The German Federal Court of Justice (BGH) has recently decided that a pledge over shares in a German limited liability company (GmbH) does not have the effect of the pledgee becoming a shareholder of the GmbH nor does it allow the pledgee to request information about the company’s affairs or to inspect the company’s books and records.

In this case, a creditor in the course of debt enforcement proceedings had been granted a pledge over shares which a debtor held in a GmbH. The creditor requested to make use of certain shareholder rights, in particular the right to obtain information on the company and the right to inspect the company records (section 51a German Limited Liability Companies Act (GmbHG)).

The BGH disagreed with the creditor. It refused to allow a pledgee to make use of a shareholder’s administrative rights because these rights cannot be pledged in addition to the pledge over the shares. Even though the German Civil Code (BGB) provides for a provision according to which ancillary rights to a claim will automatically be transferred to the transferee in case of a transfer of a main claim such as a share pledge (sections 401, 412 BGB), the BGH refused to acknowledge that the rights under section 51a GmbHG can be classified as ancillary rights.

The information and inspection rights under section 51a GmbHG are of personal nature and can only be employed by the owner of the shares. Unlike a creditor, a shareholder is obliged to comply with confidentiality obligations which are mandatory. Section 51a GmbHG allows a company’s managing director to refuse to provide information and refuse to allow inspections if there is a threat that the information will be used for purposes which are not related to the proper conduct of a shareholder, thereby causing substantial harm to the company (section 51a para 2 GmbHG). As a result, information and inspection rights cannot be separated from the shareholding.

Federal Court of Justice, decision dated 29 April 2013 (VII ZB 14/12)

Dr Marco Zessel