Internal relations : chapter 8

• DOI: 10.10520/EJC74087
• Pages: 123-150
• Date: 01 January 2008
• Author: Christoph Jaehne
• Published date: 01 January 2008

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CHAPTER 8

INTERNAL RELATIONS

8.1 Introduction

For both entities closeness is an important feature. Therefore it will

be interesting to see how the Acts provide for necessary tools regu-

lating the internal relations between the members.

While for the GmbH articles of association are compulsory and mem-

bers are free to make provision regarding internal relations, in the

close corporation it is up to the members whether they conclude an

association agreement or refrain from doing so. However, regarding

internal relations it is quite interesting to note that the Acts set out

certain minimum requirements from which the members may devi-

ate through articles of association or an association agreement pro-

vided that these minimum requirements are not compulsory. So for

the GmbH this means that even if the ar ticles of association do not

regulate internal relations, these minimum provisions of the GmbHG

apply. When internal relations are being regulated in the articles of

association or in the association agreement (if any), attention must

be given to not come into conf‌lict with minimum requirements of the

Act which are compulsory.

Subsequently, one has to distinguish between provisions in the Acts al-

ready regulating specif‌ic questions of internal relations or those reg-

ulations leaving the f‌inal decision in this matter up to the members.

The following sets out to explain the standard provisions in the Acts.

These deal, inter alia, with the meeting of members as well as with

the rights and duties of members.1

Next, the focus will be on regulations given by the members themselves,

be it in the articles of association or in the association agreement. As

in the GmbHG, through the articles of association the CCA also gives

the members the possibility to regulate their internal affairs to a great

extent through an association agreement. However, if the articles of as-

sociation make no provision for a GmbH, or for a close corporation, if

an association agreement does not exist or an existing one makes no

provision, the Acts regulate a number of important questions.

1 Cf., for example, §45 et seqq. GmbHG; s 42 et seqq. CCA.

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8.2 GmbHG and CCA

8.2.1 Power of members in the GmbH

As mentioned above through their shareholders’ meeting the members

are the highest decision making organ in the company.2

They decide, for example, about changes of the articles of associa-

tion,3 in particular, concerning increase and reduction of share capital,4

the dissolution of a company,5 appointment and revocation of liqui-

dators,6 conversion of the company7 or the merger with other com-

panies8 and the calling up of supplementary contributions.9

In addition, § 46 GmbHG lists further areas falling under the regulat-

ing powers of the members.10

These areas are:

the determination of the annual balance sheet and the distri-•

bution of the net prof‌its resulting therefrom;

the making of calls in respect to initial contributions;•

the calling up of supplementary contributions;•

the splitting and the redemption of shares;•

the appointment and revocation of managing directors and their •

relief;

the measures applicable to the control and super vision of the •

management;

the appointment of ‘Prokuristen’ and of‚ Handlungsbevollmächt-•

igten für den gesamten Geschäftsbetrieb‘;11

the assertion of the company’s claims for compensation arising •

out of formation or management against the managing directors

or members, as well as the representation of the company in

litigation with the managing directors.

2 Chapter 7.2.2, ‘Shareholders’ meeting’.

3 §53 GmbHG.

4 §§55, 58 GmbHG.

5 §60 (1) no. 2 GmbHG.

6 §66 (1), (3) 2nd sentence GmbHG, in the given circumstances.

7 Previously regulated in §24 UmwG 1969, (Act Regulating the Conver-

sion of Companies of 1969). However, due to changes now the new

‘Umwandlungsgesetz’ 1995 is applicable, see chapter 13, ‘Merger,

conversions, groups’.

8 Previously regulated in §19 et seqq. KapErhG (Act Regulating the

Raising of Capital). Due to changes now the new ‘Umwandlungsgesetz’

1995 is applicable, see chapter 13, ‘Merger, conversions, groups’.

9 §26 (1) GmbHG.

10 §46 applies if the members do not make provision in the articles of

association, see §45 (2) GmbHG.

11 Cf. chapter 9.2.2, ‘Special types of authority’.