Temporary Revocation of Authority Without Court Order – Judgment of the LG Stuttgart – Az.: 49 O 142/23
According to a remarkable judgment of the Regional Court Stuttgart dated January 23, 2024, it is possible in a partnership company (PartG) to temporarily revoke a partner’s authorization to manage the business without a court order (Az.: 49 O 142/23).
When freelancers want to join forces, the partnership company can be an interesting legal form with various advantages. For example, it is possible to establish without initial capital. The partnership agreement should not only stipulate all key points but also include further regulations on the rights and obligations of the partners, according to the law firm MTR Legal lawyers, which also advises on corporate law.
As in any other form of company, disputes can also arise in a partnership company. It is then advantageous if measures for conflict resolution have already been agreed upon contractually. This is also shown by the judgment of the LG Stuttgart.
Revocation of Management Authority Contractually Regulated
In the underlying case, each partner of the partnership company was generally individually authorized to represent and manage the company. The partnership agreement stipulated that the management and representation authority could be revoked for an important reason following a corresponding resolution of the partners.
One of the partners allegedly came into conflict with the law. Since 2019, criminal investigations had been ongoing against him on suspicion of aiding and abetting fraud, breach of trust, and aiding and abetting breach of trust by participating in payments in favor of other defendants. These payments were processed through a trust account of the partnership company. In this context, there were also searches conducted by the public prosecutor’s office. Due to these developments, the remaining partners eventually held meetings at the end of 2023. They resolved to temporarily revoke the partner’s management and representation authority for the PartG until December 31, 2024, who was entangled in the criminal investigations.
The partner opposed this and argued that the resolution was not effective. He stated that, among other things, the partnership agreement was ambiguously formulated in this regard. Moreover, there was no important reason for the revocation of the management and representation authority. The investigation had been known for a long time, and he could not provide any further information about it. Additionally, the continuation of his management and representation authority did not pose any danger to the company, and he had not violated any partner duties.
Revocation Lawful
However, he did not succeed with this argumentation at the LG Stuttgart. The court made it clear that the temporary revocation of the management and representation authority was lawful and that the resolution was formally adopted.
The resolution to revoke the management and representation authority was made based on the partnership agreement. It was clear that the revocation of authority was contractually allowed, according to the court. The statutory regulation of § 6 Abs. 2 PartGG did not oppose this either. This is a special regulation for management in partnership companies, according to which each individual partner cannot be excluded from the management of “other businesses,” but not from the management itself. Nevertheless, a revocation of the management authority can be possible in individual cases, according to the LG Stuttgart. This is particularly the case if a potential damage to the partnership company cannot be averted otherwise.
Continuation No Longer Reasonable
The complete revocation of management is particularly permissible if the other partners can no longer reasonably be expected to continue the management and representation authority. Due to the partner’s lack of willingness to provide information about the investigation, although he had access to parts of the file, there was a sufficiently important reason for the revocation of the management authority according to the partnership agreement, the LG Stuttgart further explained. It is understandable that such behavior destroys the necessary trust for further cooperation. “Such behavior is fundamentally suitable to support resolutions on the revocation of management and representation authority even in a partnership of freelancers,” the LG Stuttgart made clear.
Furthermore, the court stated that the revocation of the management and representation authority was permissible due to the regulations in the partnership agreement and did not require a court decision. The duty of loyalty alone should have obliged the partner to consider the rights and interests of the other partners.
The judgment underscores the necessity of regulating the partnership agreement in as much detail as possible in order to be able to respond to conflict situations.
MTR Legal lawyers advise on contract design and other topics of corporate law.
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