Applicable Conditions And Legal Consequences For The Forced Redemption Of Shares In The German Limited Liability Company

The forced redemption of shares is a kind of exit-mechanism in a limited liability company, because it doesn’t depend on the agreement of the shareholders. Therefore, in order to prevent the "wanton act" of the remaining shareholders, the applicable conditions of the forced redemption shall be strictly limited. The autonomy of company’s articles, the compensation payment and the concrete implementation steps are closely related to the forced redemption of shares. During the process, on the one hand, the law provisions must be observed; on the other hand, the personal autonomy should be respected. After balancing benefits, the company, shareholders and the third party will make rational choices together.There are much discussion about the legal consequences for the forced redemption in the judicial circles and academia. Without a clear regulation in the company’s articles, the relationship between the effective time of the forced redemption and the compensation payment also a focus of controversy. However, the dominant "condition theory" has been denied in accordance with the new judicial precedent of the Federal Court of Justice in 2012. Through the forced redemption of shares, a certain difference between the total face amounts and the registered capital can appear. After the reform of German Limited Liability Company Law in 2008, the ways to solve this problem become the discussion focus again. In this case, in order to avoid violating the violating the second sentence of Article 5.2, three ways will be considered, namely reducing the registered capital, increasing the denomination of the remaining shares and setting up new shares.This paper is divided into five chapters. The chapter heads are Concept, Forced Redemption of Shares in the Company’s Articles, Compensation, Implementation of Forced Redemption of Shares and Legal Consequences. In the first chapter, the author will explain the concept of forced redemption of shares and compare it with other relevant concepts. In the second chapter, the author will describe the relationship between Company’s Articles and the forced redemption of shares. Because the formulation and revision of Company’s Articles belong to the shareholders’Personal Autonomy, they can specify different options in the Company’s Articles. Meanwhile, the shareholders can also introduce the so-called "Important Reason" in the Company’s Articles as a catch-all clause. In the third chapter, the author will explain the issues related to the compensation. It is not mandatory that the shareholders stipulate a compensation clause in the Company’s Articles. However, in order to coordinate the interests of shareholders and avoid disputes, such a compensation clause is often specified in the Company’s Articles. At the same time, in order to ensure that the company can continue to operate, the compensation payment can be limited by various ways. Similar to Forced Redemption of Shares Clause, the limit also must be carried out within the framework of law. In the fourth chapter, the author will introduce the steps of the forced redemption of shares. German Limited Liability Company Law contains almost no regulation about the performance steps. But according to this law, the issues about the forced redemption of shares are in the charge of the general meeting of stockholders. The performance of he forced redemption of shares are divided into two steps in the judicial circles and academia, namely the resolution of he forced redemption of shares and the notification of the forced redemption of shares. In the fifth chapter, the author will focus on the legal consequences of the forced redemption of shares in the company. The forced redemption of shares will immediately produce a series of legal consequences. The author will introduce the latest case of Federal Court of Justice and related theories.For both applicable conditions and legal consequences, the "benefit balance" is always a main line throughout the whole process of the forced redemption of shares in the German limited liability company.