The German Federal Court of Justice (BGH; judgment of 5 November 2024 – II ZR 85/23) clarifies the principles governing shareholder actions in a German limited liability company (GmbH) with only two shareholders (the so-called bipartite (“zweigliedrige”) limited liability company), as well as the powers of the company’s bodies. An actio pro socio (i.e. a claim brought by a shareholder in its own name on behalf of the company) is generally precluded when asserting claims against non-shareholder managing directors and is, moreover, only possible in exceptional cases. If one of the two shareholders of the bipartite GmbH is subject to a voting ban, such that only the votes of the other shareholder count, a separate resolution to assert a claim for damages or to appoint a legal representative is unnecessary.

I. Background

The correct classification and delineation of the responsibilities of the bodies of a GmbH – namely the managing directors, the shareholders’ meeting and the individual shareholders – is crucial for the successful enforcement of claims. In the heat of a shareholder dispute, responsibilities and the statutory procedural and formal requirements are often disregarded or simply overlooked. As a result, the claimant risks being unable to successfully enforce their claim, or even having their case dismissed, which can add another considerable cost amount to the case.

II. Underlying Aspects of Corporate Law

As an independent legal entity, a German GmbH may itself be the holder of a claim. For example, it may itself bring claims for damages against its managing directors. Section 43(2) of the German Limited Liability Companies Act (GmbHG) provides that a managing director is liable to the company for a breach of duty, but not directly to the shareholders. Only the decision as to whether claims are to be asserted is reserved for a resolution by the shareholders’ meeting (Section 46(8) GmbHG). Shareholders who are also managing directors and who are alleged to have breached their duty are subject to a voting ban when voting on this resolution to assert claims (Section 47(4) GmbHG).
In addition to this basic legal rule, case law has recognized the concept of ‘actio pro socio’, i.e. the exceptional assertion of claims on behalf of the company by a shareholder in their own name, seeking performance for the benefit of the company. This form of representative action is considered subordinate and is subject to strict conditions.

III. Facts of the Case

The claimant, a minority shareholder (49%) of a bipartite GmbH, wanted to pursue claims against the two external (non-shareholder) managing directors of the GmbH. These were also the managing directors of the majority shareholder and held an indirect shareholder position.
The claimant sought a declaration and compensation for losses incurred by the GmbH, which she attributed to the managing directors. At the shareholders’ meeting of the GmbH convened for this purpose, a resolution was to be passed regarding the examination and assertion of the GmbH’s claims against its managing directors and/or the majority shareholder, as well as the appointment of legal representation to pursue these claims. The minority shareholder voted in favor of the resolution. The majority shareholder – represented by the very same managing directors who are also the managing directors of the limited liability company – voted against it with its 51% of voting rights. The GmbH (again through its managing directors) informed the minority shareholder of the voting result, noting that a “confirmation of the resolution (…) would not take place in view of the unclear legal situation”. The minority shareholder then brought an action in her own name against the defendants for damages payable to the GmbH.

IV. The Court’s Decision and its Reasoning

The BGH dismissed the claim as inadmissible on two grounds: firstly, because an actio pro socio against non-shareholder managing directors is generally precluded; and secondly, because the plaintiff’s actio pro socio was subordinate, as a resolution and the assertion of claims at company level would have been possible.
Even in a GmbH with only two shareholders, a shareholders’ resolution is feasible, even though only one shareholder is entitled to vote. Where the subject matter of the resolution is the initiation of legal proceedings against the managing directors and the appointment of legal representatives to pursue these claims, the managing directors concerned, who are acting on behalf of the majority shareholder, are subject to a voting ban. Due to this prohibition on voting, designed to prevent the voter from pursuing their own interests, the defendants could not exercise the voting right on behalf of the majority shareholder when passing the resolution to assert claims directed against themselves. Their votes were invalid and not allowed to be counted.
In addition, the BGH clarifies that a resolution to appoint a legal representative would not have been necessary at all in the specific case of the bipartite GmbH. The voting ban renders a resolution in this case a superfluous formality. Consequently, the plaintiff, as the representative of the GmbH – that is, acting on behalf of such GmbH and not in her own name – could have brought an action against the managing directors.
The company was therefore itself in a position to bring a claim against the defendants pursuant to section 43(2) GmbHG, and consequently there was no need for an actio pro socio. The claimant could not derive standing to sue from this. Even if the defendant managing directors are, in turn, the directors of the majority shareholder and indirect shareholders, this does not alter the situation. A shareholder may only bring an action on behalf of the company if the competent bodies of the GmbH are unable to assert the claims or are blocked from doing so, or if the company is incapacitated in a manner that threatens its existence. In the view of the BGH, a claim must, for example, be unenforceable or have been thwarted by the tortfeasor themselves, or be so impeded by the balance of power within the company that it would constitute an unreasonable detour for the shareholder concerned to first have to compel the company to bring a liability claim.

V. Implications for the Legal Practice

The judgment highlights several relevant points, the consideration of which is crucial in practice:

1. Correct claimant: Before a shareholder asserts claims or even brings legal proceedings, they must carefully assess whether the claims in question are due to them or, in fact, to the company. It is often the company itself that must enforce its claims. A shareholder must then use the means at their disposal to bring this about, for example by means of a (directive) resolution. The actio pro socio must always be applied with caution, and the existence of a relevant exceptional situation must be critically examined. Otherwise, there is a risk that the action will be dismissed as inadmissible. The plaintiff shareholder has then lost ‘on two counts’: on the one hand, they receive no substantive ruling from the court regarding the facts of the case; on the other hand, they must bear the costs of the legal proceedings (which, as in the case at hand involving multiple instances, can be enormous). The shareholder can avoid this by choosing the correct course of action from the outset and clearly establishing who is entitled to assert the claim and on whose behalf.

2. Correct defendant: Furthermore, it must be considered in advance against whom the claim is directed. If an external (non-shareholder) managing director is to be held liable, the claim must primarily be pursued by the GmbH, and according to the BGH, the route via the actio pro socio remains closed. If, on the other hand, the defendant is a shareholder (or shareholder-managing director) acting in breach of fiduciary duty, then the shareholder may, under certain circumstances, assert claims on behalf of the company via the actio pro socio. As described above, however, this applies only as a secondary remedy, provided that the company itself cannot assert a claim.

3. Avoiding procedural errors: It is equally important to adhere to the procedure, the formal steps and the involvement of the relevant bodies within the company. In this regard, the minority shareholder in a bipartite GmbH now has – contrary to previous practice and based on the somewhat counterintuitive rulings of the BGH – the option of representing the company even without a corresponding shareholders’ resolution. If – as has been the practice to date – a resolution is nevertheless passed, it must be observed that votes subject to a voting ban are not counted. They are invalid and must not be included in the resolution. However, the legal consequences must be closely monitored if, as in the present case, the managing directors refuse to confirm and record the resolution. In that case, the resolution itself would be invalid (not merely the votes cast by those subject to the voting ban). Consequently, no action to set aside the resolution would be required, but rather either a new resolution or – as now established by the BGH ruling – the minority shareholder may act directly as a representative of the GmbH.