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Created on Tuesday, 09 January 2007 00:00

Last Updated on Friday, 28 December 2012 18:40

Powers of Managing Director of GmbH Restricted by Shareholders’ Decision

Which powers does a managing director of a GmbH have, when the shareholders decide to limit his powers? This article will reflect the decision of the BGH of June 19, 2006 (re II ZR 337/05).

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Pursuant to §§35 I, 36 GmbHG, a GmbH operates through its Geschäftsführer (managing directors). If any director is restricted in his general agency to represent the company, this obligates the director only as against the company itself (§37 I 2 GmbHG). What happens however, if a managing director is restricted by a decision of the shareholders, then disobeys it, and a third party knows of this restriction? Is the company bound to the contract even though its managing director acted without proper agency, or may the third party rely on the fact that the restriction has no effect for the public? Does it matter whether the director acted for the benefit or disadvantage of the company?

The Federal Court of Justice confirmed its previous rulings that the restriction on agency will be valid if the managing director consciously acts for the disadvantage of the company and the third party also knows of the restriction. This decision follows the general rules on misuse of representation. A director is to serve the company and not misuse his powers to do something he is not entitled

In other words, managing directors will not bind the company where they maliciously use their powers of agency and a third party supports the misuse.




Published on the old CMS: 2007/1/9
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