Information and disclosure rights of shareholders

May 24, 2024

Knowledge and information of the essential information and circumstances of economic contexts are a key success factor for entrepreneurial action.

Shareholders* of a limited liability company (GmbH) are also dependent on information about the company in order to effectively fulfil their rights and obligations as shareholders. In order to ensure that the shareholder receives the necessary information, the German Limited Liability Companies Act (GmbHG) grants the shareholder a corresponding right to information.

This right to information, regulated in Section 51a GmbHG, is in addition to the participation and voting rights of the shareholders within the shareholders' meeting and has a direct effect on these. It enables the proper exercise of shareholder rights and thus effective monitoring of the activities of the managing directors. The fulfilment and refusal of the right to information has far-reaching consequences for shareholders and the company.

Scope of the shareholders' right to information

The right to information is divided into a right to information and a right of inspection. The right to information covers all matters relating to the company, i.e. everything that has a connection to the company. In particular, this includes the management of the company, including all circumstances that are relevant to the assessment thereof, the economic situation of the company and facts relating to the determination of profits, the company's relationships with third parties and the employment relationships of the managing directors and other employees. In addition to the interests of the members, individual interests can also be pursued with the help of the right to information. For example, a shareholder can request all the information he needs to value his share for the purpose of selling it. The shareholder's interest in information is thus taken into account to a very large extent and must therefore be exercised appropriately.

The right of inspection includes all business documents that the company keeps or has kept for itself, whereby the storage medium is irrelevant.

Exercising the shareholder's right to information - how can shareholders exercise their right?

Every current shareholder, irrespective of the size of his shareholding and the existence of a voting right, has a right to information at any time. The right to information is particularly important for minority shareholders and leads to increased minority protection. However, the ability to obtain information quickly is of great benefit to all shareholders. The company itself is obliged to exercise the right, i.e. the request for information must be addressed to the company. However, there are no high requirements. It is sufficient to address a written request only to the directors, as long as they can interpret it as a request for information. There are no formal requirements or time limits. However, the shareholder must specify the nature of the request for information. You have a right of choice. They may request information, inspection or both cumulatively. The company, as the addressee, must comply with this choice.

When asserting a right to information, the shareholder must specify the matter in question in order for the company to be able to comply with its duty to provide information. The requirement to specify the request for information is not very demanding and must be based on the shareholder's precise knowledge. It should be noted that a more precise question logically leads to the possibility of a more precise answer. Reasons or justifications are not required.

In the case of the assertion of a right of inspection, no such specification is required.

Compliance with the right of access by the company

If a claim is made, the company must comply with the request for information. The information must comply with the principles of conscientious and faithful accountability. It must be truthful and complete in its content and must indicate whether it is a statement of fact or an opinion. There are no formal requirements, so the form and manner of the response is at the company's discretion and will vary from case to case.

The information must be responsive to the request for information. Again, the more specific the question, the more specific and comprehensive the information must be.

The company must grant access only passively at its business premises. The company must provide access in a reasonable manner and is not obliged to make any further efforts. An effective inspection generally includes the shareholder's right to make photocopies and copies. Shareholders often do not have the necessary expertise to analyse company documents themselves. In order to effectively exercise his right to information, the shareholder must therefore be authorised to consult an expert. The confidentiality of the documents must be guaranteed in the person of the expert. Therefore, as a rule, only experts who are bound by professional secrecy, i.e. lawyers, tax advisors, auditors and accountants, can be considered.

Consequences of the exercise of the right to information

The fulfilment of the right to information is accompanied by a duty of confidentiality on the part of the shareholder. A breach of the duty of confidentiality leads to claims by the company against the shareholder for compensation for the resulting damage.

The managing directors can initiate a confirmatory shareholder resolution in order to exonerate themselves. Without exoneration, the managing directors may be liable to pay damages to the company by providing unauthorised information [L.

Refusal to provide information

The managing directors may refuse to provide information and inspect the company's books and records if they can show and prove that it is to be feared that the shareholder will use the information for purposes other than those of the company and thereby cause a not inconsiderable disadvantage to the company or an affiliated company, Section 51a II 1 of the German Companies Act (GmbHG). The regulation is intended to ensure that the right to information does not pursue interests that are contrary to those of the company or a fellow shareholder. Conduct that is detrimental to the company and contrary to the purpose of the company is deemed to be contrary to the interests of the company. This is particularly the case if the shareholder uses the information for the benefit of a competitor or fails to maintain confidentiality. It is sufficient to have concerns based on objectively available facts and reasonable grounds that the purpose is not in the best interests of the company and that disadvantages are being caused.

The refusal requires a resolution of the shareholders, § 51a II 2 GmbHG. In the case of a deliberate refusal, the managing directors must therefore immediately convene a shareholders' meeting on the issue, § 49 II GmbHG, or initiate the written procedure, § 48 II GmbHG. The decision is binding on the managing directors in any case, as the legislator has deliberately removed the power to decide on a refusal to provide information from the management and placed it in the hands of the shareholders. However, a refusal by the directors to provide information is permissible if providing the information would make them liable to prosecution. If the refusal is justified only with regard to certain information or a certain information medium, the request must otherwise be granted. The directors may refuse to provide the information until a decision has been made.

Consequences of refusal to provide information

If the shareholder refuses to provide information, the shareholder is entitled to initiate information enforcement proceedings in accordance with § 51b GmbHG. This also applies if additional information is requested because the information provided was insufficient. The chamber for commercial matters of the district court at the company's registered office has exclusive jurisdiction. Proceedings are conducted only upon application and there is no time limit for applications. However, the possibility of forfeiture should be noted in the event that the person entitled to file an application has accepted the refusal over a long period of time without objecting. Anyone who has unsuccessfully asserted the right to information against the company is entitled to make a request. It is sufficient if the company does not act immediately.

Actions for performance and declaratory judgement, as well as challenges to the refusal resolution, are therefore generally not considered due to the lack of legal protection. However, it is possible to challenge other resolutions of the shareholders' meeting that are invalid due to the refusal to provide information relevant to the resolution.

Claims for damages by the shareholder may also be considered if the shareholder has suffered a loss as a result of the unlawful refusal to provide information.

The company has a claim for damages against the directors if they refuse to provide information without authorisation and the company is therefore liable to pay damages to the shareholder. In addition, this can lead to dismissal and extraordinary termination for cause. This does not apply if the refusal is based on a company resolution.

*If we use the generic feminine or the generic masculine in future for the sake of better readability, this expressly includes all genders.