Quitting as CEO

Some directors like their job and some CEOs hate their employment. This page will tell you all about you need to know to successfully exit the company. 

After having left my previous company, I opened my own business in exactly the same line as my previous employment. My prior bosses were “not at all amused”. They demanded that I stop competing with them. My employment contract did not contain any stipulations for any kind of no-compete clause after my employment ended. What am I to do? Give in?

There are two sources for such demand of your previous employers to be found. This can be either the employment contract, and if not there, then the law will have to be consulted. As you say, your contract does not provide any such stipulation. Therefore the prior company has no rights to demand you to close down the company. The law does not regulate this situation. So if the contract does not specifically prevent it, then your previous employer has no right to demand that you stop competing with them. This again shows how important contracts are!

I just left my corporation and all of a sudden somebody wants to make me liable for not paying social security premiums. Huh? That cannot be, can it? There must be something going wrong, I left the company!

Well, maybe not. Leaving a corporation as a managing director is not that easy! There are labor as well as corporate legal rules to be considered. When you left, you only terminated your employment with the company. The corporate obligations remain until you have been struck from the commercial registry as managing director. So, when leaving a corporation, don’t just end your employment, but also get yourself out of the registry. Take care of this ASAP!

That sounds as if I need a lawyer to keep me out of trouble when I quit. What would be the scope of consultation that I need?

First of all, relax. You will really only need legal consultation if you do not amicably leave the company! In that case the questions for consultation will be:

  • strategic consultation when preparing to leave,
  • strategies to prevent any kind of liability after you have left,
  • preparation of required resolutions and shareholder meetings to terminate your position as managing director,
  • representation of director’s interests inside and outside of court in disputes regarding dismissals or revocations,
  • measures in regards to temporary injunctions.
What is actually needed to withdraw as director, so that all relationships/ties to the company end?

The shareholders have to meet and formulate a board resolution to terminate the director. Typically a withdrawal is given with important reasons and secondarily given normal notice (“ aus wichtigem Grund und hilfsweise ordentlich gekündigt”).

I’m contemplating with the idea of finding a new working environment. What is the time limitation for giving notice?

The law provides that a director can be dismissed at any time (§38 GmbHG). However, the contract or Articles of Association may stipulate that a CEO can only be dismissed under certain conditions. Withdrawing from the status of a Geschäftsführer is always possible for extraordinary reasons! Such reasons include the inability to carry out the duties of the position or the infringement of important rules, thus making it impossible for the shareholders to keep the director – weighing the interests of both sides.

Hah! These idiot partners want to throw me out of the company. Hah! I have shares in the company and I will vote against that. Even if I only create a stand-off, I will have won because everything will be stalled. Hah!

Rrrriiinnngg! Sorry, I had turn on the alarm clock for you to wake up! Nice idea, but it won’t work because your vote as a shareholder will not count – in this particular situation. Even if you come to a standoff, that is not the end of the dispute. A new level will be reached because then this dispute will go to court. Now slow motion is the program. However, if you wish to stall this process, the court has its own rules and will soon decide with full legal effect. Two sets of lawyers and a regional court will be involved.

Geee, we are going nowhere. The company lost its director, the shareholders can’t decide on a new one. How is the company to operate now?

That is not a big problem. Upon application, the court will install an emergency managing director on a temporary basis (so-called “Notgeschäftsführer ”). However, courts are extremely reluctant to install by their order because the shareholders are to expected to decide by themselves. 

I just got fired and am wondering about the normal period for terminating such labor contract. How much notice do they have to give?

The normal rules and regulations for firing employees are not applicable to CEOs as they are not considered as such. However, the rule for terminating on extraordinary grounds of §626 II BGB remain. Shareholders have to give notice within two weeks after having received knowledge of facts that lead to immediate termination. Take another look at the regulations on terminating a job!

Working for my company sucks! I want to quit. How soon can I leave?

Generally, you can leave whenever you want and without any special reason – but never mistimed. However, take a good look in the articles of association. If the Articles stipulate anything else, then that will be binding! Your revocation is usually announced at any shareholders’ meeting. Do it in writing! Cancel both your position and employment!

So what about leaving ill-timed! When I go, then I go. If the shareholders don’t want me to go, are they going to tie me down or what? Are they going to fall on their knees and beg me to stay?

The general rule remains that you leave whenever you want. That is without question. If you leave mistimed and the company incures damages thereby, you can be held liable for these damages. That is all that you have to “fear“.

Eh, when is a termination ill-timed?

Good question, next question please! It all depends on the individual situation and circumstances. It would be surely ill-timed if you were negotiating a big project and just before signing the contracts, you leave. If the company then cannot close the contract, you will be liable for any and all damages.