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The Reform Act to Modernize the Law Governing Limited Liability Companies (Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen, “MoMiG”) came into force on November 1, 2008, and contains long awaited reforms.
The new legislation introduces a number of significant improvements and eliminates onerous and burdensome regulations in order to keep the GmbH competitive when compared to legal entities of other jurisdictions.
The most important changes include:
The GmbH, the most commonly used corporate form in Germany, can now be established with a share capital of € 1 EURO (previously, € 25,000), as a kind of special start-up type of a GmbH, the “Unternehmergesellschaft (haftungsbeschränkt)” (“Entrepreneur’s GmbH”). This is not a new corporate form, but a GmbH that may be incorporated without any share capital, even with zero Euros. However, an Entrepreneur’s GmbH may only distribute a maximum of 75% of its annual profits to its shareholders until a share capital of €25,000 is saved over time. Until then, 25% of its annual profits must be retained and booked as a statutory reserve in the balance sheet of the Entrepreneur’s GmbH.
The legislation also eases some of the long standing formal requirements and speeds up registration of "standard case" enterprises by using standardized templates for incorporation which combine the articles, the appointment of directors and the
shareholders’ list into one document.
The registration process has also been accelerated by introducing electronic commercial registers and online filing in 2007. The new legislation no longer requires that necessary business permits must be obtained before the GmbH can be registered (through the new legislation).
There have also been changes in the financial structure e.g. regarding loans granted by shareholders, and the boundaries between company law and insolvency law have been clarified.
Finally, and perhaps ¬most importantly, the legislation opens the GmbH to off-shore operations: MoMiG increases the ability of German companies to do business outside of Germany by eliminating the prohibition of having a company seat outside Germany.
The German WLN member firms will be pleased to answer any questions of our colleagues from the Warwick Legal Network about the new German Company law.
Esch & Kramer Rechtsanwälte, Düsseldorf, www.eschkramer.de
Düsseldorf, contact Dr. Jill Baas-Holler +49 211 602 240 0
RöverBrönner Partnerschaft, www.RoeverBroenner.de
Berlin, contact Dr. Henning Michels + 49 30-825 021 770
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