BGH on restraints on competition between GmbH and shareholders

According to a ruling of the Bundesgerichtshof (BGH) [Federal Court of Justice], client protection clauses between a GmbH and a withdrawing shareholder are null and void if their term goes beyond what is necessary (Az.: II ZR 369/13).

GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London conclude: In the context of company law (http://www.grprainer.com/en/legal-advice/company-law.html), it is common to incorporate provisions in the articles of association or managing director contracts that restrict competition. This is meant to prevent companies" knowledge, expertise and contacts from being poached by competitors. However, these clauses are themselves subject to restrictions. They cannot unduly restrict the freedom of shareholders or managing directors to professionally develop. This also applies to later restraints on competition.

The time limit applicable to client protection clauses was confirmed by the BGH in its ruling of January 20, 2015 (Az.: II ZR 369/13). In the case in question before the BGH, the shareholders and managing directors of a GmbH went their separate ways. The settlement agreement stipulated, among other things, that the withdrawing shareholder was allowed to "retain" his clients, provided they were okay with this. Additionally, a restraint on competition was agreed. This stated that the GmbH was forbidden from approaching the clients who were being taken on by the withdrawing shareholder for a period of five years.

Shortly before the end of the agreed five-year period, a new employee of the GmbH wrote to some of the transferred clients. The withdrawn shareholder, or rather the company for which he worked in the meantime, became aware of this and brought a legal action for breach of the restraint on competition. While the courts of lower instance delivered different rulings, the BGH ultimately dismissed the action. The Karlsruhe judges came to the conclusion that the restraint on competition was no longer effective. They held that a later restraint on competition generally cannot last longer than two years. The BGH went on to say that restraints on competition are normally invalid if their term goes beyond what is necessary, which is typically two years. Client protection clauses between a GmbH and its shareholders were said to be contra bonos mores and invalid if their term goes beyond what is necessary, which is normally two years.

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