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Corporate law in Germany
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Non-competition clauses for shareholders of a German limited liability company (GmbH)
Foreign companies often develop economic activities in Germany through subsidiaries that they run together with local partners. The partner knows the local customs and opens up local access to customers or suppliers. In turn, this knowledge advantage gives the partner a greater degree of independence than is usually the case in constellations without a foreign connection. This makes it particularly important for foreign parent companies of German enterprises to safeguard their business activities in Germany. Non-competition clauses are an essential instrument in this respect.
Once the foreign company and the German partner are bound to each other under company law, the foreign parent company can secure its interests by structuring the non-competition clause.
Statutory non-competition clause
Due to his position under company law, the shareholder of a German limited liability company must show consideration for the interests of the company. The shareholder may not engage in economic activity in an area in which the company is already active according to the corporate purpose regulated in the articles of association. This applies at least to majority shareholders and to minority shareholders who can exercise significant influence on the management . Also, a non-competition clause applies to shareholder-managers, even if they only hold a minority share in the company.
Contractual non-competition clause
Contractual non-competition clauses can create more legal certainty for all parties involved (company and co-partners). Thus, depending on the situation, non-competition clauses can be extended to minority shareholders even if they are not at the same time managing directors. However, the drafting of non-competition clauses must observe general legal principles such as the requirement of good faith. They must be limited in time, space and subject matter and must not unreasonably disadvantage the shareholder affected by the non-competition clause.
Post-contractual non-competition clause
The post-contractual non-competition clause is intended to protect the company from a shareholder working for a competing company immediately after leaving the company. It only applies if it has been contractually agreed. In order to be legally effective, the non-competition clause must be limited in time. In addition, it must provide for compensation for the shareholder affected by the non-competition clause so that the company can invoke it.
You want to know more about the liability, rights and obligations of the shareholders and managing directors of a German limited liability company ? Get in touch with us! Our specialist lawyers for commercial and corporate law will advise you on all questions concerning the German limited liability company and their management.
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