Corporate law in Germany vs abroad (Overview)

1. Overview of Corporate Law in Germany

Corporate law in Germany (Gesellschaftsrecht) governs the formation, organization, operation, and dissolution of legal entities. It is mainly codified in the German Civil Code (BGB), the Commercial Code (HGB), and specialized laws such as the Limited Liability Companies Act (GmbHG) and Stock Corporation Act (AktG).

2. Types of Legal Entities in Germany

2.1 Sole Proprietorship (Einzelunternehmen)

• Nature: No legal distinction between owner and business.

• Liability: Unlimited personal liability.

• Formation: No registration needed unless operating as a merchant.

• Typical use: Small businesses, freelancers.

2.2 Partnerships (Personengesellschaften)

a) GbR – Gesellschaft bürgerlichen Rechts (Civil Law Partnership)

• Purpose: Common for joint ventures or professional collaboration.

• Legal personality: Not a separate legal entity.

• Liability: Partners are jointly and severally liable.

• Formation: Simple contract, no registration needed.

b) OHG – Offene Handelsgesellschaft (General Commercial Partnership)

• Legal status: Merchant status required.

• Liability: Unlimited for all partners.

• Registration: Mandatory with Commercial Register.

c) KG – Kommanditgesellschaft (Limited Partnership)

• Structure: At least one general partner (unlimited liability) and one limited partner.

• Use: Often used in family businesses.

d) Partnerschaftsgesellschaft (PartG) – Partnership for Professionals

• For: Professionals like lawyers, doctors, architects.

• Liability: Typically limited to the acting partner for professional liability.

• Registered: In the partnership register.

2.3 Corporations (Kapitalgesellschaften)

a) GmbH – Gesellschaft mit beschränkter Haftung (Limited Liability Company)

• Minimum capital: €25,000 (cash or assets), €12,500 at formation.

• Liability: Limited to the company’s assets.

• Management: One or more managing directors (Geschäftsführer).

• Use: Most common corporate form in Germany.

• Special variant: UG (haftungsbeschränkt) – “Mini-GmbH”, with €1 capital minimum.

b) AG – Aktiengesellschaft (Stock Corporation)

• Minimum capital: €50,000.

• Liability: Limited to corporate assets.

• Structure: Two-tier board system – Management Board (Vorstand) and Supervisory Board (Aufsichtsrat).

• Use: Medium to large enterprises, especially if stock exchange listing is planned.

c) SE – Societas Europaea (European Company)

• Regulated: By EU Regulation 2157/2001 and German SE Implementation Act.

• Cross-border: Allows easier operations in multiple EU states.

• Structure: Can choose between one-tier or two-tier system.

3. Key Characteristics Compared