Partner Disputes in a Civil-Law Partnership (GesbR/GbR): Is Commercial Mediation the Right Approach?
In disputes among partners in a civil-law partnership (Gesellschaft bürgerlichen Rechts (GesbR), Austrian civil-law partnership; Gesellschaft bürgerlichen Rechts (GbR), German civil-law partnership), the removal of a partner’s management authority is a recurring issue. This may be possible where the partnership agreement grants one partner sole authority to manage the partnership. However, such removal requires good cause. Good cause exists where the managing partner’s conduct has so seriously undermined the relationship with the other partners that they can no longer reasonably be expected to allow that partner to continue making or influencing decisions on matters affecting the partnership and all its partners.
If an Austrian GesbR or German GbR has not been established for a fixed term, any partner may generally terminate the partnership at any time. This right cannot be excluded by the partnership agreement. Depending on the terms of the agreement, termination may result in the dissolution of the partnership and the distribution of its assets among the partners. Alternatively, if the agreement contains a continuation clause, the remaining partners may continue the partnership without the departing partner.
Partner disputes: What happens if there is no partnership agreement?
Many Austrian GesbRs and German GbRs operate without a partnership agreement.
This can create significant challenges when disputes arise, as the applicable statutory rules often offer only limited practical guidance for resolving conflicts between partners.
Without provisions governing a partner’s withdrawal from an Austrian GesbR or German GbR, dissolving and liquidating the partnership may be the only available option. In most cases, however, this is far from the partners’ desired outcome, as it can mean the loss of the business they have worked together to build. When relations between partners have deteriorated, however, reaching an agreement through conventional negotiations can prove difficult.
Without a partnership agreement, a partner generally cannot be expelled from an Austrian GesbR or German GbR, even if there are compelling grounds for exclusion. Expulsion requires both good cause and a partnership agreement containing a continuation clause (Fortsetzungsklausel). Only if both requirements are met may the partners adopt a unanimous resolution to expel the partner concerned, who must be excluded from voting on that decision.
Disputes in an Austrian GesbR: Expelling a partner
In addition to the grounds for expulsion expressly set out in the partnership agreement, a partner may be expelled if their conduct makes it unreasonable for the other partners to continue the partnership with them. Such conduct may be detrimental to the partnership as a business or make continued collaboration with the other partners untenable.
A partner may be expelled from an Austrian GesbR only if there is good cause for the expulsion
Courts have recognized the following circumstances as constituting good cause for expulsion:
- insulting fellow partners;
- wrongfully creating false suspicions;
- engaging in criminal conduct against fellow partners;
- taking undue advantage of the partnership;
- serious breaches of partnership duties, particularly the duty to refrain from competing with the partnership.
A breach of confidentiality may also constitute grounds for expelling a partner from an Austrian GesbR in the context of a dispute among the partners.
A partnership agreement for an Austrian GesbR may make the requirements for expelling a partner more or less stringent and may even designate specific grounds as sufficient for expulsion.