Minority Shareholder's Eligibility to Assert Claims Employed Directors

Is a company’s shareholder in the position to assert claims for compensation against an employed director for the benefit of his company? The Federal Court of Justice ruled on this in its case of January 25, 2022 (re II ZR 50/20).

Minority shareholder cannot assert claims against employed director alone

One of Two Shareholders Wanting Compensation

Two shareholders held shares in a GmbH in liquidation; one shareholder held 80% of the shares, and the other - the later plaintiff - held 20% of the shares. In addition, the GmbH had a director; the latter did not own any shares in the company.

The director had created non-recoverable receivables for the GmbH amounting to almost seven figures. The minority shareholder took action in court to claim damages from the director for these worthless receivables on behalf of the GmbH. The BGH ruled on the appeal against this.

Shareholders’ Assembly’s Eligibility to Assert Claims

The appeal was successful. In the view of the BGH, the minority shareholder’s action lacked any merits. He could not assert any claims on behalf of the GmbH against a director because he was acting alone. He has to contact his co-shareholders. If his co-partners refuse to cooperate, this can be countered by actions for rescission and resolution.

Practical Hint

In principle, BGH actually deals with a procedural question - the right to sue when asserting claims for compensation against an employed director. However, the significance of the ruling for practice should not be underestimated because it shows you that when asserting claims for compensation against directors, details and a careful approach are essential. Only the shareholders’ assembly may resolve that a director be held liable and appoint one shareholder to take care of this issue.

Immediate Termination of a Director’s Employment Contract for Compliance Violations

Director's Liability vis-à-vis third Parties for "Seizing the Cash Box"

De Facto Director’s Liability for Unpaid Taxes

Responsibility of the Shareholders' Meeting for Executive Compensation