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Report on Authorised Dealer’s Entitlement to Compensation

Under certain circumstances, an authorised dealer may be entitled to claim compensation after termination of the contract with the company if the latter continues to be able to use its business contacts.

In our experience at the commercial law firm GRP Rainer Rechtsanwälte, it is common for an authorised dealer’s potential claims for compensation after termination of the contract with the company to lead to legal disputes. We note that because the German legislature has not explicitly regulated authorised dealers’ entitlement to compensation, it is possible for the provisions governing commercial agents’ right to compensation under sec. 89b of the Handelsgesetzbuch (HGB), Germany’s Commercial Code, to be applied analogously.

These state that the commercial agent is entitled to claim compensation after termination of the contractual relationship with the company if he or she has established new business contacts and the company continues to be able to benefit from these contacts after the contract has come to an end. This right to compensation cannot be contractually excluded.

The provisions can be applied analogously to an authorised dealer’s entitlement to compensation under certain circumstances. The conditions that need to be met for this to happen were set out by the Bundesgerichtshof (BGH), Germany’s Federal Supreme Court, in a ruling from 5 February 2015 (Az.: VII ZR 315/13). According to this ruling by Germany’s highest court of ordinary jurisdiction, the right to claim compensation only arises if the authorised dealer was integrated into the company’s sales force and committed to making his or her business contacts available to the company so that the latter can continue using them. The authorised dealer must have committed to transferring his or her client base to the company in such a way that the company is able to readily harness the benefits of this client information without any delay. Furthermore, the authorised dealer must by virtue of special contractual arrangements be integrated into the company’s sales force to such an extent that he or she from an economic per
spective has extensive duties to perform that would otherwise have to be met by a commercial agent.

In the case in question, the BGH denied the authorised dealer the right to claim compensation because the company had not been entitled to use the client information, having contractually committed to block the transferred data and delete it at the request of the authorised dealer.

The right to claim compensation is a controversial topic in the case of commercial agents and all the more so in relation to authorised dealers. Lawyers who are experienced in the field of commercial law can assist authorised dealers and businesses in drafting agreements as well as in the event of legal disputes.

If you would like to find out more, please visit https://www.grprainer.com/en/legal-advice/commercial-law.html

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Rechtsanwälte GRP Rainer

Criteria for Assessing Whether GmbH Managing Directors are Subject to Mandatory Social Security Contributions

According to a decision of the Bundessozialgericht, Germany’s federal court of appeals for social security matters, GmbH managing directors are ordinarily deemed to be employees of the company and hence subject to mandatory social security contributions.

It is not uncommon for disputes to arise over whether GmbH managing directors are subject to mandatory social security contributions. We at the commercial law firm GRP Rainer Rechtsanwälte note that it can prove to be a costly affair for the company if it is determined that the managing director is subject to mandatary social security contributions but no payments have been made to this end and therefore supplementary contributions become payable.

In rulings from 14 March 2018, the Bundessozialgericht set out clear criteria for assessing whether GmbH managing directors are subject to mandatory social security contributions (Az.: B 12 KR 13/17 R and B 12 R 5/16 R). According to these judgments, the managing director of a GmbH is ordinarily deemed to be an employee of the company. The Court held that they are only considered not to be employees if they own more than 50 per cent of the company’s share capital and are thus majority shareholders. The Court went on to state that if they have a 50 per cent stake in the share capital, a presumption in favour of self-employed status is then only possible if the articles of association clearly confer a full blocking minority on the managing director and this enables him or her to prevent instructions from being issued by the general meeting of the shareholders. The Court therefore concluded that the decisive factor for the managing director’s status as self-employed is whether he or she has the legal power to determine the fate of the company by influencing the general meeting of the shareholders.

In doing so, the Bundessozialgericht has set high standards for recognizing managing directors as self-employed. It also made clear that the crucial factor in assessing whether the managing director is an employee and thus subject to mandatory social security contributions is not how he or she acts in relation to third parties. Even if he or she is granted broad powers and freedoms, this alone does not indicate that they are self-employed. Instead, it is the extent to which the managing director has recourse to legally enforceable measures for the purposes of influencing resolutions of the general meeting of the shareholders that is the key factor.

Companies should keep in mind the issue of mandatory social security contributions for managing directors as early as when agreements are being drafted in order to avoid unpleasant surprises at a later date. Lawyers who are experienced in the field of company law can provide companies as well as shareholders with expert advice on matters that go beyond mandatory social security contributions.

If you would like to find out more, please visit https://www.grprainer.com/en/legal-advice/company-law.html

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Rescinding Acceptance of an Inheritance on Account of an Error

It is only possible to rescind acceptance of an inheritance on account of an error concerning the estate’s over-indebtedness if the heir assumed that the estate was of value.

An inheritance can be rejected. This has to happen within a period of six weeks, with this period starting from when the heir becomes aware of his status as an heir. We at the commercial law firm GRP Rainer Rechtsanwälte note that if the inheritance has been accepted, the acceptance can be rescinded if the heir was mistaken about the value of the estate. Notwithstanding this, it is not sufficient for the purposes of rescission if the heir was aware that the estate could have been insolvent. That was the verdict of the Oberlandesgericht (OLG) Schleswig [Higher Regional Court of Schleswig] in its ruling of July 31, 2015 (Az.: 3 Wx 120/14).

In the instant case, the son had accepted the inheritance following the death of his mother. He had not been aware of the exact value of the estate. Nonetheless, he assumed that on balance it would probably be nil. Yet it became clear to him after examining the testatrix’s bank records that he had been mistaken and declared around three month following his mother’s death that he was rescinding his acceptance of the inheritance. In justifying this course of action, he stated that he had not been aware of the estate’s over-indebtedness. He had received the certificate of inheritance approx. four weeks prior to this.

The OLG Schleswig-Holstein held that the heir could not rescind acceptance of the inheritance due to an error relating to the estate’s over-indebtedness, as this kind of error presupposes that the heir assumed the estate was of value. But in the case in question, the heir was found to have been very much aware of the possibility that the estate might be insolvent.

However, the heir had proceeded on the assumption that the six-week period in which the inheritance could be rejected did not commence until the certificate of inheritance had been received. According to the OLG Schleswig, this represented a substantial error regarding the legal consequences of his conduct. For this reason, he was ultimately still able to rescind his acceptance of the inheritance, even though this really ought to be an exception to the rule.

Lawyers who are experienced in the field of succession law can advise testators and heirs on matters pertaining to estates.

https://www.grprainer.com/en/legal-advice/private-clients/law-of-succession.html

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Experience with D&O Insurance

Taking out a D&O insurance policy is supposed to reduce executives’ risk of liability. Experience shows that it is crucial to pay attention to details when taking out a policy.

Mistakes made by a company’s executive bodies can have serious consequences for the entire business. Managers bear an extremely high level of responsibility for the company they work for and its staff. In addition to this responsibility, executive bodies are also subject to a high risk of personal liability. A lot of companies take out a D&O insurance policy for their executive staff as a way of reducing this risk. If an event covered by the insurance policy occurs, it is nonetheless possible for a dispute with the insurer to emerge if it does not wish to stand good for the loss. Experience shows that the policy ought to be tailored to the individual liability risks faced by a given manager. We at the commercial law firm GRP Rainer Rechtsanwälte note that this is the best way to prevent a legal dispute with the D&O insurance company.

The executive organs attend to different tasks within a company. The more varied these tasks are, the more nuanced the D&O insurance policy should be drafted to ensure optimal coverage of the various liability risks.

Even careless mistakes can give rise to substantial consequences for managers and trigger internal as well as external personal liability. Accordingly, a D&O insurance policy should always cover the risk of both internal and external liability. The coverage agreed, i.e. the insured amount, is, of course, also a matter of vital important.

It is equally important to consider aspects pertaining to coverage of retroactive and follow-up liability alike. In the case of retroactive coverage, the insurer commits to step in even in liability cases that have arisen before the D&O insurance policy was concluded but only came to light afterwards. By contrast, the insurer assumes follow-up liability in liability cases that arose during the term of the policy but were only discovered later on.

Even if the D&O insurance policy covers the key liability risks, it is still always possible in an emergency that the insurer will not want to assume liability in the event of a claim. Lawyers who are experienced in the field of company law can advise companies when taking out a D&O insurance policy and enforce claims against the insurance company.

https://www.grprainer.com/en/legal-advice/company-law/do-insurance.html

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Experience in Business Succession

A large number of small and medium-sized businesses are going to have to make arrangements for business succession in the near future. There are various possible approaches to organizing succession.

According to a study conducted by KfW Research, approximately one in every six small and medium-sized businesses will be planning for business succession by the year 2018. The study states that around 620,000 businesses will be searching for a suitable successor. For a lot of businesses, a change at the management level represents a considerable challenge. We at the commercial law firm GRP Rainer Rechtsanwälte have the experience required for weighing up the various options and finding a suitable solution to a business’s transition.

Generational change is something many family-run businesses are set to be faced with in the coming years. Often the desired solution is for the business to remain family-owned and the next generation to carry on the business. Having said that, this is not automatically the ideal solution, as the children, for instance, might not have any interest in the company or be suited to continue the business. In these cases, other options such as the sale or partial sale of the company need to be considered. In doing so, it is also important to take taxation and family aspects into account in addition to economic factors.

Selling a business requires intensive preparation, which is why business succession ought not to be kicked into the long grass. The order situation, balance sheets and existing employment contracts play an important role. Another key aspect is, of course, the valuation of the business to ascertain an appropriate selling price. Depending on the corporate form, it might also be a good idea to sell one’s company shares to one of the other shareholders.

It is equally important to consider inheritance claims. The rules of intestate succession kick in in the absence of appropriate arrangements, and this can give rise to problems. For this reason, it Is advisable to prepare what is referred to in German as an “Unternehmertestament” (entrepreneur’s will). With this kind of will, the testator can prevent a community of heirs from pursuing different interests and thus avoid the business’ continuity being put at risk. It is possible to make arrangements in an entrepreneur’s will that already apply during the testator’s lifetime. Another possible option may be to set up a foundation.

Business succession should be planned in advance with due regard to all legal aspects as well as factors pertaining to taxation. Lawyers who are experienced in the field of company law can ensure that the handover of the business runs smoothly.

https://www.grprainer.com/en/legal-advice/company-law/business-succession.html