I. Introduction

Pursuant to § 48 para.2 of the German Limited Liability Companies Act (Gesetz betreffend die Gesellschaften mit beschränkter Haftung – GmbHG), resolutions of the shareholders of a GmbH may only be adopted outside a meeting if all shareholders agree in text form to the provision to be made or to the votes being cast in writing. This means that an effective adoption of resolutions by way of circulation generally requires the consent of all shareholders. If a shareholder (including minor shareholders or those who are subject to a voting prohibition in the actual resolution) refuses to give his consent, a resolution would thus, according to the legal conception, only be possible within the framework of a shareholders’ meeting, i.e. with the physical presence of the shareholders in the required number. In order to take account of the associated pandemic-related dangers and prohibitions on contact and to maintain the companies’ ability to pass resolutions and to take action, the German legislator has temporarily amended the provision of § 48 para. 2 GmbHG with § 2 Act on Measures in Corporate, Cooperative, Association, Foundation, and Condominium Law to Combat the Effects of the COVID-19 Pandemic (Gesetz über Maßnahmen im Gesellschafts-, Genossenschafts-, Vereins-, Stiftungs-, und Wohnungseigentumsrecht zur Bekämpfung der Auswirkungen der COVID-19-Pandemie – COVMG) to the effect that resolutions of the shareholders can be passed in text form or by submitting votes in writing even without the consent of all shareholders, i.e. in the so-called circulation procedure. The time scope was originally limited to resolutions passed in the 2020 calendar year only. However, it was extended until 31 December 2021 by the Federal Ministry of Justice and Consumer Protection (Bundesministerium der Justiz und für Verbraucherschutz) on the basis of § 8 COVMG allowing such prolongation by the ministry.

II. Ruling of the Regional Court of Stuttgart

The shareholders of a GmbH had decided by majority vote in a so-called circular procedure to dismiss one of its managing directors, who himself holds a 20 % stake in the GmbH in question. This managing director then obtained an interim injunction obliging the company to leave him all management and representation powers for the time being and to grant him unhindered access to the business premises. The company now appealed against this order on the grounds that the resolution to dismiss the managing director was lawful. In the underlying case, the provisions of the GmbH’s Articles of Association were modelled on the law (§ 48 para. 2 GmbHG), i.e. they stipulated that resolutions may only be adopted by circular resolution with the consent of all shareholders. The Regional Court of Stuttgart (judgment dated 25 January 2021 – 44 O 52/20 KfH) resolved the previously disputed issue to the effect that § 2 COVMG only grants the facilitation of the adoption of resolutions by circular resolution if the Articles of Association of the GmbH do not contain any provision on this. Because only in this case the statutory regulation is applicable and only this, according to the court, is covered by the temporary change, while existing provisions in a GmbH’s Articles of Association are not prevailed.
In the opinion of the Regional Court of Stuttgart, § 2 COVMG expressly “only” amends § 48 para. 2 GmbHG and does not affect § 45 para. 2 GmbHG, which, among other things, expressly allows the shareholders to make provisions in the Articles of Association that deviate from the statutory provision of § 48 para. 2 GmbHG. As a result, it is argued that a superseding provision of the Articles of Association is not affected by § 2 COVMG. This was also constitutionally required, as otherwise the contractual autonomy and the constitutionally protected rights of minority shareholders would be encroached upon. Consequently, the resolution on the dismissal of the managing director had been invalid.

III. Assessment and consequences for the practice

A lively discussion on the scope of § 2 COVMG had already arisen in the legal literature when it was introduced. According to the largely dispositive provisions on the passing of resolutions in the GmbHG (cf. § 45 para. 2 GmbHG), shareholders are in principle free to make a provision in the Articles of Association that deviates from § 48 para. 2 GmbHG on the passing of resolutions outside shareholders’ meetings. In practice, many Articles of Association of GmbHs contain provisions on the holding of shareholders’ meetings that comply with § 48 para. 2 GmbHG. This is partly because shareholders and managing directors primarily want to look at the Articles of Association and not at the law. The purpose of § 2 COVMG, which is to facilitate the adoption of resolutions in times of contact and travel restrictions, is thus likely to be rendered meaningless in many cases according to the legal opinion on which the Regional Court of Stuttgart based its decision.
In the legal literature, many authors are therefore of the opinion that existing provisions of the Articles of Association should also be interpreted in the light of the pandemic in such a way that the shareholders, had they considered the possibility of a pandemic, would in any case not have intended to make it more difficult to pass resolutions by circular procedure than would have been the case under the statutory concept. According to this view, the introduction of § 2 COVMG would also modify existing provisions of the Articles of Association, which are modeled on the law, to the effect that a resolution can be adopted by circular procedure even without the consent of all shareholders. Only if the Articles of Association explicitly exclude § 48 para. 2 GmbHG do the Articles of Association express an unambiguous intention against the possibility of adopting resolutions by circular procedure, which is not open to supplementary interpretation, which is why § 2 COVMG does not modify such a provision in the Articles of Association.
In our view, the judgment of the Regional Court of Stuttgart is – although brief – well reasoned and fundamentally comprehensible. § 2 of COVMG in fact only covers statutory regulation and it is well arguable that in its current form it cannot interfere with regulations in a GmbH’s Articles of Association. However, this is not mandatory, especially considering the purpose of the amendment and the haste with which it was passed. Of course, it can be argued that the legislator should have clearly formulated a binding regulation that also interferes with existing provisions in Articles of Associations. However, this concern cannot be inferred from the law – as the Regional Court of Stuttgart correctly assumes – especially since the legislator has clearly regulated its mandatory character elsewhere, for example in § 9a para. 1 sentence 2 of the Economic Stabilization Acceleration Act (Wirtschaftsstabilisierungsbeschleunigungsgesetz), which was enacted on the same day as the COVMG (it states: “Deviating provisions in the Articles of Association are irrelevant”). The fact that § 2 COVMG does not contain such a provision therefore speaks in favor of its limited scope of application to GmbHs, to which § 48 para. 2 GmbHG applies in the absence of a provision in the Articles of Association.
The result that individual shareholders can block the adoption of resolutions during the pandemic by refusing to give their consent to the adoption of resolutions by circular procedure may be undesirable from the point of view of pandemic containment. In this case, however, the legislator would have been called upon to provide a remedy of the situation by means of a clear regulation.
For practice, the (final) judgment of the Regional Court of Stuttgart means that resolutions adopted by circular procedure should in any case not be prematurely based on the temporary amendment to the law pursuant to § 2 COVMG. If the provisions of the Articles of Association do not permit resolutions to be adopted by circular procedure or if this procedure does not meet with the necessary approval among the shareholders, a meeting should be held in person instead and, if necessary, proxies should be used for pandemic reasons.
From the point of view of many companies, the ruling generally provides an opportunity to reconsider and adapt existing provisions in the Articles of Association. The shareholders have extensive leeway and can allow contemporary resolutions to be adopted in virtual meetings (video conferences, etc.) or mixed forms of physical and virtual presence. After all, even after the pandemic, there is probably often a need in many companies for swift decision-making without an actual physical presence.