Key Person Risk in law: What must a keyman coach know about company and inheritance law?

Key Person Risk in a GmbH: Who represents the company when the managing director drops out?

A GmbH is represented by its managing directors (Section 35 (1) GmbHG). If it has no managing director, the law speaks of a company without leadership; the shareholders then represent it only for receiving declarations and documents. That is not enough for active business. Where several managing directors are appointed, they represent the company jointly unless the articles provide otherwise (Section 35 (2) GmbHG); if one of them drops out, this can block the others.

Key Person Risk and power of procuration: What applies when the owner dies?

A power of procuration (Prokura) does not end with the death of the owner of the business (Section 52 (3) HGB). A Prokura granted in good time can therefore carry beyond the emergency. It can be revoked at any time and cannot be transferred (Section 52 (1) and (2) HGB).

Key Person Risk in company shares: What happens to them on death?

Shares in a GmbH are inheritable (Section 15 (1) GmbHG). The heirs become shareholders, whether or not they know the business. In a general partnership (OHG), the death of a partner leads to his departure unless the partnership agreement provides for dissolution (Section 130 (1) No. 1 HGB); the agreement can set further rules.

Key Person Risk in a community of heirs: Why can a single co-heir move so much?

The estate is administered jointly by the heirs (Section 2038 (1) BGB). Each co-heir can demand the division of the estate at any time, unless the law provides otherwise (Section 2042 (1) BGB). For real estate this can lead to a compulsory auction to dissolve the community, the partition auction (Section 180 ZVG). This is the legal background of the veto power described on the Key Person Risk page.

• Key Person Risk: Why can strong leadership hide it for a long time?

Key Person Risk and lasting power of attorney: Who acts when the owner can no longer decide?

If an adult cannot manage his affairs because of illness, the guardianship court appoints a legal custodian (Section 1814 (1) BGB). This is not necessary insofar as an authorised representative can manage the affairs equally well (Section 1814 (3) BGB). Without a power of attorney, a court therefore decides who acts in an emergency.

Key Person Risk in law: Which questions should be settled before the emergency?

• Who represents the company if the managing director drops out tomorrow, and with what authority?
• Is there a Prokura, and who knows about it?
• What do the articles say about the death or incapacity of a shareholder?
• Is there a will that matches the articles?
• Is there a lasting power of attorney that also covers business decisions?
• Do the authorised representatives know that they hold this authority?

Key Person Risk in law: Where is the gap that contracts leave open?

Contracts determine who may act. Whether this person has the trust of the family, the co-shareholders and the staff, whether he wants the task and whether the owner can really let go, is decided elsewhere. These questions often decide whether a clause holds in an emergency.

This is where keyman coaching starts: Johannes Faupel clarifies with owners, families and successors what is wanted before the professionals put it into words, and invites representatives of other professions when negotiations are due.

This page gives an overview of basic statutory rules under German law and does not replace legal advice. Lawyers and notaries are responsible for drafting in the individual case.

Key Person Risk (Keyman Risk): How can it be minimised?

Keyman Coaching: What else does this website cover?

• Keyman Coaching / Key Person Coaching: Securing the ability to act at founder and owner level
• Key Person Risk: Why can strong leadership hide it for a long time?
• Keyman Coaching and executive coaching: What sets them apart?
• Keyman coach: What must he be able to do?
• Key Person Risk and tax: What must a keyman coach know about inheritance tax on business assets?
• Key Person Risk and banks: What must a keyman coach know about powers of attorney and accounts in an emergency?
• Key Person Risk and insurance: What must a keyman coach know about the keyman policy?
• Key Person Risk in valuation and sale: What must a keyman coach know about the key person discount?
• Key Person Risk and governance: What must a keyman coach know about appointment and interim authority?
• Key Person Risk in IT: What must a keyman coach know about access, passwords and digital estate?
• Key Person Risk and health: What must a keyman coach know about illness and exhaustion?
• Key Person Risk in the family: What must a keyman coach know about life's work, loyalty and informal authority?
• Key Person Risk and communication: What must a keyman coach know about the first days of an emergency?
• Key Person Risk in hospitals and research institutions: What must a keyman coach know about chief physicians and project leaders?
• Key Person Risk and confidentiality: What must a keyman coach know about discretion and trade secrets?
• Johannes Faupel: Who books him?