Dismissal and Dismissal of a GmbH Director

Termination of a GmbH CEO contract is subject to several special conditions in relation to conventional labor law, which must also be observed when it comes to the issue of legal protection.

On the one hand, it is important that the managing director of the GmbH regularly has a dual function. One as a management body for the company and one for a (senior) employee. Although both functions meet, they must be legally distinct:

employment and dismissal

The CEO’s function is associated with the position of body, to take over the management of the company. The appointment of a managing director must be made by a decision from the company and then leads to the entry of the position as a body in the commercial register. Section 6 of the GmbHG regulates the requirements for the executive position of a managing director.

There are no special legal requirements for dismissal. However, a shareholder resolution is required that allows for the dismissal of the CEO. In the absence of a separate regulation, dismissal is possible without justification.

In practice, there are often articles of association that only allow the CEO to be dismissed for substantial reasons. Section 38 (2) GmbHG expressly provides this option. For the appointed managing director, this is extended protection, as dismissal without substantial justification is then no longer possible. Either the significant reasons that can lead to dismissal are listed in the articles of association. Or the statutes only generally require that there is a substantial reason for a dismissal. It is then necessary to check whether the managing director has violated the law or the company’s articles of association in such a serious way that he can no longer be expected to remain in the position of the company and the shareholders.

It should be noted that substantial reasons only justify a dismissal if they lead to the dismissal of the managing director within a period of 14 days from knowledge. In this regard, § 626 BGB applies accordingly. Previous conditions or violations can no longer justify dismissal for good reasons, unless the underlying conditions are immediately and exhaustively clarified without delay. In such cases, the 14-day period begins according to § 626, subsection Otherwise, under certain circumstances, there may be a premature “suspicion of dismissal”. However, caution is advised when observing the 14-day period. For managing directors, exceeding a deadline is often the first point of departure for taking action against the dismissal.

resignation of a manager

The termination of an executive director’s employment contract must be separated from his position as a body and any dismissal of an executive director. This is the (service) contractual relationship between a company and its managing director, with which topics such as the duration of the contract, remuneration or termination options are agreed. First of all, it must be noted that the managing director is not employed by the company, but is typically in an employment relationship with the company. Contractually, this may not make much difference. However, due to his management function, the CEO cannot regularly invoke statutory protection provisions applicable to employees. For example, the essential provisions of the Act on Protection against Redundancy (KSchG) do not apply to CEOs.

The termination of the CEO’s employment contract does not immediately follow labor law provisions, although there are certainly some parallels.

If there is a time-limited employment relationship between the company and the managing director, the contract ends at the end of the period, unless the shareholders decide beforehand that the employment relationship must be extended.

If, on the other hand, the managing director has entered into an indefinite contract with the company, the options for termination are regulated by the law and the articles of association. Unless otherwise agreed, the provisions of § 621 of the German Civil Code apply with the deadlines stated therein. However, service contracts with managing directors often contain individually extended notice periods or an express reference to § 622 of the German Civil Code.

Finally, it should be noted that director contracts can also be terminated exceptionally for significant reasons. This is the case, for example, if the managing director has disregarded the obligations arising from the employment contract with his actions. Section 626 subsection Crucially, such a breach by the CEO must always be considered in two respects. On the one hand, with a view to his position as a body in the commercial register, on the other hand, with a view to the contractual relationship with the company. Merely the dismissal as CEO does not terminate the contractual relationship. If there are substantial reasons, the shareholders often decide to be dismissed and at the same time terminate the employment contract. Likewise, so-called synchronization or coupling clauses are regularly found in CEO service contracts, from which it appears that dismissal of the CEO’s position as a body by a general meeting decision automatically leads to termination of the service contract. In this connection, however, it must be ensured that such clauses are formulated clearly enough.

Legal protection against dismissal and dismissal

In the dispute about dismissal and dismissal, there are in practice a number of possibilities for the managing director to successfully intervene against such measures. The legal protection against dismissal and dismissal then continuously leads to settlement agreements, after which CEOs are financially compensated by paying a severance package.

Two aspects The following must be observed with regard to legal protection:

In part, the 3-week period corresponding to § 4 KSchG applies to bring proceedings. Even if the managing director is not employed according to the model in the KSchG, the analogous application of the provision should ensure that legal clarity is created between the potential parties in a dispute due to a comparable situation of interest by complying with the statutory deadline.

It should also be noted that the CEO usually does not submit his complaint about the dismissal and dismissal to the labor courts, but to the regional courts. On the other hand, complaints that a managing director has mistakenly filed with the labor court may be dismissed. Renewed proceedings in the civil courts are often rejected because the 3-week deadline for bringing the case may have expired in the meantime. In this regard, the greatest care is always required in choosing the right to be invoked. Only in certain constellations is it possible for the managing director to bring an action for protection against unfair dismissal at a labor court. These are often cases where the managing director was already employed by the company before he was appointed to the board. But that is a matter of the individual case.

A message:

We advise companies and managing directors nationwide in connection with redundancies and terminations with expertise in company law and service law. If you have any questions about this, please feel free to contact us at any time. Effective legal protection often starts with prompt and careful preparation and investigation of the facts. Experienced advice is therefore absolutely necessary to secure one’s own legal position in the long term.

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