Rather, Section 166(3) Commercial Code extends the limited partner’s right of information upon cogent grounds.
It is not unusual for a limited partnership to refuse to provide its limited partners with complete information on its financial situation. In such cases, the limited partner can initiate legal proceedings against the limited partnership in order to obtain information. It appears it is not well known that Section 166(3) Commercial Code makes it possible for the limited partner to file an application with the local court keeping the relevant commercial register for its limited partnership to submit its books and the annual financial statements for auditing. In addition, in these proceedings, other information can be requested from the managing partner, which is necessary to understand the annual financial statements. The proceedings are governed by the simpler procedural regulations of voluntary jurisdiction (Section 145 German Act on Non-Contentious Matters). As an advantage, in this case the local court is subject to the inquisitorial system and therefore must determine the necessary factual details itself.
So how far does the obligation of the limited partnership to provide information to the limited partner actually extend?
In a decision dated June 18, 2015, the 12th Civil Senate of Oldenburg Higher Regional Court still held that the limited partner’s right to information under Section 166(3) Commercial Code was limited to information necessary to understand the annual financial statements drafted by the managing partner and the possibility of ordering "other information" was to be interpreted to mean that all claims to information may only focus on asset questions relating to the annual financial statements. A general, unlimited claim to information by the limited partner was therefore not objectively justified, even where cogent grounds existed.
Following an appeal by the applicant, the Higher Regional Court decision was not able to withstand a legal examination by the German Federal Court of Justice. In its ruling of June 14, 2016, Case II ZB 10/15, the Federal Court of Justice found that the limited partner’s right under Section 166(3) Commercial Code, in the same way as the general claim to information of a shareholder in any partnership, serves the purpose of enforcing the right of partners to information to which the limited partner is entitled. In the same way as the general claim of partners to information, the limited partner’s claims arising out of this right to information can be directed not only towards the company, but also towards the managing body of the company, which will easily be able to provide such information (cf. also Federal Court of Justice, February 15, 2013, Case II ZR 134/11, BGHZ 196,131 para. 48 with additional references). In this respect, this extraordinary claim of the limited partner to information is also not limited to information that only serves the purposes of auditing the annual financial statements or necessary in order to understand them. Rather, Section 166(3) Commercial Code extends the limited partner’s right to information in case of cogent grounds to information on the general partner’s management in general and the associated company documents. The Federal Court of Justice refers to case law from previous years and also to the recognized case law for silent partnerships, in accordance with which partners have an extraordinary audit right, which also serves the purposes of monitoring company management. The same must apply with regard to the claim by the limited partner. In addition, the explicit stating of the ordering of “other information” compared to the information sources expressly mentioned in Section 166(1) and (3) means increased opportunities to receive information and therefore with regard to content exceeds the right to information stipulated in Section 166(1) Commercial Code. The order can also be made “at any time” at the request of a limited partner. This was also said to be an indication for the right to information provided for in Section 166(3) Commercial Code to be independent of the annual financial statements.
With regard to the further proceedings after the referral back to Oldenburg Higher Regional Court, the Senate of the Federal Court of Justice pointed out that the limited partner’s extraordinary right to information under Section 166(3) Commercial Code was not a general right of information and disclosure of the limited partner, who, in accordance with Section 166(2) Commercial Code expressly does not have the right to information at any time about company matters in the same way as a partner in a general partnership who is excluded from management. Rather, the right justifies from the outset only the granting of rights to information and explanations suitable and appropriate for the exercising of rights in accordance with the company’s Articles of Association or to protect the justified interests of the limited partner. The extraordinary right to information is limited in this respect by the limited partner’s need for information, which is based on cogent grounds. The option is therefore also not available to the limited partner to influence measures that are matters of management.
In this way, the Federal Court of Justice has now determined again that a partner, in this case the limited partner, at least after submitting cogent grounds, definitely has further rights to information and disclosure than just the submission of the annual financial statements and further information to aid in understanding them. In case of concrete signs of a threat of damage to the limited partnership and/or to the limited partner and their submission, it should therefore be possible to enforece the extended claim to disclosure in accordance with Section 166(3) Commercial Code.