[ESTABLISHING A BUSINESS ENTITY IN GERMANY]
210
vehicle in the legal form of a corporation enables to setup a debt push down. This means that the non-capitalized expenses resulting from the transaction – including interest on acquisition loans – can be offset with the operating income of the target company. c. Limited Liability Company (GmbH) aa. Characteristics The German limited liability company ( Gesellschaft mit beschränkter Haftung, GmbH ) is the “smaller” version of the capital corporation and the most widely used legal form for corporations in Germany. It combines high flexibility with relatively few statutory obligations. Setting up a GmbH is uncomplicated and can be accomplished within a short period of time. bb. Share Capital The minimum share capital required to establish a GmbH is EUR 25,000 (this can be made up of contributions in kind). At the time of registration, at least half of the minimum capital (i.e.., EUR 12,500) must be actually and verifiably contributed on a bank account. cc. Formation Procedure The formation procedure of a GmbH is fairly uncomplicated, as it is established by the founding shareholder(s) executing a deed of formation and articles of association before a notary public qualified in Germany (Notar). Ideally, the time period required for the formation of a GmbH is up to four weeks. The estimated court and notary costs for the formation of a standard GmbH are approximately EUR 800 plus the fees for legal counsel. dd. Management A GmbH is managed and legally represented by its managing directors. There must be at least
one managing director (who must be an individual but does not have to be a shareholder, a resident of Germany or a German citizen). By issuing binding instructions or directions to the managing directors, the shareholders may exercise direct influence on the management of the GmbH. ee. Registration In order to be valid, the GmbH must be entered into the commercial register ( Handelsregister ). All managing directors ( Geschäftsführer ) must sign the commercial register application in person in the presence of a notary. Once registered in the commercial register, the GmbH becomes a legal entity. The GmbH must then be registered at the local trade office ( Gewerbe- oder Ordnungsamt ). a) "Mini GmbH" (Limited Liability Entrepreneurial Company) The Mini-GmbH ( Unternehmergesellschaft UG, haftungsbeschränkt ) is not a separate legal form of company, but a GmbH which has a minimum capital of less than EUR 25,000 and where cash subscription is required. This means that it is possible to set up a company with limited liability in Germany with capital of only EUR 1.00. However, it must be noted that a Mini-GmbH with such an absolute minimum of share capital will hardly be regarded as a serious business partner in Germany and should only be considered as an ultimate start- up model to be capitalized further as soon as possible. In order to compensate for the initial absence of capital the Mini-GmbH has to retain a quarter of its annual profit until it has accumulated the minimum shareholder capital of an ordinary GmbH (which is EUR 25,000). The accumulated capital can then be converted into share capital and the Mini-GmbH altered into a standard GmbH.
ILN Corporate Group – Establishing a Business Entity Series
Made with FlippingBook Ebook Creator