Key Points at a Glance
- The right to withdraw exists in three situations: if there is good cause, if the articles of association permit withdrawal, or if a corresponding agreement has been concluded.
- A withdrawing shareholder is entitled to receive compensation from the company.
- The company may determine how the shares are to be dealt with, i.e., whether the shares will be cancelled (redeemed) or transferred to third parties.
When does a shareholder have the right to withdraw from a GmbH?
A shareholder’s right to withdraw from a GmbH exists if this right is provided for in the articles of association, if the shareholder and the company have entered into a corresponding agreement, or if there is a good cause that justifies withdrawal.
- Extraordinary right of withdrawal: An extraordinary right of withdrawal applies when there is good cause making continued membership in the company unreasonable. Such good cause may stem either from the shareholder’s sphere (for example, illness) or from the company’s sphere (for example, a long-standing dispute among shareholders).
- Ordinary right of withdrawal: If there is no good cause, an ordinary right of withdrawal may exist — but only if it is explicitly set out in the articles of association.
- Contractual withdrawal: Withdrawal is also possible if the shareholder and the company agree on it by mutual consent.
In practice, the extraordinary right of withdrawal is most relevant. The following conditions must be met for it to apply:
- Good cause: Exists if circumstances make continued participation in the company unreasonable. This requires a case-by-case assessment, taking into account, for example, the shareholder’s reasons for leaving, the financial position of the company, and the shareholder’s importance to the business.
- Subsidiarity: Withdrawal is only permissible if no other reasonable solution exists — for instance, the shareholder must first attempt to sell their shares to other shareholders or third parties.
- Capital preservation: Withdrawal may not endanger the company’s share capital. This restriction is relevant if the company intends to redeem or purchase the shares itself; in such cases, the full contribution must already be paid in.
An extraordinary right of withdrawal typically exists in cases of deep-seated conflicts between shareholders that prevent constructive cooperation. Withdrawal may, however, be excluded if it would be unreasonable for the remaining shareholders — for example, if the company is in liquidation.
How does the withdrawal process work?
Withdrawing from a GmbH involves several steps, as the shareholder’s position is based on ownership of company shares. The process concludes only when these shares are transferred or redeemed.
- Declaration of withdrawal: The shareholder must declare their withdrawal in writing to the company’s management. There are no formal requirements for this declaration.
- Disposition of shares: The declaration alone does not terminate membership. The shares must either be redeemed or transferred. The company may decide whether to redeem the shares or to transfer them to the company or a third party. This decision depends on whether the shares are fully paid up and on the remaining shareholders’ objectives. A shareholder resolution, which may require notarisation, formalises this decision.
The method of disposal depends on whether the shares are to be redeemed or sold:
- Redemption procedure: Redemption of shares is only possible if the shares are fully paid. The redemption is resolved by shareholder resolution and communicated to the withdrawing shareholder, who is then entitled to receive compensation from the company.
- Transfer procedure: Alternatively, the company may require that the shares be transferred to itself or to a third party. This constitutes a standard share purchase transaction.
How Is the Compensation Claim Determined?
Whether the shareholder’s interest is transferred or redeemed, the shareholder is entitled to fair compensation for their shares. If the articles of association do not contain specific provisions regarding such compensation, the following principles apply:
- Obligor: The shareholder has a compensation claim against the company. This claim exists even if the shares are transferred to other shareholders or third parties. In cases of transfer, both the purchaser and the company are jointly liable for payment of the compensation.
- Fair Market Value: The amount of compensation is generally based on the fair market value of the shares. Commonly recognised valuation methods include the earnings value method and the discounted cash flow (DCF) method. Both approaches aim to determine the present value of the company’s expected future profits.
- Valuation Date: The relevant date for determining the fair market value is the day on which the company receives the shareholder’s notice of withdrawal, not the date on which the redemption or transfer actually takes place.
Alternatively, the articles of association may stipulate specific provisions governing the compensation claim. Shareholders enjoy broad discretion when drafting such clauses. However, this discretion is limited — a compensation clause must not effectively deprive shareholders of their right to withdraw by making withdrawal economically unreasonable. In addition to determining the amount of compensation, the articles of association may also specify payment modalities, such as instalments or interest on deferred payments.
Is a Notary Required for Withdrawing from a GmbH?
Whether a notary is required for a shareholder’s withdrawal from a GmbH depends on how the withdrawal is carried out. If the shareholder’s interest is redeemed, neither notarisation nor notarial certification is required — a notary is therefore not necessary. If, however, the shares are transferred, notarial certification of the transfer is mandatory pursuant to Section 15 (3) of the German Limited Liability Companies Act (GmbHG). Depending on the specific circumstances, the shareholders’ resolution determining to whom the shares are to be transferred may also require notarial certification.
