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(Redirected from Gmbh) "Company with limited liability" in German-speaking countries

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Gesellschaft mit beschränkter Haftung (German: [ɡəˈzɛlʃaft mɪt bəˌʃʁɛŋktɐ ˈhaftʊŋ]), literally 'company with limited liability' (abbreviated as GmbH [ɡeːʔɛmbeːˈhaː] in Germany, Switzerland and Liechtenstein, and as Ges.m.b.H. in Austria), is a type of legal entity in German-speaking countries. It is equivalent to a société à responsabilité limitée (Sàrl) in the French-speaking part of Switzerland and to a Società a Garanzia Limitata (Sagl) in the Italian-speaking part.

It is an entity broadly equivalent to the private limited company in the United Kingdom and many Commonwealth countries, and the limited liability company (LLC) in the United States. The name of the GmbH form emphasizes that the owners (Gesellschafter, also known as members) of the entity are not personally liable for the company's debts. GmbHs are considered legal persons under German, Swiss and Austrian law. Other variations include mbH (used when the term Gesellschaft is part of the company name itself), and gGmbH (gemeinnützige GmbH) for non-profit companies.

The GmbH has become the most common corporation form in Germany because the AG (Aktiengesellschaft), the other major company form corresponding to a stock corporation, was much more complicated to form and operate until recently.

Requirements of formation

A GmbH is formed in three stages: the founding association, which is regarded as a private partnership with full liability of the founding partners/members; the founded company (often styled as "GmbH i.G.", with "i.G." standing for in Gründung – literally "in the founding stages", with the meaning of "registration pending"); and finally the fully registered GmbH. Only the registration of the company in the Commercial Register (Handelsregister) provides the GmbH with its full legal status.

The founding act and the articles of association have to be notarized, as do a number of business transactions, such as transfer of shares, issuing of stock, and amendments to the articles of association. Many of those documents have to be filed with the company registry, where they are checked by special judges or other judicial officers. This can be a tiresome and time-consuming process, as in most cases the transactions are legally valid only when filed with the registry. The founding process is expensive. Normally the foundation of a new GmbH costs about €1000 to €3000. The GmbH law outlines the minimum content of the articles of association, but it is quite common to have a wide range of additional rules in the articles.

Under German law, the GmbH must have a minimum founding capital of €25,000 (§ 5 I GmbHG), of which €12,500 has to be raised before registering in the commercial register (§ 7 II GmbHG). A supervisory board (Aufsichtsrat) is required if the company has more than 500 employees; otherwise, the company is run only by the managing directors (Geschäftsführer) who have the unrestricted proxy for the company. The members acting collectively may restrict the powers of the managing directors by giving them binding orders. In most cases, the articles of the association list the business activities for which the directors obtain prior consent from the members. Under German law, a violation of these duties by a managing director will not invalidate a contract with a third party, but the GmbH may hold the managing director in question liable for damages.

Germany, Austria, Switzerland, and Liechtenstein have different national requirements as follows:

Differences Germany Austria Switzerland Liechtenstein
Minimum share capital €25,000 €35,000 CHF20,000 CHF10,000
Mandatory supervisory board 500 employees 300 employees

History

The concept of a company with limited liability existed in the United Kingdom before it did in German-speaking countries. In 1892, the laws governing the GmbH were adopted in Germany, and in Austria in 1906. During the 19th century, a legal entity with liability limited to the contributed capital was regarded as something dangerous. Hence, German law has many restrictions unknown to common law systems.

Because there is no central company registry in Germany but rather several hundred connected to regional courts, administration of the law can vary somewhat between German states. Since 2007, there has been an internet-based central company register for Germany, called the Unternehmensregister.

In 2008, a derived form called Unternehmergesellschaft (haftungsbeschränkt) (English: "entrepreneurial company (limited liability)"), or in short UG (haftungsbeschränkt), was introduced. It requires a minimum founding capital of €1 and was introduced to assist company founders in setting up a new company. Also, the UG must enlarge its capital by at least 25% of its annual net profit (with some adjustments), until the general minimum of €25,000 is reached (at which point the company may change its name to the more prestigious GmbH). In this case, the word haftungsbeschränkt must not be abbreviated.

Gemeinnützige Gesellschaft mit beschränkter Haftung

A gemeinnützige Gesellschaft mit beschränkter Haftung (gGmbH) is a special form of a limited liability company with a charitable purpose. Traditional foundations and gGmbHs in Germany do not have minimum annual giving requirements. They are required to spend any profits by the end of the fiscal year in which they were accrued, but are allowed to build capital reserves totaling 10 percent of annual donations or 33 percent of dividends received.

See also

References

  1. RIS – Bundesrecht konsolidiert – Suche Archived 19 March 2021 at the Wayback Machine. Ris.bka.gv.at. Retrieved on 19 July 2013.
  2. GmbHG – nichtamtliches Inhaltsverzeichnis Archived 31 August 2011 at the Wayback Machine. Bundesrecht.juris.de. Retrieved on 19 July 2013.
  3. Müller, Klaus J. The GmbH: a guide to the German limited liability company Archived 16 August 2023 at the Wayback Machine Beck, 2006 ISBN 978-90-411-2444-9
  4. GTAI. "Limited Liability Company (GmbH) – Investment Guide to Germany". Archived from the original on 4 March 2021. Retrieved 5 March 2020.
  5. ^ "GmbH gründen - alles zur Haftung, Geschäftsführer und Auflösung". Hannover. Archived from the original on 29 September 2018. Retrieved 29 September 2018.
  6. ^ "Establishing Your Business In Germany - Payroll, HR & Entity Set Up". UnaTerra. 5 October 2020. Archived from the original on 28 October 2020. Retrieved 4 November 2020.
  7. Limited Liability Company Reporter. "Historical Background of the Limited Liability Company". Archived from the original on 4 June 2001. Retrieved 18 August 2008.
  8. "Unternehmensregister". www.unternehmensregister.de. Archived from the original on 2 February 2011. Retrieved 29 August 2019.
  9. de Jong, David (23 October 2012). "German Billionaire Schwarz Seen Having Tax-Exempt Fortune". Bloomberg. Archived from the original on 8 January 2015. Retrieved 13 January 2020.

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