Control rights of a minority shareholder of a GmbH

In particular, when a limited liability company shareholder loses confidence in the company’s organs, the question arises for the shareholder of what options there are to respond to potentially unlawful behavior by the organs. The GmbH Act (GmbHG) provides for participation, disclosure, and voting rights within the framework of the general meeting in this regard. In addition, such shareholders also have informational and control rights outside of the general meeting. The following provides an overview of the most important minority shareholder rights.

Right of access to books

The most important information rights of the shareholders are regulated in § 22, paragraph 2 of the GmbHG. According to this, each shareholder must be sent the annual financial statements, including the management report, and, if applicable, the consolidated financial statements, including the consolidated management report, as soon as they have been prepared. Additionally, within 14 days before the shareholders’ meeting convened to review the annual financial statements or before the deadline set for the written vote, the shareholder may inspect the books and records of the company. Any provision stating that the shareholders do not have the right to inspect the books and records of the company, or that such right must be exercised within a shorter period or is otherwise subject to any other restrictions, may only be included in the company’s articles of association if a supervisory board must be appointed. But even in those cases where the right of inspection was excluded or restricted in the company’s articles of association, the shareholder has the right to receive the annual (group) report along with the financial statement. In the event of a complete exclusion, the shareholder also has an additional right to receive the profit distribution proposal, the auditor’s audit report, and the resolutions of the general meeting. The legislator has thus given every shareholder the opportunity to obtain information about the company’s financial situation or to prepare for the general meeting.

Comprehensive information requirement

According to the OGH’s consistent jurisprudence, the shareholders of a GmbH also have a wide range of information claims – not clearly defined – that are not subject to explanation. Since the shareholders must properly perform their auditing and management duties, this also entails a broader information claim regarding all matters concerning the company. This information claim extends not only to shareholders with a valid membership, but also to shareholders who have been excluded. The information interest of the shareholder must be concretely demonstrated in the context of non-judicial claims and concerns documents for the period of the shareholder’s membership. However, the information claim of the shareholder is not unlimited. The company may refuse to provide the information if there are interests outside the company that harm the company. This is the case, for example, when a competing partner requests access to information relevant to competition and there is a violation of the antitrust prohibition.

Minority rights

In addition to the individual rights already mentioned, the GmbHG also provides for minority rights; a merger of several shareholders to achieve the necessary quorum is possible. The minority rights are based on the level of participation or the amount of initial investment.

An important instrument for decision-making by one or more minority shareholders is the blocking minority. The required voting weight results from the respective majority rules. For example, if a ¾ majority is required for a decision in the articles of association or the law, e.g. for a decision, the decision can be prevented by 25 + % 1 votes. For example, the law requires a mandatory ¾ majority for the first two years after the registration of the company if the purchase price of the acquisition of assets or immovable property for permanent business purposes exceeds 20 % of the share capital.

The following list shows other minority rights of shareholders (some of them require a certain level of participation, etc.).

With a participation of 10 % of the share capital or with a nominal investment of at least €700,000, the shareholder may

• order an auditor to determine any misconduct by the bodies. The minority shareholder can therefore submit a motion at the general meeting to have an auditor appointed to audit the last annual financial statements (special audit). If the motion is rejected, the shareholder may file the motion for special audit under § 45 (1) of the GmbHG at the court. The competent court is the commercial court of the registered office of the company. The motion must state that the motion for special audit (e.g., under agenda items such as the approval of the annual financial statements or the discharge of the management) was rejected at the general meeting. Furthermore, the application must substantiate any irregularities or serious violations of the law or the company agreement (e.g., violations of accounting and reporting regulations, the creation of disproportionately high reserves, unauthorized withdrawals, the offsetting of non-operating expenses, and other accounting manipulations).
• Make claims for compensation against shareholders, managing directors or the supervisory board if this was previously rejected by a shareholders’ resolution or even if no corresponding motion was voted on, even though the motion was submitted to the managing directors in a timely manner.
• order other liquidators for important reasons during the liquidation phase of the company.

A shareholder with a stake of 10 % of the share capital or a nominal contribution of at least €350,000 may

• unless the company agreement entitles a lower proportion of the members to participate, convene a general meeting and include items on the agenda (§§ 37, 38 GmbHG).
• have a member of the supervisory board removed from office by the court if there is a valid reason for this.

A shareholder with a share of 5 % of the registered capital can

• apply for the judicial appointment of auditors and
• require the review of the annual financial statements in the liquidation (§ 91, paragraph 1, GmbHG).

The principle of freedom of design, which is theoretically granted by the legislator in contracts, takes on great importance in the formation of a GmbH, particularly when it comes to shaping the articles of association in such a way that, depending on the company’s ownership structure, the rights of the shareholders are designed to minimize the potential for conflict within the shareholders.

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