Voting prohibitions in corporation and partnership law

In company law, you must separate the company’s legal issues from the shareholders’.
These issues may be irreconcilable in individual cases, so the legal system must provide solutions to whether the individual’s or association’s interests take precedence.

In certain constellations, partly developed by law and partly by case law, this balance goes so far as to impose a voting ban on a shareholder in the decision-making process under company law to prevent the shareholder from acting “as a judge in his cause.”

There is no uniform company law on this. Depending on the type of company, such voting prohibitions can be structured differently.

In advisory practice, however, a common feature of this topic is that shareholders or responsible board members or managing directors of companies think about the issue of voting bans when it comes to particular advantages or benefits by individual shareholders or when a dispute arises between the players for other reasons. In this sense, voting bans also involve active minority protection, as minority shareholders can assert their interests against the majority shareholder if voting bans are applied. When a voting ban shall apply to assess and enforce the correct formal and substantive limits of constellations, it is advisable to seek advice and, if necessary, representation from experienced lawyers in corporate law.

A. Voting prohibitions in corporations

1. Limited liability companies (GmbH)

Section 47 (4) of the German Limited Liability Companies Act (GmbHG) legally defines four cases in which a voting ban shall apply:

• Resolution on the discharge of a shareholder
• Resolution on the release of a shareholder from a liability
• Resolution on the execution of a legal transaction vis-à-vis a shareholder
• Resolution on the initiation or settlement of a legal dispute with a shareholder

In the context of corporate law disputes between shareholders, the last two statutory cases of application are of particular importance, as their scope of application also includes resolutions on the examination of liability claims against shareholder managers, the initiation of special audits, or the conduct of legal liability proceedings.

Beyond the scope of application of the cases defined by law, case law, and doctrine have affirmed a large number of other cases of application of voting bans, some of which were developed concerning situations of interest that are comparable to the statutory instances of application, or some of which were based on the duty of loyalty under company law. The basic idea that no one should be a judge in their cause is often, but not exclusively, applied in these other cases. In particular, the scope of application of the corporate duty of loyalty goes beyond this point.

As a practicable rule of thumb, it is possible to refer to the idea that a voting ban can be applied if you decide against shareholders for good cause. The best-known example is the dismissal of a shareholder-managing director for good reason. However, a conflict of interest of any kind is not sufficient. It must be a matter of qualified circumstances in which the interests of the association, i.e., the interests of the company, are deemed predominantly worthy of protection.

As experienced lawyers in corporate law, we are available to advise you on this at any time.

2. Entrepreneurial company with limited liability (Unternehmergesellschaft/UG (haftungsbeschränkt)

The same principles apply as to GmbH law.

3. Public limited company (Aktiengesellschaft)

Similar to GmbH law, the legislator has defined a catalog of cases in § 136 I AktG (German public limited company law) in which a voting ban applies by law:

• Resolution on the discharge of a shareholder
• Resolution on the release of a shareholder from a liability
• Resolution on the assertion of a claim against a shareholder

In contrast to GmbH law, there is expressly no prohibition on voting if the subject of the resolution concerns the execution of a legal transaction against a shareholder. This consequence is not an unintentional loophole on the part of the legislator but a deliberate decision so that GmbH law may not be applied accordingly in this respect.

As in GmbH law, case law and doctrine have developed voting bans through individual analogies for constellations that represent quantitatively and qualitatively comparable conflicts of interest. Here, too, advice from experienced corporate lawyers is essential.

Voting bans may also apply to resolutions passed at supervisory board meetings. In addition to any applicable provisions of the articles of association, you can find an analogous legal argument for a voting ban in Section 34 BGB and Section 111b (2) AktG. The most important cases of application are votes on the conclusion of a legal transaction between the company and the Supervisory Board member, the initiation or settlement of legal disputes between the company and the Supervisory Board member, and dismissal for good cause. Section 34 BGB (German civil law code) also applies analogously to the Supervisory Board of a GmbH.

Even in a de facto group, you must observe these principles. For example, the controlling shareholder is subject to a ban on voting on resolutions at the subsidiary regarding the assertion of liability claims against the subsidiary’s Management Board if the alleged conduct has led to the controlling shareholder benefiting.

4. SE – Societas Europaea –

The primary relevant legal sources for the introduction and regulation of the supranational European Company, the directly applicable Regulation (EC) 2157/2001 and, at the national level, the Act Implementing Regulation (EC) 2157/2001 (SEAG), do not contain any provisions corresponding to Section 136 AktG. These legal sources on the SE do not address the issue of shareholders being prohibited from voting. The SE is not a stock corporation under national law, but the law of the SE is derived from the provisions applicable to it. Nevertheless, the EU regulators refer to the respective national law applicable to public limited companies to resolve issues not resolved by the SE Regulation (Art. 9 SE Regulation).

For this reason, § 136 AktG is also to be applied accordingly to relevant cases of conflicts of interest in general meetings of the SE. In addition, § 34 BGB applies analogously to corresponding cases of conflicts of interest in resolutions of the executive bodies.

B. Voting prohibitions in partnerships

The various legal sources on partnership law, §§ 705ff BGB for civil partnerships (GbR) and §§ 105ff HGB for commercial partnerships (oHG, KG), do not contain any provisions on voting bans corresponding to §§ 47 IV GmbHG, 136 I AktG. Even the right to challenge resolutions in partnerships, which was codified for the first time from 01.01.2024 in the new version of Sections 110 et seq. of the German Commercial Code (HGB) by the Act on the Modernization of Partnership Law (MoPeG), is silent on when voting bans exist according to substantive law principles.

Indications for the validity of voting bans and the underlying principle of preventing “judging on one’s behalf” can be found indirectly in Sections 715 V, 720 IV BGB in the new law version after MoPeG and Section 43 VI GenG. These principles regarding the GbR apply accordingly to the oHG and the KG.

According to the case law of the Federal Court of Justice (BGH), a shareholder of a GbR is subject to a voting ban on resolutions

• on his discharge
• on the initiation of legal disputes or the out-of-court assertion of claims against them
• on the release from an obligation.

The BGH expressly justifies this with the “generally” applicable principle that no one may be a judge in their cause (see BGH, the judgment of 17.01.2023 -II ZR 76/21, para. 25). In essence, such resolutions are, therefore, those that approve or disapprove of the conduct of a shareholder. The existence of a conflict of interest as such is not sufficient. You can apply the principles of this BGH case law without restriction to cases concerning commercial partnerships (OHG, KG).

In its decision, the BGH expressly left open the question of whether a voting prohibition in the corresponding application of §§ 34 case 1 BGB, § 47 para. 4 sentence 1 case 1 GmbHG should also apply if a decision is to be made to execute a legal transaction with a shareholder.

C. Separation of participation rights and voting prohibition

In the case of both partnerships and corporations, you should note that the prohibition on voting does not result in the shareholder being excluded from the decision-making process. The shareholders may participate in their respective meetings and present their views on the issues. They have a right to be heard. However, they may not vote. In this case, his vote is irrelevant.

D. Structuring of voting prohibitions

As experienced corporate lawyers, we will be happy to advise you on extending or restricting voting prohibitions by individually drafting the articles of association.