For international investors, foreign business owners, and companies operating in Germany, removing a managing director (Geschäftsführer) from a GmbH is rarely straightforward. German corporate law governs the entire process — from the grounds required and the procedures that must be followed, to the employment law consequences that run alongside. Even where removal is clearly justified, missteps in procedure can expose the company to challenge, delay, and significant financial liability.
The situation becomes particularly complex when the managing director is also a shareholder, when the articles of association impose restrictions, or when cross-border elements introduce additional uncertainty. For those unfamiliar with the German legal system, navigating these requirements without specialist support carries real risk.
Schlun & Elseven Rechtsanwälte advises international shareholders, investors, and companies on the legally secure removal of managing directors in Germany. Our lawyers assess the available grounds for removal, develop a clear procedural strategy, and manage every step of the process — from convening a proper shareholders’ meeting to registering the change in the Commercial Register. We coordinate corporate, employment, and civil law considerations to protect the company’s position throughout, while ensuring the rights of all parties are properly handled.
Under What Circumstances Can a Managing Director Be Removed in Germany?
The removal of a managing director concerns their status as a corporate officer of the GmbH and is distinct from the exclusion of a shareholder. Under Section 38(1) of the German Limited Liability Companies Act (GmbHG), managing directors can, in principle, be removed at any time by a shareholders’ resolution, unless the articles of association provide otherwise. Removal can take place either on an ordinary or an extraordinary basis. Ordinary removal is possible at any time without the need to state reasons, provided there are no contractual restrictions. This flexibility allows shareholders to respond quickly to changing circumstances and realign the company’s management. Where the articles of association include a deviating provision, removal is only permissible on “important grounds” (wichtiger Grund) — a defined legal standard under German law — as under Section 38(2) GmbHG.
Special rules apply where a managing director is also a shareholder in the GmbH. This structure is particularly common in family-owned businesses and foreign-invested GmbHs, where founders or overseas investors take on management roles directly. The duty of loyalty that exists under German corporate law means that removal in such cases is not without limits. An arbitrary removal, or one carried out for pretextual reasons without objective justification, may be invalid. That said, even a loss of confidence or flawed business decisions can constitute sufficient grounds for removal — even if those grounds are later found to have been unsubstantiated.
Formal Requirements for Removal
Any removal of a managing director from a GmbH requires a properly convened shareholders’ meeting in accordance with Section 6(3), sentence 2 and Section 46 No. 5 GmbHG. The removal must be expressly included on the agenda, and all procedural steps of the removal process must be followed. The statutory minimum notice period is one week, unless the articles of association specify otherwise. In urgent cases, a shareholders’ meeting may be convened on shorter notice if all shareholders consent. Failure to comply with these procedural requirements can render a removal resolution vulnerable to challenge — a particular risk for those unfamiliar with the formalities of German corporate procedure.
Important Grounds and Required Majorities
Where the articles of association make removal conditional on the existence of important grounds (wichtiger Grund), those grounds must objectively exist and be demonstrable. Important grounds may include, in particular, serious breaches of duty, gross negligence, breach of trust, violations of a non-compete obligation, or a fundamental and sustained breakdown of confidence. The burden of proving those grounds lies with the shareholders seeking removal.
What Are Typical Grounds for Removing a Managing Director?
Performance-related grounds: Inadequate business results, a lack of qualifications for new challenges, a strategic reorientation of the company, or organizational restructuring can all justify removal from a GmbH. Even in the absence of a specific breach of duty, removal may be warranted where the existing management no longer meets the company’s current requirements.
Breaches of duty: Violations of the duty of care expected of a prudent businessperson, conflicts of interest, breaches of confidentiality, unauthorized transactions outside the scope of the managing director’s authority, or actions to the detriment of the company represent serious grounds for immediate extraordinary removal.
Loss of confidence: Even without a specific breach of duty, a fundamental breakdown of trust between the shareholders and the managing director can justify removal. This may be the case in particular where there are fundamental strategic disagreements or a sustained breakdown in communication.
What Are the Consequences of Removing a Managing Director under German Law?
The removal of a managing director carries far-reaching legal and financial consequences that all parties must carefully weigh.
Legal Consequences
Once removal takes effect, the managing director’s status as a corporate officer terminates immediately. However, their authority to represent the GmbH vis-à-vis third parties does not cease until the removal is registered in Germany’s Commercial Register. Until that point, they can continue to enter into legally binding transactions on behalf of the GmbH, which can give rise to complications. The company must therefore arrange for registration without delay and, where necessary, notify business partners of the removal.
Employment Law Consequences
Where an employment or service relationship existed alongside the managing director’s role, the corporate law removal does not automatically terminate that relationship. The “separation principle” is critical here: the managing director’s status as a corporate officer and their underlying employment or service relationship are treated as legally distinct under German law and require separate termination. Employment law protections apply to that relationship, including statutory protection against unfair dismissal, works council involvement, and the terms of any applicable collective agreements. This dual structure can give rise to complex legal situations.
Liability and Damages Risks
An unlawful or contractually unjustified removal can expose the company to substantial damages claims from the affected managing director. These may include lost remuneration for the remainder of the appointment period, loss of pension entitlements, severance claims, or non-financial harm resulting from reputational damage. Conversely, where the managing director is found to have breached their duties, the GmbH may pursue claims against them. In either case, the sums at stake can be significant and may lead to years of litigation.
Financial Impact
Removal can have serious financial consequences for the company, particularly where the managing director held important business relationships, specialized expertise, or responsibility for key projects. Clients may lose confidence in the GmbH, suppliers may tighten payment terms, and banks may call in credit facilities. Careful transition planning and professional communication are therefore essential to prevent business disruption.
At Schlun & Elseven, our corporate lawyers advise and support companies and shareholders both preventively and throughout the removal process. This includes early review of the articles of association and any employment or service agreements, identification of legal risks, and development of a legally sound course of action. During the removal process itself, our experienced corporate law attorneys manage the structured preparation and implementation of shareholders’ resolutions through to registration in the Commercial Register, in order to avoid challenges and minimize liability exposure.
Where problems arise within the company, shareholders and managing directors alike have a range of available options — the appropriate choice will depend on the situation and the seriousness of the issues involved. The legal requirements vary depending on the type of removal sought and the contractual arrangements in place.
Shareholders have various legal options depending on the circumstances. These include ordinary or extraordinary removal of the managing director from the GmbH, termination of the underlying employment or service relationship, and the pursuit of damages or liability claims in the event of breaches of duty. Well-drafted articles of association — including clear provisions on authority and the grounds for removal — can also help limit the scope for future disputes.
Options for Managing Directors
Managing directors facing removal or the threat of removal have access to various legal protections and remedies. These are designed to defend against unlawful resolutions, mitigate financial disadvantage, and protect their rights against the company.
- Contesting the removal decision: A resolution to remove a managing director can be challenged before the German courts within one month of the shareholders’ meeting — a tight deadline that those unfamiliar with German procedural law may easily miss. Grounds for challenge may include procedural errors, failure to raise important grounds when required by the articles of association, inadequate investigation of the relevant facts, or a violation of the managing director’s rights. A successful challenge renders the removal invalid.
- Damages claims: If the removal is unjustified or contractually improper, the managing director may claim damages. These may cover lost remuneration through to the end of the ordinary appointment period, losses arising from pension commitments, severance entitlements, or non-financial harm resulting from reputational damage. The extent of the loss must be specifically established and substantiated.
- Employment law protections: Where a separate employment contract exists alongside the managing director’s role, employment law protections apply. These include statutory unfair dismissal protection, the requirement for a social selection process for operational dismissals, works council co-determination rights, and entitlements to severance pay or reinstatement.
- Interim injunctions: In urgent cases, a managing director may seek an interim injunction to secure reinstatement or preserve damages claims. This requires both urgency and a credible prima facie case. Whether the conditions for an interim injunction are met must always be assessed on the specific facts of the case.
An Overview: Frequently Asked Questions: Removing a Managing Director in Germany
In principle, at any time by means of a shareholders’ resolution under Section 38(1) GmbHG. However, the articles of association or any employment agreement may impose restrictions that require important grounds to exist before removal can take place.
Without a special contractual provision, a simple majority of votes cast is sufficient. The articles of association may, however, require a qualified majority — in particular where the managing director is also a shareholder.
Only if the articles of association or the employment agreement expressly require this. Under German law, ordinary removal is possible at any time without the need for important grounds.
As a general rule, yes — the affected managing director retains voting rights unless the articles of association expressly exclude this. An exception may apply where the managing director has a direct personal interest in the outcome that creates a conflict of interest under German corporate law, in which case their participation in the vote may be restricted.
Removal under German corporate law does not automatically terminate a parallel employment relationship. A separate employment law termination is required, subject to applicable statutory and contractual protections.
Yes, the removal of a managing director must be registered without delay. This is done by submitting a certified copy of the shareholders’ meeting minutes to the Commercial Register.
Practice Group: German Corporate Law
Practice Group:
German Corporate Law
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