Fiduciary duties of a shareholder-managing director

Judgement

In a judgement (II ZR 91/21) dated 8 November 2022, the Federal Court of Justice (BGH) ruled that a co-shareholder has no claim against the managing director of a GmbH to refrain from submitting an incorrect list of shareholders. According to the prevailing view, which is supported by the BGH, this claim only exists against the company, but not against the managing director. However, if the managing director is also a shareholder, a claim for injunctive relief on the part of the co-shareholders arises from the shareholder-managing director's duty of loyalty as a shareholder.

Facts of the case

As a result of an inheritance, a dispute arose between the testator's wife, who was to inherit 80% of the shares in the GmbH, and a third party, who was to receive the remaining 20%. Under the condition precedent that she would receive the sole certificate of inheritance, the wife and later defendant assigned one fifth of the shares to the third party and later plaintiff in fulfilment of the legacy. The defendant was appointed managing director of the company. Subsequently, the plaintiff called the defendant to an extraordinary shareholders' meeting in order to dismiss her as managing director due to serious breaches of duty.

The defendant's authorised representative stated that he had doubts about the plaintiff's status as a shareholder and wanted to submit a new list of shareholders to the commercial register. The plaintiff opposed this with a temporary injunction. The Regional Court of Stade and the Higher Regional Court of Celle ruled in favour of the plaintiff in the main proceedings, and the Federal Court of Justice confirmed this as a result.

Addressees of the duty of loyalty

The fiduciary duty as a general clause under judicial law is now unanimously recognised as being applicable to all corporate bodies. Accordingly, in the stock corporation (AG), the limited liability company (GmbH), the registered association (e.V.) and the registered co-operative (e.G.). It obliges both partners/members/shareholders and executive bodies to show mutual consideration and to act in the interests of the company. For managing directors who are shareholders, the duty of loyalty has two forms: the position of managing director vis-à-vis the company and the position of shareholder vis-à-vis the company and the co-shareholders. The managing director has a fiduciary duty as an executive body, which obliges him to act in the interests of the company. However, the duty of loyalty does not apply to the shareholders. The shareholders are required by the duty of loyalty to act considerately both towards the company and towards the individual shareholders.

Scope of the duty of loyalty

The shareholders' duty of loyalty may include, for example, actively safeguarding the interests of the company in the manner specified in the articles of association and promoting its purpose, maintaining confidentiality, abstaining from voting in the event of conflicts of interest or prohibiting discrediting the company in public or taking advantage of the company's business opportunities. This limits the scope of the duty of loyalty within the scope of the shareholder position. As the shareholder has both altruistic rights (such as the right to approve and object to shareholder resolutions) and altruistic rights (in particular property rights), the duty of loyalty is always subject to a balancing of company and shareholder interests. As a managing director, on the other hand, the managing director acts exclusively in the interests of the company. The duty of loyalty is therefore particularly far-reaching and is not limited by the articles of association, as the managing director's own interests must take precedence over the interests of the company and the duty of loyalty does not arise from the contract, but from the position as an executive body. The management authorisation is always a disinterested right. The consequence of the duty of loyalty is a prohibition for the managing director to exploit the position on the board in his personal interest and to enrich himself.

Significance of the judgement

Both forms of the fiduciary duty therefore apply to the managing director as a shareholder, meaning that there is a comprehensive duty of consideration. In its judgement (II ZR 91/21) of 8 November 2022, the BGH highlighted two aspects in this regard. On the one hand, in line with the prevailing view, the BGH considers only the company to be passively legitimised in the context of breaches of fiduciary duty by the managing director, but not the managing director himself. This emphasises the exclusive protection of the company's interests, to which the managing director is obliged. On the other hand, the judgement clarifies the interplay between the managing director's duty of loyalty and that of the shareholder when both functions coincide in one person.

Author: Marie-Luise Nalop