Federal Court of Justice, May 10, 2010 Case No.: II ZR 70/09
Distinction Between Appointment and Employment Relationship
The appointment of a managing director of a GmbH (limited liability company) and their employment relationship must be strictly separated. While the appointment establishes the corporate rights and obligations as well as the representative authority of the managing director, the employment relationship governs the personal relationship between the managing director and the company. This includes, in particular, claims for remuneration, bonuses, and vacation. The employment contract is typically classified as a service contract according to §§ 611, 675 of the German Civil Code (BGB), but not as an employment contract. Such a contract may also be part of the articles of association but is then considered a non-genuine statutory component (§ 3 GmbHG).
Competence of the Shareholders’ Meeting
The shareholders’ meeting is responsible for both the appointment and removal of the managing director, as well as for concluding and terminating the service contract. This competence derives from § 46 No. 5 GmbHG, albeit in an extended form (“ancillary competence”). Any declarations or agreements made outside of a shareholders’ resolution are invalid for the company. This principle ensures that the shareholders’ resolution remains the central governing instrument.
Labor Law Protection Regulations and Managing Directors
Since the managing director’s employment contract is not an employment contract, labor law protection regulations such as the German Termination Protection Act (KSchG), the Federal Vacation Act (BUrlG), the Social Code (SGB IX), or the Working Hours Act (ArbZG) do not generally apply. However, it is possible for the employment contract to include a contractual agreement that regulates the application of termination protection provisions in favor of the managing director. This possibility was addressed in the Federal Court of Justice (BGH) decision discussed here, where the managing director had entered into such an agreement.
Decision of the Federal Court of Justice
In this case, the plaintiff, a managing director, had agreed to the applicability of the Termination Protection Act in his employment contract. After being terminated without notice by the company, he sued to challenge the validity of the termination. The BGH ruled that the agreement to include the termination protection provisions was valid. The employment contract was to be viewed as a free service contract; however, this did not prevent the contractual inclusion of labor law norms. Nevertheless, this private autonomy should not interfere with the statutory and corporate structure of the relationship between the managing director and the company. The BGH emphasized that the shareholders’ freedom to appoint and remove the managing director would only be indirectly affected by the limitations in the employment contract.
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Source: Federal Court of Justice
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