GmbH: Contestability and nullity – the most common errors in shareholder resolutions.

1. voidability vs. nullity – what is the difference?

Contestable resolutions initially remain valid, but can be cancelled by a successful lawsuit. This applies, among other things:

• Violations of legal or statutory procedural rules
• Conflicts of interest or inadequate provision of information
• Breaches of the shareholders’ fiduciary duties

Invalidity occurs automatically if the resolution violates mandatory law, for example in the case of

• Lack of decision-making authority of the shareholders
• Offences against common decency or the Basic Law
• Serious formal defects

2. frequent sources of errors in shareholder resolutions

• Missing or incorrect convocation
  The invitation to the shareholders’ meeting must be issued on time and in the correct form. Violations can lead to contestation.
• Insufficient quorum
  If not enough shareholders with voting rights are present, the resolution is invalid.
• Inadequate minutes
  Missing or incorrect minutes of resolutions make it difficult to provide evidence and favour challenges.
• Conflicts of interest and breaches of fiduciary duty
  Resolutions based on unauthorised influence or lack of information are contestable.

3. how to avoid contestation and nullity

• Check the articles of association for specific requirements for passing resolutions.
• Comply with all formalities when convening and holding the meeting – Document resolutions carefully and comprehensibly.
• Avoid violations of mandatory law or company law principles in terms of content.