The Managing Directors (“MDs”) (in German: “Geschäftsführer”) are – besides the Shareholders – a governing body mandatory for every German Limited Liability Company (“LLC”) (in German: “Gesellschaft mit beschränkter Haftung – GmbH”).

Division of Duties: The MDs manage the Company. However, the Shareholders are entitled to issue (by way of resolutions) binding instructions to the MDs on all issues affecting the Company; such entitlement may also be conferred on other corporate bodies, e.g. through the Articles of Association (“AoA”). Moreover, it is common that specific types of transaction shall only be entered into with the Shareholders’ or another corporate body’s prior consent, as stipulated, e.g. in the AoA, by Shareholders’ Resolutions or Bylaws of the MDs. [...] The MDs assume joint responsibility for every action by the MDs. Even though it is common for MDs to allocate the duties for certain areas between individual members by way of a schedule of responsibilities (in German: “Geschäftsverteilungsplan”), important issues need a decision by all MDs. In addition, every MD has to satisfy itself that the other MDs are working as they should, i.e. exercising supervision. The MDs have unlimited capacity to represent the Company in and out of court. If more than 1 MDs are appointed, the MDs shall represent the Company jointly (unless the AoA provide otherwise). Moreover, the AoA or another corporate body (if authorized to do so by the AoA) may provide that particular MDs may represent the Company by acting solely or – provided that more than 1 MD is appointed – jointly with another MD or with a holder of a special proxy (in German: “Prokurist”). 

Composition: The appointment of 1 MD is required and – as a basic rule – sufficient. However, if the Company is subject to the German Co-Determination Act 1976 (in German: “Mitbestimmungsgesetz”) or the German Montan Co-Determination Act (in German: “Montanmitbestimmungsgesetz”), 1 MD is required to be the labor director (in German: “Arbeitsdirektor”) and thus, at least 2 MDs are required. German law does not provide for a maximum number of MDs. Only a natural person with full legal capacity may be an MD. A person may not be an MD if such person (i) is under guardianship and its property affairs are in whole or in part subject to consent requirements pursuant to the German Civil Code (in German: “Bürgerliches Gesetzbuch”), (ii) is prohibited by judicial decision or an enforceable administrative order from engaging in a profession, a branch of a profession or a trade or branch of a trade if the Company’s purpose encompasses in whole or in part such prohibited activity or (iii) has been convicted of certain intentional criminal offenses (including, but not limited to a delayed filing of insolvency) within a period of basically the last 5 years. Moreover, in general, a member of the Supervisory Board (“SB”) may not be an MD.

Appointment/Dismissal Competence: As a general rule, the MDs are appointed by the Shareholders by way of a resolution (simple majority vote; AoA may require a higher majority or restrict the revocation to cases with good cause, e.g. a gross breach of duties or inability to manage the Company properly). Moreover, the AoA (i) may stipulate a certain person to be MD, (ii) may shift the right of appointment/revocation to another corporate body (e.g. the SB) or to a third party. If the Company is subject to the German Co-Determination Act 1976 or the German Montan Co-Determination Act mandatory law requires an appointment or revocation of the MDs by the SB in accordance with the provisions and restrictions set out in such Acts. As a general rule, the employment contract remains unaffected from the revocation of the appointment.

Alternates: N/A.

For a description of how to change the respective board members, please see the individual steps in the "Step-by-Step"-schedules below. As all information on how to change board members in Germany on the CBM Site by nature is generic (i.e. does not include specific requirements for listed companies, special requirements in statutory documents or as otherwise stipulated in any type of special law), we strongly recommend seeking legal advice with Allen & Overy before actually changing any board members in Germany.