Removal and termination of the managing director

In corporate law, there is a distinction between the position of a managing director as a corporate body and their employment relationship. This distinction must be taken into account, especially when it comes to separating from the managing director.

Corporate law stipulates that the general meeting of shareholders appoints the managing director as a corporate body. However, this only applies to his or her function as a corporate body. To regulate his or her employment relationship, an additional service contract or a contract for the employment of the managing director is required. If the company wishes to part ways with its managing director, both the dismissal by the general meeting of shareholders and the ordinary termination of the employment contract must be effective, as emphasized by attorney Michael Rainer, specialist in corporate law at MTR Legal.

Unless a linking clause has been agreed upon, the removal and termination of the managing director must be handled separately. A lawyer experienced in corporate law understands the requirements that must be met for the termination of the managing director's relationship to be legally effective in all aspects.

The dismissal merely terminates the managing director's position as an executive body. They lose the right to represent the company externally, but retain entitlements arising from their employment contract, including their remuneration. This can represent a financial burden for the company. To avoid this, it is recommended to consult an experienced corporate lawyer. It should also be noted that while there are generally no time limits for the dismissal of a managing director, notice periods must generally be observed when terminating the employment contract. However, it is possible to agree to different provisions in the employment contract. Therefore, it is advisable to consult an experienced corporate lawyer when drafting the contract.

The removal of a managing director is usually carried out by a majority resolution of the shareholders' meeting. This can be problematic if the managing director is also the majority shareholder. In such a case, removal against their will is generally only possible if there is a good cause, such as gross breaches of duty, incompetence, or behavior detrimental to the business, to name just a few examples. If removal for good cause is being considered, it is essential to consult an experienced corporate lawyer. Furthermore, even in the case of removal for good cause, the employment contract must be properly terminated.