Regional Court of Cologne, 07.07.2016, Ref.: 29 S 180/15
The authority to manage the company conferred on a shareholder by the articles of association can be withdrawn by a unanimous resolution or, if the majority of votes decide according to the articles of association, by a majority resolution of the other shareholders if there is good cause; such cause is, in particular, gross breach of duty or inability to manage the company properly, as stipulated in Section 712 BGB.
If the partnership agreement stipulates that if a shareholder gives notice of termination, the partnership shall continue to exist among the remaining shareholders, a shareholder in whose person a circumstance occurs that entitles the other shareholders to terminate the partnership in accordance with section 723 para. 1 sentence 2 may be excluded from the partnership. The other shareholders are jointly entitled to the right of exclusion. Exclusion is effected by declaration to the shareholder to be excluded.
The prevailing legal opinion also applies these provisions to the management of a homeowners' association.
The Cologne Regional Court makes it clear that when deciding on the dismissal of the administrator for good cause, the administrator himself may not vote on his dismissal as an authorised representative - as is only the case with the appointment of the administrator.
Facts and cause of action
The parties are owners in a condominium owners' association. An owners' meeting was held on 5 February 2015 at which, among other things, the dismissal of W GmbH as administrator was voted on. The motion to dismiss the administrator with immediate effect was rejected. The plaintiff then filed an action for annulment and contested the invalidity of the resolution on agenda item 6 (agenda item 6). The notice period for the meeting had been too short and important information had been withheld from the owners. Furthermore, not all condominium owners had been invited and the plaintiff questioned the quorum of the meeting.
Legal dispute regarding the exercise of voting rights by the administrator
The central point of dispute was whether the administrator was authorised to cast votes in the vote on his own dismissal as a representative of other condominium owners. The plaintiff argued that the administrator was prohibited from voting on this matter and that 24 votes cast were therefore invalid. He based his argument on the legal principle that no one may decide on the withdrawal of a legal position on their own behalf. The plaintiff demanded that the resolution not to dismiss W GmbH be declared invalid.
Decision of the Brühl Local Court
The Brühl district court initially dismissed the action. It based its decision on a ruling by the Munich Higher Regional Court (OLG), according to which the administrator, as the representative of other owners, could also vote on his own dismissal. The local court's reasoning was that the administrator was acting as a representative of the co-owners and therefore their rights were at stake. The court did not see any impairment of voting rights, as the administrator was acting as a representative of the co-owners and was not voting on his own behalf.
Appeal before the Cologne Regional Court
The plaintiff appealed against the judgement of the Brühl Local Court. The Regional Court of Cologne ruled in favour of the plaintiff and declared the resolution on agenda item 6 invalid. The court agreed with the prevailing opinion in the literature and the decision of the Higher Regional Court of Düsseldorf, according to which the administrator is not entitled to vote as a representative of other condominium owners when voting on his own dismissal. It referred to the legal concept of Sections 712 and 737 of the German Civil Code (BGB), according to which no one may decide on the withdrawal of a legal position on their own behalf. The administrator had unlawfully influenced the vote by exercising powers of attorney.
Regional court judgement and consequences
The regional court overturned the judgement of the Brühl district court and ruled that the resolution of the owners' meeting of 5 February 2015 on item 6 was invalid. As the administrator had taken part in the vote on his own dismissal as the authorised representative of 24 condominium owners, the resolution had not been properly passed. The court clarified that an administrator is not authorised to vote in such a constellation, as there is a risk of a conflict of interests and the purpose of a ban on voting rights is to maintain neutrality.
Source: Cologne Regional Court
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