Directors’ Duties in Germany

>> Board Requirements in Germany

Under German statutory law, a GmbH requires at least one managing director (“Geschäftsführer”), unless the articles of association of the company specify a higher number of managing directors. There is no maximum number of managing directors of a GmbH.

In general, there is no maximum duration of the appointment of managing directors of a GmbH.

The managing directors of a German GmbH are not required to be resident in Germany, however they should be able to enter Germany in order to comply with their duties and obligations. Please note that it is advisable that at least one managing director should reside in Germany in order to avoid additional taxation (Wegzugsbesteuerung).

There are no formal qualifying requirements for directors of a GmbH. Any natural person with full legal capacity (ie at least 18 years of age and not regarded as mentally ill) can be appointed a Managing Director unless certain restrictions apply.

You are restricted in your capacity to act as a managing director of a GmbH if you fall into any of the follow categories:

  • Any person subject of ward of the state or subject to

any guardianship (“Betreuung”).

  • Any person prohibited by court order or administrative decision to carry out certain professions or business if the object of the company is related to this profession  or business.
  • Any person convicted of certain crimes such as fraud, misappropriation of funds,  or insolvency crimes.

Further, the managing director of a German GmbH has to be a natural person. It is not possible to appoint a legal entity as a managing director of a GmbH.

Board meetings and composition requirements

A German GmbH is not governed by any kind  of board of directors. Hence, there are no  board meetings.

Please note that most of the actions that are decided via a board of directors in the US or the UK must, in Germany, be decided by the shareholders via a shareholders meeting.

Signatory rights/powers of directors

Pursuant to German statutory law, the managing directors of a GmbH have unlimited signature rights and powers for any kind of legal transaction or legal act in connection with the administration of the Company. The material scope of the signature rights and powers of the managing directors can vis-á-vis third parties neither be restricted by the stipulations of the articles of associations, nor by shareholder’s resolution.

According to German statutory law and unless specified otherwise in the articles of association, if only one managing director is appointed, the managing director shall represent alone, if more than one managing director is appointed, they shall represent the company jointly. However, please note that when appointing a managing director, the company can grant him sole representation powers. Although this would need to be registered with the commercial register.

However, the shareholders, by shareholders’ resolution, could limit the authorities of a managing director to a certain extent (eg actions requiring the prior approval by the shareholders), but this would only have internal effect, ie vis-àvis third parties the managing director could still carry out these actions with binding effect on the company. Normally, a managing director would request instructions from the shareholders before undertaking any extraordinary actions.

Conflicts

Pursuant to German law, the managing directors are restricted from self-dealing, unless the articles of association or his appointment resolution specify otherwise. If the managing director is not exempt from self-dealing he must inform the shareholder and abstain from acting on behalf of one side.

Please note, should the managing director be the only director/authorised signatory (which often happens in group structures), the only possibility to overcome this situation would be to appoint an additional director.


Latest version updated 22nd March 2018

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