I. Introduction and background

The statutory provisions (§§ 119 para. 1, 161 para. 2 German Commercial Code (Handelsgesetzbuch – HGB)) stipulate the unanimity principle (Einstimmigkeitsprinzip) as the standard case for shareholder resolutions in partnerships. In practice, the majority principle (Mehrheitsprinzip) is frequently agreed for shareholder resolutions in partnership agreements of partnerships – in deviation from the statutory principle. In contrast to shareholder resolutions based on the unanimity principle (Einimmimmigkeitsprinzip), majority resolutions in partnerships are subject to a two-stage effectiveness review with regard to their formal and material legitimacy according to the established case law of the Federal Court of Justice (BGH).
At the first stage, namely formal legitimation, it must be examined whether the subject matter of the resolution in question is subject to a majority decision under the partnership agreement. In the opinion of the BGH, it is sufficient for this if the interpretation of the partnership agreement in accordance with the general principles of interpretation (§§ 133, 157 German Civil Code (Bürgerliches Gesetzbuch – BGB)) shows that the subject matter of the resolution is to be subject to a majority decision. This also applies in particular to shareholders’ resolutions which have as their object an extraordinary transaction (außergewöhnliches Geschäfts) or a fundamental transaction (Grundlagengeschäft) or measures which encroach upon the irrevocable legal positions of the shareholders. The interpretation must not be based solely on the wording of the partnership agreement; circumstances outside the partnership agreement must also be taken into account, such as the history of the majority clause in question or a concurring will of the parties. The previously developed so-called principle of certainty (Bestimmtheitsgrundsatz), on the other hand, is not (no longer) applicable at the level of formal legitimation, not even in the form of an interpretation rule according to which majority clauses are to be interpreted restrictively or do not include extraordinary transactions (außergewöhnliches Geschäfts) or fundamental transactions (Grundlagengeschäft).
At the second level, namely material legitimacy, the substantive validity of a majority resolution must be examined. A majority resolution does not have material legitimacy if the resolution represents an exercise of majority power against the minority in breach of fiduciary duty or if there are other reasons leading to substantive invalidity (materielle Unwirksamkeit). In particular, it must be examined whether there has been an inadmissible encroachment on membership rights which are inalienable either per se or in relative terms. The deprivation of a relatively inalienable right requires special justification.

II. Current judgment

A recent decision of the Karlsruhe Higher Regional Court (judgment of 27 February 2022 – 6a U 1/21) dealt with the scope of a majority clause in the partnership agreement of a limited partnership (Kommanditgesellschaft – KG) and the validity of shareholder resolutions based thereon. The partnership agreement of the limited partnership contained a clause according to which “all resolutions shall be adopted by a majority of the votes of the shareholders”. In 2019, the general meeting of the limited partnership passed three resolutions aimed at dissolving and liquidating the limited partnership. In this context, it was decided (i) to dissolve and liquidate the limited partnership, (ii) to appoint the general partner of the limited partnership as the sole liquidator and (iii) to determine the form of liquidation by way of auction of non-cash assets among the shareholders. Only the defendant, who held the majority of the votes, voted in favor of the resolutions. The other shareholders who had voted against the three resolutions then brought an action before the Mannheim Regional Court to have the resolutions annulled. The Mannheim Regional Court dismissed the action in its entirety. The claimants appealed against this decision.

III. Effectiveness of majority resolutions

The competent Karlsruhe Higher Regional Court upheld the appeal of the minority shareholders only in part; only the resolution on the appointment of the general partner as sole liquidator was invalid due to a lack of material legitimation.
It first found that the general majority clause in the partnership agreement of the limited partnership permissibly deviates from the statutory rule of the unanimity principle (Einstimmigkeitsprinzip) in accordance with the principle of private autonomy (Grundsatz der Privatautonomie) and covers, without restriction, all matters accessible to a resolution of the shareholders, in particular also fundamental transactions (Grundlagengeschäfte) and measures which encroach on absolutely or relatively inalienable membership rights. Thus, the subjects of the three shareholder resolutions in question were also subject to the majority principle (Mehrheitsprinzip) and the resolutions based thereon were formally legitimate. However, a specific reference to the individual measures in the majority clause of the partnership agreement was not required.
On the level of material legitimacy, the Higher Regional Court found that the resolution on the dissolution and liquidation of the company was materially legitimate. The senate justified this with the fact that the disposition over the continuance of the company and in this respect the position as a shareholder already does not represent an absolutely inalienable right. The latter only exists in the case of individual legal positions of a shareholder or a group of shareholders which are granted by the partnership agreement and are structured as irrevocable rights. This does not include legal positions which are generally associated with membership and the effects of which apply equally to all shareholders. Therefore, it is not a question of whether the encroachment is justified, i.e. in the interests of the company, and whether the shareholders affected can reasonably be expected to accept it. Rather, the material legitimation is already indicated by the formal legitimation.
In contrast, the decision to appoint the general partner as sole liquidator is a different matter. The decision to deprive the other shareholders of their legally attributed position as liquidators is an encroachment on a relatively inalienable right, since the liquidators make decisions with considerable consequences at the stage of the liquidation and special conflicts of interest may arise. Consequently, the restriction or withdrawal of such a legal position requires a special justification. The partnership agreement of the limited partnership does not contain an anticipated consent of the claimant shareholders to such an intervention which sufficiently specifies the extent and scope of the burden for the shareholders. Moreover, the exclusion of the claimant shareholders from their statutory position as liquidators was not indispensable or necessary for the company and therefore not required. Thus, the intervention was not justified and the resolution in question constituted an abuse of majority power by the defendant majority shareholder vis-à-vis the minority shareholders.
The resolution on the type of liquidation, on the other hand, was materially legitimate. As already stated, whether liquidation is carried out is at the discretion of the shareholders, so that the same must apply to the manner of liquidation. The type of liquidation therefore did not represent either an absolute or a relatively inalienable right of the shareholders. There were no circumstances which would impair the interests of the minority shareholders in favor of unjustified special advantages of the majority shareholder.

IV. Outlook and consequences for the practice

The decision of the Karlsruhe Higher Regional Court illustrates the importance of a determined and interest-oriented structuring of majority requirements for shareholder resolutions in partnerships. In the case of the majority principle frequently agreed in practice in partnership agreements, it should be ensured from a material point of view that for fundamental transactions, such as amendments to the partnership agreement, or interventions in irrevocable membership rights, a careful weighing of all interests – including minority interests – is first carried out. From a formal point of view, exceptions and restrictions to the majority principle should be explicitly and sufficiently defined in the partnership agreement in order to avoid any legal uncertainties in interpretation or the associated risk of abuse as well as undesirable results for minority shareholders.
With regard to the effectiveness of majority resolutions in partnerships, however, a certain degree of legal uncertainty remains, as the material legitimacy of resolutions ultimately remains a question of the circumstances of the individual case, which will ultimately be decided by a court involved in this matter.