Death of the Sole Director – Now What?

If the sole director of a GmbH and all shareholders entered in the list of shareholders have died, can an emergency manager be appointed to restore the GmbH's ability to act? OLG Cologne helped the heirs to determine their rights with its judgment of June 27, 2019 (re 18 Wx 11/19).

mourning death of sole company director then what

Death of the Sole Director and all Shareholders

A GmbH had two partners, one of whom was also the sole director of the company. Both partners died, one shortly after the other. The heirs of the deceased partners were not entered in the list of shareholders at this time and therefore could not be considered to be partners. Since they were not shareholders, they could not appoint a new director. At the same time, there was no other director who could have submitted a new list of shareholders.

One of the heirs then applied to Commercial Registry Cologne to be appointed as the emergency director of the GmbH. However, the registry rejected the application, whereupon the heir lodged an appeal to be decided by the Cologne Higher Regional Court.

OLG Cologne upheld the complaint. In situations in which the sole director of a GmbH and all shareholders entered in the list of shareholders have died, an emergency manager can be appointed (§29 BGB – analogous). The competencies of the emergency manager do not cover the entire management and representation of the GmbH, but is limited to what is necessary in the individual matter for which they are appointed. In the current case, it would be the submission of a new list of shareholders and organizing a general assembly to appoint one or more new managers.

Remark

Installing a director is a two-step procedure: 1) the shareholders resolve to do so, and 2) either an existing or a new director applies via notary to register the new directors with the Commercial Registry. By word of law, only persons mentioned in the list of shareholders will be considered as such (§16 GmbHG). Who can the install a new director when there is no longer neither a shareholder nor director? According to the code, a shareholder of a GmbH is a person who is entered in the list of shareholders. If a shareholder dies, the director must immediately submit a new list of shareholders to the Commercial Registry, in which the heir(s) are listed as new shareholders. If one of several shareholders dies in a GmbH, who was also the sole director, this is generally not a problem: the other shareholders (entered in the list of shareholders) can then appoint a new director by shareholder resolution, who will be responsible for submitting an updated list of shareholders.

Comprehensive powers granted by limited liability company partners to their heir(s) can be an alternative to emergency management. If these expressly allow the (post-mortem) exercise of shareholder rights from the business shares of deceased shareholders, the heirs can appoint a new director based on the power of attorney, who can then submit the updated list of shareholders to the commercial register. The heirs can thus be spared a judicial appointment procedure. However, the registry courts only accept this route if there are clear post-mortem powers for the specific participation in the company. In this respect, too, it becomes clear: when integrating inheritance and company law, careful structuring is essential.

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