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Course: Law of Project and Acquisition Finance II

Types of Legal Enterprises in


Germany

Prepared by Zokirjon Abdusattarov,


Institute for Law and Finance, Frankfurt
April 10, 2008
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The Types of Enterprises
in Germany

Partnerships
(Personengesellschaften)
Corporations
(Kapitalgessell-
schaften)
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Corporations
(Kapitalgessellschaten):
 - Limited Liability Company
(Gesellschaft mit beschränkter Haftung -
GmbH);
 - Stock Corporation (Aktiengesellschaft -
AG);
 - Partnership Limited by Shares
(Kommanditgesellschaft auf Aktien -
KGaA);
 - European Stock Corporation (Europäische
Gesellschaft –SE)

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Partnerships
(Personengesellschaften):
 - Partnership under Civil Law (Gesellschaft des bürgerlichen
Rechts- GbR);
 - General Commercial Partnership (offene Handelsgesellschaft -
OHG);
 - Limited Commercial Partnership (Kommanditgesellschaft -
KG);
 - Composite Limited Partnership with a Limited Liability
Company Acting as a General Partner
(GmbH & Co.KG)
 -Sole Proprietorship (Einzelunternehmen)
 - Silent Partnership (Stille Gesellschaft)
 - Euroäische Wirtschaftliche Interessenvereinigung (EWIV) - a
business form for multinational enterprises, comparable to the
general partnership.
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The most widespread form Regulated by the Limited
Liability Companies Act
of corporation in Germany

1. The GmbH
Limited Liability Company

Has a legal personality and


Its shares are itself possesses rights and
dematerialized and can obligations and is liable
thus not be traded on a for all of its debts to the
stock exchange full extent of its corporate
assets. It also may pursue
and defend legal actions in
its own name.

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1. The GmbH –
Limited Liability Company
Management: Founders or Initial
 managing director(s); Shareholders:
 shareholders;
 supervisory board. natural or legal entities,
residents or non-residents,
Representation: German or foreign citizens
Managing director is the
only person entitled to
represent the company
in and out of court.

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1. The GmbH Formation Procedure:

 the first step in the process of forming a GmbH is the drafting of its of
incorporation by its founders (shareholders). The articles must be signed by
each of the shareholders and approved by a notary;
 articles of incorporation include the name, location, purpose of the company
together with the total amount of the nominal capital (Stammkapital) and the
percent or share of it that each shareholder has agreed to pay in return for
shares in the business;
 the company name must directly relate to the company's purpose or contain the
names of at least one of the shareholders. It is further required that the
company name contain the designation "GmbH". (Article 4, GmbHG);
 registration in the district court of the company's place of business;
 in order to register the combined amount of cash and non-cash assets required
by law before the GmbH can be legally registered has indeed been paid into the
company and is available for use by its management. The law requires that at
least 25 % of each share and 50 % of the nominal capital must be paid in
before the company can be registered unless non-cash investments have been
arranged and agreed upon;
 in the case of a one person GmbH the cash and non-cash contained in the
company must equal 25 000 euros at the time of registration;
 assurance that the total amount of investment shares ( the nominal capital of
the business, or Stammkapital) equals at least 25 000 euros;
 if all the requirements are met, the GmbH will be registered and the registration
automatically announced in a nation-wide publication.

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tional
The best business organiza
form in Germany for large Regulated
by Stock
st
enterprises. It offers the be Act (Aktie Corporat
ion
l
legal basis for an internationa ngesetz )
business.

2. The AG
Stock Corporation

Has a legal personality and


Its shares can be traded
itself possesses rights and
on a stock exchange
obligations and is liable
for all of its debts to the
full extent of its corporate
assets. It also may pursue
and defend legal actions in
its own name.
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2. The AG –
Stock Corporation:
Management: Founders or Initial
General meeting
Shareholders:

(Hauptversammlung);
 board of directors
(Vorstand); natural or legal entities,
 supervisory board. residents or non-residents,

Representation: German or foreign citizens

The board of directors is responsible for managing the business, handling all
general administrative matters and representing the corporation in its dealing with
third parties as well as in all judicial actions. The power of its authority may not be
limited in its dealing with third parties. It is possible, however, to provide in the
articles of incorporation that certain actions require the approval of another organ
of the AG
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2. The AG Formation Procedure:
 Draft articles of incorporation (Satzung) which primarily must include:
the AG's name, location, business objectives and amount of stock
capital (face amount as well as the number of stock certificates issued
and their initial subscription price).
 The company's name usually reflects its activities and must be followed
by the acronym "AG".
 The place of establishment must be where management will be located.
 The articles of incorporation must have been recorded by a German
notary before the corporation can be officially formed and registered.
 The AG must apply to for registration in the commercial register
(Handelsregister) of the local court responsible for the district in which
the company is located.
 The registration will be granted only if the required percentage of the
initial stock subscription has been duly paid-in. That amounts to at least
25 % of the par value of the stocks in the case of cash subscriptions and
100 % in the case of non-cash investments.
 The AG comes into existence as a legal entity upon entry in the
commercial register.

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Regulated
by Art 16
Commerc 1-177 of t
he
Incorporated to conduct (Handelg
ial Code
commercial activities ezetsbuc
h)

3. The KG and
GmbH & Co.KG
Limited Partnership

Doesn’t have legal personality.


It doesn’t have shares. However it may acquire rights
and obligations and own
assets, and is by operation of
law treated for commercial and
procedural purposes as if it
were a legal person.

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3.The KG and GmbH & Co.KG

Management & Representation:


The general partner is responsible for the
Founders :
management and the external
representation of the partnership, whilst
- at least one partner is
the limited partner provides an equity
contribution and, having paid in the
only limitedly liable;
relevant amount of liable capital in full
bears no further personal liability for
- at least one general or
obligations of the partnership.
unlimited partner
(Komplementär)
In the case of
GmbH&Co.KG, the
general partner is GmbH

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Thank You !!!

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