In a nutshell:  The Federal Supreme Court (Bundes­ge­richtshof) has eased its requi­re­ments for share­holders’ resolu­tions on the sale of the entire assets of a limited partnership (Komman­dit­ge­sell­schaft). Sec. 179a of the German Stock Corpo­ration Act (AktG – Aktien­gesetz) is not by analogy appli­cable to those partner­ships. For the sale of a ship by a typical single-ship entity in the legal form of a GmbH & Co. KG there is now more legal certainty in respect of the necessary parti­ci­pation of the partners. From the outset parti­cular attention should be paid to the drafting of the partnership agreement and the respective clauses on the sale of the ship.

For a long time, there was disagreement in the legal commentary literature as to whether sec. 179a of the German Stock Corpo­ration Act was appli­cable by analogy to limited partner­ships. This was supported in parti­cular by a ruling of the Federal Supreme Court from 1995, but has not been subject to any further supreme court rulings since. What exactly is it all about? Pursuant to sec. 179a of the German Stock Corpo­ration Act, a sale contract by which a stock corpo­ration (AG) under­takes to transfer the entire assets of the entity requires a supporting resolution of the general meeting with a 75% majority of share­holders’ votes. In addition, that contract must be made available for inspection by the share­holders in advance of the general meeting. Applied to a typical single-ship entity in the legal form of a GmbH & Co. KG, this would have required for the sale of a ship (usually the only material asset of the entity) that the final form of the sale contract had been approved by a share­holders’ resolution with a 75% majority. Therefore, “antici­patory resolu­tions”, where the final form of the agreement was not in place, did not generally meet these requi­re­ments even if they were passed with a 75% share­holder majority. If the share­holders’ resolution required according to this case law was missing, the sale contract could have been considered void, regardless of whether the buyer of the ship was aware of the absence of the share­holders’ resolution or not. Obtaining consent on the basis of the final draft of the sale contract is not always practi­cable in view of the usual speed of execution in such a transaction. Therefore, following completion of the sale sometimes ratifying resolu­tions were obtained from the shareholders.

For the limited liability company (GmbH), the Federal Supreme Court had already ruled in 2019 that sec. 179a of the German Stock Corpo­ration Act was not appli­cable by analogy. The court has now repeated this statement for the limited partnership and expressly abandons the previous position from 1995. The Federal Supreme Court essen­tially bases this on the fact that there was no unintended regulatory gap which would justify such an analogy but a suffi­cient degree of share­holders’ protection was achieved under the existing regula­tions. How does this impact shipping and the sale of ships, in parti­cular since single purpose entities are common to the industry?

Firstly, a consenting share­holders’ resolution will still be required as a general rule, but without the strict formal requi­re­ments of the law appli­cable to stock corpo­ra­tions. In order to carry out a transaction that goes beyond the ordinary course of the partnership’s business, the management of a limited partnership must obtain an assenting resolution from all share­holders, unless a majority decision is permitted under the partnership agreement. The obligation to transfer the entire partnership’s assets is generally considered to be a transaction beyond the ordinary course of business. An exception to the resolution requi­rement would only apply if the consent of the share­holders was already included in the partnership agreement. In addition, “antici­patory resolu­tions” should in principle be accep­table in the future, as long as the sale remains generally as set out in such resolutions.

Secondly, the Federal Supreme Court expressly empha­sised that it is an essential part of business transac­tions that the parties can generally rely on the rules of repre­sen­tation regis­tered with the commercial register. This was all the more relevant for limited partner­ships with limited balance sheet trans­pa­rency – as opposed to the stock corporation.

Thirdly, the Federal Supreme Court expressly left open whether an analogy to sec. 179a of the German Stock Corpo­ration Act was also ruled out for partner­ships open to the public (Publi­kums­per­so­nen­ge­sell­schaft) where the limited partners’ possi­bi­lities of exerting influence were as low as those of a share­holder in a stock corpo­ration. This was not an issue in this specific case.

In summary, there is now much more legal certainty in respect of the resolution requi­re­ments for a limited partnership. Attention should be paid parti­cu­larly to the drafting of the partnership agreement from the outset. However, for the adoption of resolu­tions in public partner­ships the Federal Supreme Court has kept a loophole.

If you have any further questions, please do not hesitate to contact your regular contact person at EHLERMANN RINDFLEISCH GADOW or Dr. Carolin Schmeding or Dr. Hauke Rittscher.