Many managing directors experience removal from office and termination as one and the same event. Legally, however, they are two independent processes.
Removal from office ends your position as a corporate body (Organstellung). You are removed from your role as representative of the GmbH by shareholders’ resolution. Pursuant to section 38 (1) GmbHG, the appointment of managing directors may be revoked at any time, without a special reason being required. According to consistent supreme court case law, the revocation only becomes effective upon receipt of the removal declaration by the managing director; the shareholders’ resolution alone is not sufficient.
Termination of the service agreement is a separate step. It ends the contractual service relationship between you and the GmbH. Without this termination, your salary claims generally continue to exist, even if you no longer represent the GmbH. A separate shareholders’ resolution is required for the termination.
In general, they do not. The Protection Against Dismissal Act (KSchG) does not apply to managing directors as a rule. Section 14 (1) no. 1 KSchG expressly excludes corporate body members, and thus also GmbH managing directors. An ordinary termination of the service agreement may generally be served at any time and without social justification, provided the contractual notice periods are observed.
The notice periods for a managing director’s service agreement are, in the absence of a contractual provision, governed by section 621 BGB. Section 622 BGB applies directly only to employment relationships; according to more recent labour court case law, an analogous application to managing director service agreements is excluded.
As a rule, the managing director has no statutory severance claim following removal from office or termination. Nevertheless, there are several constellations in which severance pay is legally justified or commonly agreed in practice:
Termination of the service agreement without notice is permissible under section 626 BGB only if there is good cause. In practice, the following are cited as good cause: breach of trust, misappropriation of company assets, serious breaches of duty, repeated non-compliance with management instructions, or loss of reliability due to criminal conviction.
Important: Whether contractual severance clauses lapse in the event of extraordinary termination depends on the specific clause; it is typical for the contract to exclude severance in the case of termination for cause, but there is no statutory automatism. The validity of an extraordinary termination should therefore always be legally reviewed.
In practice, the termination agreement is the most important instrument in separating from a managing director. It covers, by mutual consent, all aspects of the termination and creates legal certainty for both sides. Typical provisions include: termination date, granting discharge from liability, amount of severance pay, reference, return of company property, confidentiality obligations, post-contractual non-compete covenants.
Particularly with respect to severance pay, we recommend that the tax implications be taken into account already in the termination agreement. The so-called one-fifth rule under section 34 EStG can significantly reduce the tax burden if the severance payment is treated as extraordinary income. This should be coordinated with a tax advisor at an early stage.
Whether the rule of §§ 74 et seq. HGB automatically also applies to managing directors is legally disputed. Case law tends to apply sections 74 et seq. HGB at least analogously to non-shareholder managing directors (Fremdgeschäftsführer). If a non-compete covenant is agreed without providing for compensation, it may be invalid, or the managing director may be free to decide whether to comply with the covenant and claim compensation, or to waive both.
There is no statutory formula for calculating severance pay for managing directors. Key factors include: remaining term of the service agreement, agreed severance clause, economic importance of the managing director for the GmbH, negotiating position of both sides, risks of litigation. In the case of a fixed-term service agreement with several years remaining, the economic compensation can be substantial.
Severing ties with a GmbH managing director is legally complex and economically significant. There is no statutory entitlement to severance, but there are numerous starting points for negotiating or enforcing an appropriate severance payment. We assist you in realistically assessing your legal position, developing your negotiation strategy, and achieving a fair outcome, whether out of court or, if necessary, before the courts.
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