The position of managing director of a GmbH (German limited liability company) does not entitle the managing director to remuneration for his or her activities as man-aging director. Such remuneration must be agreed sepa-rately in a service agreement, whereby a coupling be-tween the status as executive body and the remuneration entitlement is admissible and often advisable.
Just imagine: A guest orders "strawberries" in a restaurant. He then gets the strawberries (and only them), but he complains to the waiter: "It goes without saying that cream is a natural addition to strawberries!" The waiter calls the owner, who confirms the waiter's appraisal: It is perfectly reasonable to eat strawberries with cream, a win in terms of taste - but if the guest wishes this delight, then he has to order it that way.
The case recently decided by the Higher Regional Court of Frankfurt am Main was similar: The third-party manager of a GmbH (German limited liability company) was dismissed for cause, which led to a legal dispute. The Regional Court of Frankfurt am Main ruled in summary proceedings that the dismissal may not be enforced for the time being meaning that the former managing director dismissed by the contested decision must continue to be treated as managing director and allowed to continue his activities as managing director and representative of the GmbH. The GmbH complied with this and reappointed the dismissed managing director as managing director. However, the GmbH no longer paid him a salary - unlike before his dismissal. The plaintiff, who had successfully argued that the dismissed managing director is to continue to be treated as a managing director for the time being, believes that this constitutes an infringement of the decision of the Regional Court. From the point of view of the plaintiff, "in the case of an employed third-party manager, the payment of his remuneration is of course included."
The Higher Regional Court of Frankfurt am Main, which dealt with the matter as the appellate court, rejected the claim as unfounded. The (challenged) decision on the dismissal of the managing director on the one hand and a potential remuneration entitlement on the other hand, are possibly related in fact, but not in law, according to the Higher Regional Court. In principle, the status as executive body alone does not entitle the managing director to remuneration for his work performed for the company. Such an entitlement always requires a separate contractual basis.
The decision is not objectionable, on the contrary: In pleasing clarity, it underlines the importance of a careful regulation of the conditions under which a managing director enters service with a GmbH.
As a managing director is not an employee by definition, many (practical) arrangements may be made in his service agreement, that an employer can otherwise only dream of. In particular, a coupling of the status as executive body and employment is possible. And as the status as executive body, in principle, can be revoked at any time, the agreement can also be designed to be terminable at virtually any time.
But there is also freedom of legal arrangement in the other direction - since not every managing director wants to take a seat on the ejection seat, managing director service agreements often contain long (fixed) terms, that secure a livelihood for the managing director, even if he or she is replaced as managing director (possibly for reasons for which they are not even responsible). And provision can also be made in this respect: Some managing director service agreements even provide for an entitlement to a position as managing director.
Particular caution is advised when "promoting" an employee to managing director. It is often overlooked that the "old" service agreement of the employee, if it is not properly terminated upon promotion, will continue to exist in the background. If the GmbH then pulls the emergency brake at some point and again dismisses the person promoted as managing director, the agreed coupling clause applies, and the managing director service agreement is automatically terminated. But at that moment, the old service agreement revives - and the person who has just been dismissed continues to receive their salary as former employee.
The decision makes it clear: ius scriptum vigilantibus - laws (and menus) are written for attentive people. Failure to exercise due care when structuring the legal relationship between a GmbH and its managing director often leads to disputes later on. And this often ends with a hefty severance payment for the dismissed managing director.
Higher Regional Court of Frankfurt am Main, decision as of 30 December 2024 - 26 W 1/24
Dr Jan Barth
Julius Bauer
This post also appears in the Haufe Wirtschaftsrechtsnewsletter.
