• Long-Term Commitments of Partners in a Gbr May Be Invalid
  • May 7, 2013
  • Law Firm: GRP Rainer LLP - Stuttgart Office
  • In some circumstances a commitment of partners in a partnership organised under the German Civil Law (GbR) binding the partners to the partnership for an overly long period may be inappropriate.

    GRP Rainer Lawyers Tax Advisors, Cologne, Berlin, Bonn, Düsseldorf, Essen, Frankfurt, Hamburg, Hanover, Munich, Stuttgart, Bremen, Nuremberg and London www.grprainer.com/en explain: The GbR is a partnership based on a partnership agreement in order to support a purpose jointly pursued by the partners. There are only a few mandatory legal requirements for the GbR and it is up to the partners to shape the company through its memorandum of partnership. However, commitments of partners by a memorandum of partnership of a GbR can also be invalid in some circumstances.

    The Federal Court of Justice (BGH) ruled in the court decision dated 6 November 2012 (Ref. no.: II ZR 176/12) that a commitment of partners by a memorandum of partnership of a GbR binding the partners to the partnership for a long period of time (31 years in the case to be decided) may be inappropriate and therefore invalid. The GbR concerned was a closed-end fund and one of the investors wanted to leave. In the eyes of the BGH the long-term commitment of the partners led to an inappropriate limitation of the partner’s options for termination having regard to the German Civil Code (BGB).

    As a consequence, a long-term commitment that restricts the personal and economic freedom of a partner of a GbR and that makes the existing risks of liability unmanageable may be invalid. This makes a deliberate decision in every single specific case necessary. Important indications may be the legitimate interests of the individual partner and the company, the nature and extent of the obligations arising from the participation in the company and the structure of the company.

    There is always a risk when establishing a partnership organised under the German Civil Law, maybe even because there are only a few mandatory legal requirements. That is why it is so important to place the interests of a company even before its establishment in the hands of experienced lawyers.