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Collecting GmbH Shares or Duty of Allegiance of Major Shareholders

The Federal Court of Justice (decisions of April 5, 2011, re II ZR 263/08 and II ZR 279/08) settled a dispute between minor and major shareholders of a German Limited. The question was whether the major shareholder can, just because he has the most shares, execute into the minority shares?

Bob, Billy, and Christopher were shareholders of a real estate GmbH. At first Bob and Billy were equal owners. Later Christopher joined and even later, due to a capital raise became majority shareholder. Bob and Billy took out a bank loan for the company and also personally guaranteed the payment. Later Christopher took over the loan from the bank and executed into their shares of now only 0.1%. Bob and Billy vainly sought legal regress in court against this, in their opinion inequitable approach from Christopher.

The court did not see any injustice in Christopher's collection of the remaining shares whatsoever. There is no duty of the major shareholder to protect the minor shareholders against seizure of their shares. The court strictly distinguishes between personal and company debts. Since Bob and Billy had no rights against the bank to prevent execution, they had no rights against Christopher - now as successor of the bank loan. Something else would be the case, if intra-company duties were involved.