I. Resignation of the managing director of a limited liability company (GmbH)

The managing director of a limited liability company may have many reasons to resign from his position. But what must be considered for such resignation from the managing director position to be legally effective and valid?
Unlike the revocation of an appointment as managing director, the resignation of a managing director of a limited liability company is not provided for in statutory law. There are some insecurities concerning some of the requirements of such a resignation. Regarding the consequences of a resignation, one must also make a distinction between the admissibility of the resignation towards the limited liability company and the (external) legal effectiveness of such resignation. This article addresses the (external) legal effectiveness only and in which circumstances such (external) legal effectiveness may be assumed.
It is agreed that the resignation of the managing director is generally possible at any given time. Furthermore, the resignation does not have to be provided in any particular form and may even be given verbally. According to consistent case-law by the Supreme Federal Court (BGH), there even does not have to exist a good cause for the immediate resignation and the resignation does not have to be based upon such a good cause.

II. Resignation of the sole managing director: Ineffectiveness due to abuse of law?

TThe portrayed principle of the legally effective resignation at any time, however, is not absolute. A common limitation arises especially for a “one person limited liability company “; here, according to case law of the higher regional courts, a resignation may be considered as legally ineffective and void when the resignation may be seen as an abuse of law.
A resignation may in particular be seen as an abuse of law if the resigning person

• is the sole managing director of the limited liability company,
• is also the sole shareholder of the limited liability company, and
• does not appoint a new managing director simultaneously to his resignation.

Generally, the resigning managing director is not responsible for appointing a successor as the responsibility for this lies with the general meeting of the shareholders. However, where the sole managing director is the sole shareholder, the situation is slightly different, as the limited liability company will become actively and passively incapacitated until a new managing director is appointed; this could result in an incalculable lack of clarity in view of the legal representation of the limited liability company.
Although the passive representation of a leaderless limited liability company has been provided for with the introduction of the Act to Modernize the law on limited liability companies and anti-abuse provisions (MoMiG) through sec. 35 para 1 sentence 2 Limited Liability Companies Act (GmbHG), the higher court case law has so far maintained the portrayed principles.
Opening an insolvency proceeding regarding the assets of the limited liability company does not constitute a specific situation and does not exceptionally authorize the resignation of the sole shareholder and managing director without naming a successor. An insolvency proceeding rather represents a particularly difficult economic situation for a limited liability company and thus it is expected from the shareholder and managing director that he does not shirk his responsibility. However, if he does in fact avoid his responsibility, this can be viewed as an improper resignation or laying down responsibility at an inopportune moment which can result in an invalidity of his resignation.

III. No abuse of law with a third-party managing director; decision of the Higher Regional Court of Bamberg

Once again, the Higher Regional Court of Bamberg [decision dated 17.07.2017 – 5 W 51/17, ZIP 2017, 1467, (1467)] recently explicitly pointed out that it considers the resignation of a sole managing director during an economically difficult situation as an abuse of law and thus as legally void but only if the sole managing director is also the sole shareholder of the limited liability company; however, this does not apply if the resigning managing director is a third-party managing director (not being the sole shareholder).
In this particular case decided by the Higher Regional Court, a sole managing director of a limited liability company who did not hold a direct or indirect equity interest in the company resigned after the limited liability company had filed for insolvency. He was not able to name a successor for his position as managing director. The Higher Regional Court generally outlined how the voluntarily assumed responsibility for the limited liability company and additional obligations particularly during difficult economic situations are tied to the position as managing director, as well as that in such cases, where the managing director and the decision-making body of the limited liability company are the same person, higher demands are to be laid down.
Unlike the previous instance, however, the Higher Regional Court did not consider it an abuse of law, as it was a third-party manager resigning. If the sole managing director is not a shareholder of the limited liability company, the shareholders are presented with the option of appointing a new managing director. Due to this, the Higher Regional Court does not consider it a necessity to compare cases of the sole managing director and shareholder of a “one person limited liability company“ with cases where third-party managing directors are concerned, and to which the same principles do not apply.

IV. Conclusions for practical application

While the sole manager and shareholder of a “one person limited liability company“ must appoint a successor when resigning from his position, this is not required from a third-party managing director. The risk of an invalidity of the resignation, however, must be examined on a case-by-case basis, as an abuse of law cannot be ruled out, it is always depending on the economic situation. It must be taken into account that the (third-party) managing director can be held liable for compensation towards the limited liability company even though the resignation is legally valid vis-à-vis third parties.