Claim for reinstatement: BGH on the scope of the company‘s duty of loyalty following the termination of a shareholder’s contract

It is standard for shareholders to terminate the employment of another shareholder. There are many reasons for this: the breach of social fiduciary duties is often a reason for such a termination.

But is it conceivable that the terminated shareholder has a claim to reinstatement in the company precisely because of the social duty of loyalty? That is possible. The possible claim for reinstatement alone can have legal consequences (BGH, judgment of 12.07.2022, ref.: II ZR 81/21).

Ex-spouses, co-partners, and a cost assessment order

Two ex-spouses, who were also limited partners in an asset-managing family company (GmbH & Co KG – German limited commercial partnership), were in dispute in court. The ex-husband had obtained a cost assessment order against his “ex” from family law proceedings. However, the wife did not pay. So, the ex-husband obtained an attachment and transfer order for these costs to seize his ex-wife’s company shares and a possible settlement balance. However, even when the order was served on the company as a third-party debtor, the ex-wife did not pay.
However, the impending seizure of the company shares was the reason to terminate the ex-wife as a shareholder. The partnership agreement provided for this accordingly. However, the woman paid shortly before the end of the period between termination and resignation.

Had the partner now left the company?

A legal dispute arose over whether the ex-wife had left the company. The ex-husband was convinced that his ex-wife was now also an ex-partner and wanted this to be established in court—the first instances ruled in favor of the man. The BGH, however, assessed the legal situation differently.
In principle, the ex-wife’s termination as a partner was effective, even if she had paid the costs from the cost reimbursement claim before the termination became effective. Furthermore, the ex-husband was also a “private creditor” of the shareholder with this specific claim and, therefore, an outside third party. The fact that he was also a shareholder did not contradict this: The claim for reimbursement of costs was a claim that was not connected to the company per se. He, therefore, had the option to terminate the contract – a provision based on Section 135 of the German Commercial Code (HGB) stating this was part of the partnership agreement. The BGH also did not see any abuse of the right of termination to force his ex-wife out of the company.

And yet, there is no claim for a declaration of the effectiveness of the termination?

However, this was not the end of the BGH’s decision: The termination was formally effective. However, the shareholder concerned could claim reinstatement in the company based on the company’s duty of loyalty (Section 242 BGB).

This consequence would be the case if the remaining shareholders could reasonably be expected to continue the company together in the specific individual case. If such a claim exists, it is impossible to establish that the shareholder has effectively left the company. The BGH even went so far as to say that the mere possibility that such a claim existed made a decision impossible in this case. The lower court had not precisely addressed this question: The Higher Regional Court of Schleswig had yet to consider and consider the terminated shareholder’s claim for reinstatement. The BGH, therefore, overturned the lower court’s decision and referred the case back to the court.

Content of the decision and consequences

In this decision, the BGH clarifies that a co-shareholder can be a “private creditor” within the meaning of Section 135 HGB – and comparable provisions in a partnership agreement. The prerequisite for this is a claim without any connection to the company.
On the other hand, the BGH clarifies that a judicial determination of the validity of the termination of a company is impossible if a claim for reinstatement of the terminated shareholder in the company exists or could exist.

In this respect, when assessing the validity of a shareholder’s termination, it will be necessary to examine even more closely whether the terminated shareholder may have a claim to reinstatement in the company. This method is the only way to avoid unnecessary stalemate situations in shareholder terminations due to a claim for reinstatement from the outset.