawyer for commercial and corporate law and for banking and capital market law.

You can find out whether a GmbH needs a compliance system in the next article in our series GmbH-Handbuch für Mittelstand.