Clear Reason for Dissolution in Articles of Association

The Higher Regional Court Düsseldorf passed its verdict dated 2 July, 2020 (I-3 Wx 88/20, 3 Wx 88/20) over the question how specific a reason for dissolution must be described in the articles of association.

Unclear Reason for Dissolution

After a GmbH shareholder has effectively terminated his share, the managing director applied to the commercial registry for the dissolution of the GmbH. The reason for this was a stipulation in the articles of association according to which the company enters into liquidation if the terminating shareholder does not receive a resolution on the redemption or assignment of his or her previous shares.

The registration court rejected the application for liquidation on the grounds that the mentioned reason was too vague. It is not clearly determinable when this resolution takes effect.

The GmbH filed an appeal against the registration court’s decision. It considers the provision in the articles of association to be sufficiently defined. Furthermore, it argues that the determination of a negative fact is always a prerequisite for the dissolution of the company, as the shareholders always have the possibility to make a continuation resolution at a later date and thus prevent the dissolution, even if there are other reasons for dissolution.

Appeal Confirms Ambiguity of Articles of Association

The Company's appeal was unsuccessful. The higher court confirms the decision of the registration court and finds that the registration was rightly rejected. The provision in the partnership agreement regarding dissolution is not sufficiently clear, because the existence of a reason for dissolution cannot be established beyond doubt. Therefore, the regulation in the articles of association of the GmbH is ineffective. Consequently, the GmbH has not yet been dissolved effectively, which is why the dissolution was not to be entered in the commercial registry.

Practical Note

The termination of a GmbH takes place in three steps: First, a reason for dissolution is required, which automatically and without further involvement of the shareholders brings the company into the stage of liquidation. As soon as the liquidation is completed, the company can be deleted from the Commercial Registry and is terminated from that point on.

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