Shareholders of a GmbH: Roles, Rights and Duties
Anyone setting up a GmbH or joining an existing company should know which rights and duties come with being a shareholder. Above all, the distinction from management matters: shareholders decide on fundamental questions, but do not automatically run the GmbH themselves.
The principles generally also apply to the UG (haftungsbeschränkt).
Table of contents
At a glance
- Shareholders hold shares and have a financial stake in the GmbH.
- They do not automatically run the company and may not represent it externally merely on the basis of their shareholding.
- Their most important rights include voting, information, disclosure and inspection rights.
- The central duty is to make the agreed contribution. Added to this is the duty of loyalty under company law.
- Shareholders take fundamental decisions by resolutions in the shareholders’ meeting.
- One person can be both shareholder and managing director. Legally, the two roles nevertheless remain separate.
What it means to be a shareholder
Shareholders hold shares in the GmbH, that is, stakes in its share capital. However, it does not automatically follow that they run the day-to-day business or may represent the company externally. The GmbH is legally independent. Accounts, real estate, machinery and other assets therefore belong to the company and not to the shareholders personally.
Shareholders exercise their rights above all through resolutions and through information and control rights within the company. The internal relationship refers to the legal relationships within the company.
For the liabilities of the registered GmbH, in principle only the company’s assets are liable towards creditors. Personal obligations of a shareholder may, however, arise from special circumstances.
What duties do shareholders have?
The central general duty is to make the agreed contribution. It forms the economic basis of the GmbH. If the agreed contribution is not properly made, the company can demand payment. Depending on the individual case, further legal consequences may follow. The contribution is in principle owed to the company, not to the creditors.
Being a shareholder also entails a duty of loyalty under company law. It requires shareholders to give appropriate consideration to the interests of the company and their fellow shareholders when exercising their own rights. Which specific duties arise from this depends on the shareholding, the articles of association and the circumstances of the individual case. A non-compete obligation may be expressly agreed or, under special conditions, follow from the duty of loyalty.
The general duties at a glance:
- making the agreed contribution
- observing the duty of loyalty under company law
- fulfilling additional duties, provided these are validly laid down in the articles of association or in a separate agreement
Being a shareholder alone generally does not create a duty to work in the day-to-day business or to attend every shareholders’ meeting.
Rights of shareholders
The rights of shareholders can be divided into financial rights and participation, information and control rights.
Financial rights
Shareholders have a financial stake in the results of the GmbH. However, an annual surplus is not paid out automatically. What matters in particular are the adopted annual financial statements, the resolution on the appropriation of profits and the provisions of the articles of association.
In addition, there may be a claim in the event of liquidation, that is, the orderly winding-up of a dissolved company. If the company is dissolved and wound up, a claim to a share of the remaining assets may exist after its liabilities have been settled.
Participation and control rights
For shareholders who are not themselves managing directors, these rights provide insight into the financial situation and the activities of the management. With these rights, shareholders take part in fundamental decisions and can form their own picture of the company’s situation.
How many votes a shareholder has is in principle determined by the nominal amount of their shares, unless the articles of association provide otherwise. Resolutions are in principle passed by a majority of the votes cast, unless a different majority is required or agreed.
Typical participation and control rights include:
- voting rights in the shareholders’ meeting
- information and disclosure rights regarding the affairs of the company
- rights to inspect the company’s documents
- participation in resolutions to control and instruct the management
An individual shareholder generally cannot give personal instructions to the management merely on the basis of their shareholding. Instructions are regularly given by shareholder resolution or on the basis of a special provision in the articles of association.
Instructions tell the management how to act in a particular matter. Consent requirements define which transactions require the prior internal approval of the shareholders. A breach generally does not render a contract concluded with a third party invalid. It can, however, trigger internal consequences and liability issues.
If two shareholders each hold 50 per cent of the votes and vote against each other, a resolution requiring a simple majority regularly fails. The articles of association can regulate how such deadlocks are to be handled. This can become relevant when a decision has to be taken at short notice on financing, a major investment or the appointment of a managing director.
The shareholders' meeting as the central decision-making body
The shareholders’ meeting is the body in which the shareholders form their common will through resolutions. These include, for example:
- appointing and removing managing directors
- reviewing and supervising the management
- adopting the annual financial statements
- deciding on the appropriation of profits
- amending the articles of association
Minority shareholders also have statutory information and participation rights. Shareholders whose shares together amount to at least ten per cent of the share capital can, under the statutory conditions, demand that a shareholders’ meeting be convened and that certain items be placed on the agenda. The articles of association can provide for additional minority rights.
Shareholders and managing directors: what is the difference?
Shareholders and managing directors have different legal tasks. The shareholders decide on fundamental matters of the company by resolution and exercise information and control rights vis-à-vis the management. The management runs the business and represents the company externally.
| Shareholder | Managing director |
|---|---|
| holds shares | is a body of the company |
| takes part in shareholder resolutions | runs the business of the company |
| exercises information and control rights | implements permissible resolutions and instructions |
| has no power of representation merely by virtue of the shareholding | represents the company in and out of court |
| has a financial stake in the company | may receive remuneration for their work |
Both roles can be held by the same person, but must still be considered separately in legal terms.
Which managing directors may act for the GmbH alone or only jointly is explained in the article on representation by managing directors.
Special case: the shareholder-managing director
Very often, one person is both shareholder and managing director. Three legal levels then come together: the position as shareholder, the office of managing director and, where applicable, the managing director’s service agreement.
As a shareholder, the person takes part in resolutions and exercises membership rights. As managing director, they run and represent the company. An additional service agreement can regulate, for example, remuneration, holiday and other terms of the work. Removal from the office of managing director and termination of the service agreement are not automatically the same thing in legal terms.
The social security classification of a shareholder-managing director depends in particular on their shareholding and their legally secured influence on shareholder resolutions. The competent authorities assess the status on the basis of the specific legal arrangement.
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Frequently asked questions about the roles and duties of shareholders
For the liabilities of the registered GmbH, in principle only the company’s assets are liable towards creditors. Shareholders are not liable with their private assets merely on the basis of their shareholding. A personal obligation may, however, arise from a guarantee, their own breach of duty or special statutory liability provisions, for example. An outstanding contribution is in principle owed to the company.
Not merely on the basis of being a shareholder. For that, they must additionally be a managing director or otherwise validly authorised, for example.
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Regulate rights and responsibilities appropriately
In the notarial consultation, the legal options and their consequences can be explained. Which shareholdings, majorities and consent requirements suit the planned everyday working arrangements is for the parties themselves to decide. Insofar as notarial deeds or register filings are required for the chosen arrangement, these can be prepared on the basis of the decisions taken.
