Remove the managing director for cause

A managing director authorises unapproved payments, jeopardises a key contract or makes cooperation impossible in a two shareholder GmbH. An internal loss of confidence is not enough to resolve that situation. The shareholders must establish whether an effective removal can be passed by resolution or whether good cause must be enforced in court.

Corporate office, service agreement, company register and actual access rights are four separate layers. A sound removal strategy therefore combines the correct corporate route with a reliable factual record, continued ability of the GmbH to act and coordinated changes to banking, accounting, contracts and digital systems.

Distinguish a shareholder resolution from court removal

Section 16(1) Austrian GmbHG generally allows the shareholders to revoke the appointment of a managing director at any time by resolution. The ordinary corporate route therefore does not require good cause. Under section 39(1) GmbHG, a simple majority of votes cast is sufficient unless the law or the articles provide otherwise. The articles may require a stronger majority or confer a special appointment right.

Where a managing director was appointed in the articles, those articles may limit removal to good cause under section 16(3) GmbHG. A removal resolution nevertheless remains effective until its invalidity has been determined by a final judgment. With an appointment embedded in the articles, the resolution wording, the relevant clause and any challenge to the resolution must be assessed together.

If no majority is available, section 16(2) GmbHG provides for court removal for good cause. Where the managing director is also a shareholder, sections 117(1) and 127 Austrian UGB apply by analogy. For a managing director who is not a shareholder, the shareholders who did not vote for removal may be sued for consent. Our page on managing director removal and liability places these routes in their broader corporate context.

When conduct amounts to good cause

A serious breach of duty and inability to manage or represent the company properly are recognised examples of good cause. The court must also assess all surrounding circumstances. The central question is whether continued office materially endangers the interests of the company and can no longer reasonably be expected of the other shareholders after balancing their interests.

The assessment is not a count of isolated allegations. Relevant factors include the potential damage, whether the problem is temporary or lasting, the director's previous contribution and the conduct of the other shareholders. In decision 6 Ob 191/25v of 18 March 2026, the Austrian Supreme Court accepted that damaging interference with an essential contractual relationship could support good cause even though final loss had not yet occurred.

A disagreement about business policy, personal hostility or an ordinary family dispute will normally not be enough. Even a severe breakdown matters only where cooperation has in fact become unreasonable and joint pursuit of the company's purpose can no longer be expected. The overall conduct of all shareholders remains part of that assessment.

Prepare an effective removal resolution

The starting documents are the articles, current company register extract, appointment decision and service agreement. They show who may convene the general meeting, which majority applies and whether a shareholder holds a special appointment right. The agenda should clearly announce the proposed removal and list any replacement appointment as a separate item.

A shareholder who is also managing director may generally vote on that person's own removal under section 39(5) GmbHG. This often changes the voting position completely. A voting exclusion must not be assumed simply because the shareholder is personally affected. Other matters such as litigation with the company or discharge may be governed by separate voting exclusions.

The minutes and declaration of the result should record the motion, votes cast and announced result precisely. A single vague resolution covering removal, the service agreement, damages claims and account access creates avoidable points of attack. If the decision may be defective, our article on challenging a shareholder resolution helps separate procedural defects from the substantive grounds for removal.

Reorganise representation and access rights immediately

The GmbH must remain capable of acting after the resolution. A remaining or newly appointed managing director needs clear sole or joint representation. Bank signing authority, payment approvals, accounting access, company cards, contract platforms and administrator accounts should all be reviewed and changed in coordination with the effective time.

Under section 17(1) GmbHG, the end or change of representation authority must be filed with the company register without delay. Evidence of the change must be provided in certified form. Company register publicity requires particular care in dealings with third parties. Internal effectiveness, the public register and actual system permissions must therefore be treated as separate questions.

Company records should be transferred in an evidence preserving manner. This includes complete email mailboxes, contract files, approval records, accounting journals and access lists. Our article on email and cloud data as evidence explains how to retain origin, completeness and timing of digital material.

Combine court removal with interim protection

Where the general meeting is blocked, a claim does not replace the factual case. Each alleged breach should be connected to the director's responsibility, information available at the time, the act itself, the response and its effect on the GmbH. General allegations of poor management or lost confidence do not yet explain why good cause exists.

Section 16(2) GmbHG permits the court to prohibit further management and representation by interim injunction. The company must show a threatened irreparable disadvantage. In decision 6 Ob 97/25w of 3 July 2025, the Austrian Supreme Court ordered such protection for the duration of the removal proceedings. The concrete danger and the claim being protected must be aligned.

The closer the threatened contract, payment or asset transfer is, the more precisely the protective objective should be defined. Our guidance on a preliminary injunction against an asset transfer explains how the threatened act, supporting evidence and requested protection relate to each other.

End corporate office and service agreement separately

Removal ends the corporate office. It does not automatically terminate an employment or independent service agreement. Section 16(1) GmbHG expressly preserves compensation claims arising from existing contracts. Contract term, termination provisions, any contractual cause and agreed remuneration require a separate assessment.

A serious breach of corporate duty may also matter under the service agreement. The two legal relationships still have different requirements and consequences. A company that passes only the corporate resolution may remain bound to remuneration. A company that terminates only the contract may not have removed the director's corporate power of representation.

The handover should cover company property, keys, devices, storage media, records and a documented account of open matters. Non compete and confidentiality duties should be assessed under the actual agreement. A factual handover arrangement protects operations even where the parties later dispute financial claims.

Coordinate removal with managing director liability

Removal does not determine whether the managing director owes damages to the GmbH. Section 25 GmbHG applies the standard of a prudent businessperson. A damages claim requires a specific breach, loss suffered by the company and a causal connection. A poor business result alone is not sufficient.

Section 35(1)(6) GmbHG assigns the decision to pursue claims arising from management to the general meeting. Where the GmbH cannot be represented by management or a supervisory board in the conflict, a litigation representative must also be appointed. Removal, pursuit of claims and representation should therefore appear as separate resolutions.

The claim file should include contracts, approvals, payment records, meeting papers, correspondence and a transparent loss calculation. Discharge resolutions, insurance cover and possible defences also matter. This keeps removal focused on protecting the GmbH rather than treating an untested allegation as an established damages claim.

Documents needed for a defensible decision

The corporate file should contain the current articles, company register extract, shareholder list, appointment instrument, rules of procedure, shareholders' agreement and all resolutions on reserved matters. Add the service agreement with amendments and the records on remuneration, leave, benefits and termination.

For good cause, record each event by date, participants, specific act, responsibility, information available and consequence for the GmbH. Original contracts, bank records, emails, approval logs and witness evidence carry more weight than later summaries. Exculpatory circumstances belong in the file as well.

Finally, define the position after removal. Who represents the GmbH, who controls banking and systems, who informs key counterparties and who files the change with the company register? A complete transition matrix prevents a legally effective resolution from causing operational paralysis.

Frequently asked questions about removal