Voting ban for shareholder-managing directors in special audit votes

In its final judgment of May 18, 2022 (case number: 7 U 89/21), the Brandenburg Higher Regional Court addressed the question of the applicability of the voting ban pursuant to Section 47 Paragraph 4 Sentence 2 of the German Limited Liability Companies Act (GmbHG) to shareholder-managing directors of a limited liability company (GmbH) in votes on a special audit. For the first time, it confirmed voices in the specialist literature demanding that this provision should be applicable to the adoption of resolutions on a special audit.

The plaintiff, a shareholder of the GmbH, had requested a special audit pursuant to Section 46 No. 6 of the GmbH Act (GmbHG) to determine whether the managing director of the GmbH, who was also a shareholder, had breached his duties and whether this had led to financial damages for the GmbH. At the shareholders' meeting, the plaintiff and another shareholder, who together held more than 49% of the votes, voted in favor of ordering the special audit. The shareholder-managing director and another shareholder, who together held 51% of the votes, voted against. The managing director alone already had 42.5% of the votes. The chair of the meeting determined that the request was rejected by a majority. The plaintiff argued that the vote was invalid because the shareholder-managing director was not permitted to participate in the vote. He therefore filed an action for annulment and demanded a declaration that a resolution ordering the special audit existed.

In the first instance, the Potsdam Regional Court (case number 51 O 14/21) ruled in favor of the plaintiff and determined that the shareholder-managing director was not permitted to participate in the vote due to Section 46 No. 8 of the German Limited Liability Companies Act (GmbHG). Since the special audit was intended to prepare claims for damages, a shareholder-managing director potentially affected by such claims had to be excluded from the vote, as he could otherwise hinder the assertion of the claims.

The Brandenburg Higher Regional Court upheld this ruling on appeal, although it used different reasoning. It used the analogy of Section 47 Paragraph 4 Sentence 2 of the German Limited Liability Companies Act (GmbHG) for the exclusion of the shareholder-managing director's voting rights.

According to Section 47, Paragraph 4, Sentence 2 of the German Limited Liability Companies Act (GmbHG), shareholders have no voting rights in resolutions concerning their own legal transactions or legal disputes. However, since ordering a special audit does not constitute the initiation of legal proceedings, this provision cannot be directly applied.

The court argued that the cases regulated by Section 47 Paragraph 4 of the GmbHG can be interpreted broadly and are suitable for analogy. Indeed, Section 47 Paragraph 4 of the GmbHG has already been applied analogously in cases involving transactions with another company whose sole shareholder was also a shareholder of the GmbH. This analogy was also recognized by the Federal Court of Justice in cases where the shareholders decided on the assertion of claims for compensation against a person who had committed breaches of duty jointly with a company member.

The Brandenburg Higher Regional Court identified a comparable conflict of interest with regard to the purpose of the provision. The provision was intended to prevent a shareholder who, when voting, had both the company's interests and his own interests in mind from influencing the voting outcome. A special audit can help uncover misconduct by the managing director, and therefore the shareholder-managing director had a vested interest in preventing this in order to protect his own reputation and avoid liability risks. Section 47, Paragraph 4, Sentence 2 of the GmbHG (German Limited Liability Companies Act) aims to prevent voting outcomes that could be influenced by such a conflict of interest.

The decision of the Brandenburg Higher Regional Court is to be welcomed. The question of whether Section 47, Paragraph 4, Sentence 2 of the Limited Liability Companies Act (GmbHG) applies analogously or extensively to votes on special audits is purely academic. However, given the purpose of the provision, there is no way around applying it in such cases.