Role of Shareholders in a Corporation – Shareholders' Assembly

What are the rights and duties of Shareholders?

How about distributing shares? If so, how is this possible?

Shares of shareholders in company

The company's shareholders are able to determine individually the amount of their shares and so line up the company more in accordance with their wants and needs.

I've heard something strange about the registry keeping a list of shareholders? What's that all about? I am anxious about my data and I don't think so much information is necessary.

Take it literally. The court will be keeping such a list because only those persons who are on the list will be legally considered as a shareholder. By the way, such a list is nothing new. This list enables purchasers and sellers to know easily if a person belongs to the company or not. As pointed out in the article Company Information on the Internet Starting 2007, these details are retrievable online.

Is it possible to fund the company with a shareholder's loan? The thing is that I don't have that much money to "only" be lying around in the company's bank account.

It is not possible that the shareholder gives his company a loan to fund the company when founding. It is also not permitted to fund the company and return the funds back to the shareholder. §30 GmbHG determines that funds needed to run the company may not be returned to the shareholders. This gives grounds for the bankruptcy manager to have the assets returned. When company assets are to be liquidated, shareholder's loans come last. Returning the statutory funds to the shareholder(s) and without risking personal liability is something you ought to discuss with your (tax consulting) lawyer! (§39 I no. 5 InsO).

Shareholders Assembly

Okay, I just learned that the Geschäftsführer represents the company towards the public. Why do we have to have a shareholders' assembly? What is its function?

The shareholders hold the capital and internally determine the company's policies. The daily nitty-gritty work remains with the director (Geschäftsführer). This wording relates to one person companies where the shareholder is simultaneously the director. In the event of more than one shareholder, they assemble to vote on corporate policies.

What are the responsibilities of the Shareholders Assembly?

The assembly of shareholders is the superior body of the GmbH. It consists of all shareholders – regardless of their capital and voting rights. Voting rights can and really differ – often respecting the invested capital. They have all the rights and duties as assigned by the articles of association and §46 GmbHG. The statutory and mandatory duties of the shareholder's assembly are:

  • acknowledgment of the annual closings
  • determining the use of the annual profit,
  • calling for contributions,
  • dividing, combining, and confiscating of shares,
  • engaging proxy directors,
  • alterations in the articles of association,
  • dissolution of the company,
  • calling for (further) funds.

These duties are mandatory for the shareholders assembly and cannot be delegated to any board of directors (Aufsichtsrat) or other representatives. The assembly's decisions are made by resolutions. The formalities of the resolution are found in the articles of association and if the articles do not contain any regulation or invalid ones, the Act on GmbHs will determine these formalities – if not case law.

Isn't it a conflict that I as a shareholder am also the CEO of my company?

Not at all. The law demands that there be at least one director and one shareholder. If the director also holds any shares or not is irrelevant for the position. Seen from daily life, you not only determine the policies of your company but simultaneously implement them.

Our twit of a director has vanished. I can't find him anywhere and nobody knows his whereabouts. Who cares?

You should care! Being without management does not mean that the shareholders can rest and do nothing. It is your job as shareholder to appoint a new director – ASAP! (see above)

Our director is refusing to deplete the company's funds because we shareholders want to split to the Bahamas. The company is broke and we don't want to take care of it anymore. Can the director refuse to follow the shareholders' instructions?

It's a very good idea for your director to disobey your orders. If he were to obey, he would be aiding and abetting a fraud (of the creditors). The prohibition on payment in §64 GmbHG is to ensure this. He could also be held personally liable because he is participating in damaging the company.

I'm already holding shares of another company. Are there any restrictions about having shares in a different company?

Based purely by word of the law, you are allowed to own as many shares of as many companies as you personally wish. Continue reading! It depends on the corporate form. When holding shares of a public joint-stock corporation, this is conceptually already no issue. Otherwise, you have to search in the articles of association of the company where you already hold shares and the one where you want to become a shareholder.

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