Gesellschaft mit beschränkter Haftung - GmbH

Company Type	Time to Incorporate	Cost
GmbH	6-8 weeks	£2890

Founding of a GmbH

The act of having founded a GmbH (comparable to a UK private limited company) creates a new legal entity; one with its own rights and duties, and one bearing its own name.

The right to either found or participate in a GmbH is likewise extended to non-German nationals.

Articles of Association

A GmbH may only be founded by a written contract documented by a notary and specifying the following minimum mandatory points:

• The company name.
• The purpose of the company
• The registered office
• The amount of share capital (Stammkapital).
• The sum to be paid by each shareholder towards the share capital.

There is now a pre-approved text for the company statutes for companies formed by cash subscription, which have up to three shareholders and have one managing director, which can be used. Companies formed with these pre-approved statutes, still need to go to the notary, but there are streamlined processes in the notary, with the Chambers of Commerce and the commercial courts, to approve the formation.

Share Capital

The company can choose to form as a normal GmbH, or can start as a limited liability entrepreneurial company, should it not wish to raise the whole GmbH capital immediately.

With a simple, ordinary GmbH, share capital must total a minimum of €25,000 and be divisible into shares with a minimum face value of €109. Capital contributions may be made either in the form of cash subscription, or in the form of investments in kind. With regard to the establishment of GmbH on the basis of cash subscription, 25% of the total cash investment, nevertheless a minimum of €12,500 must have been paid prior to registration in the Trade Register. When incorporating, you need to open the bank account immediately AFTER you have signed a deed of incorporation with the notary, and deposit the share capital in the bank. A bank statement stating the capital blocked for the company incorporation needs to be filed with the Court of Registration, along with the Company Statutes.

Name and business of a GmbH

Should the company choose to start as a limited liability entrepreneurial company, the company can start with €1 share capital. The company, at this stage, has the suffix, UG; standing for haftungsbeschränkte Unternehmensgesellschaft until the normal GmbH share capital of €25,000 is subscribed. During the time that the company is a UG, it must put one quarter of its annual profits into a special reserve, which is capitalised when the company becomes a GmbH

The name of a GmbH must be derived from the surname of one or all of its shareholders. Alternatively, it must contain a component from which the object or nature of business may be sufficiently inferred, and readily comprehensible to outsiders. The company name may contain a mixture of both the surnames of the shareholder(s) and the nature of the business. Other than that, one may choose to add an imaginary designation. Further demanded by law is an indication of the corporate form, in this case the German equivalent for a private company limited by shares, 'Gesellschaft mit beschränkter Haftung', or 'GmbH'.

Managing Directors

Managing Directors are appointed by the shareholders and need not be German nationals. If, for the large part, business is run from the Federal Republic of Germany, then care must be taken with regard to the requirements concerning residence or work permits. It is the responsibility of the Managing Director(s) to represent the business enterprise to third parties.

Managing Directors are to submit a written assurance that no circumstances prevail which could impair their appointment as Managing Director. Circumstances of this nature are, by means of example, any previous bankruptcy offences, or a court ruling prohibiting the pursuit of business activities ('Gewerbeuntersagung'). Further to be included in the assurance submitted is a confirmation on the part of the Managing Directors that they have been instructed as to their unrestricted duty to provide information to a court of law.

Registration in the Trade Register

A notary will document the articles of association as well as verify the application for registration in the Trade Register.

The application form together with the documents mentioned in §8 of the Private Limited Company Law (GmbH-Gesetz) are forwarded by the notary to the cognisant Court of Registration.

The responsible Chamber of Industry and Commerce will be requested by the local court to submit an expert statement of opinion.

In the course of inspecting the registration requirements should any doubts as to the correctness of the application arise, then the local court will inform the applicant of such, either directly, or via the applicant´s notary. Opportunity will be given to revise the application. Provided that there are no further grounds for the rejection of the application, registration in the Trade Register will then ensue.

The GmbH acquires the rights of a legal entity from the point of having been registered in the Trade Register. Prior to registration, a distinction is made by German law between the period subsequent to the decision on the part of the shareholders to found the company up until the notarial documentation of the articles of association on the one hand, and between the period thereafter up until the official registration in the Trade Register on the other. The company in the making is subject to different legal requirements for the time periods mentioned, particularly with regard to the liability of the already engaged shareholders.

The GmbH is subject to compulsory registration as is every newly founded business enterprise. Hence, registration in the Trade Register must be followed by registration at the cognisant Office for Public Order ('Amt für öffentliche Ordnung'), or Mayor´s Office ('Bürgermeisteramt'). The official form used for this purpose is supplied with carbon copies which are to be forwarded to the other obligatory places of registration, for example, the Finance Office and the mutual indemnity association.

Registration of the trade process

The duration of the registration process is determined, to a large extent by any additional difficulties which may arise during the course of the application, and which must necessarily be dealt with. Otherwise, one may calculate a period of 6 weeks, starting from the date on which the notary sends the registration documents to the local court.

Basic charges

Basic charges will be determined by the level of share capital as much as by the corporate value involved. Thus, the current charge for the documentation of the articles of association for a GmbH with a share capital of €25,000 is set at €168. Public certification of the application will cost €20, and the charge for registration in the Trade Register is currently set at  €100.

Costs will be increased by a further €20 in the case of the notary wording the application  for the Trade Register himself as opposed to using a pre-formulated application form. To this must be added the costs for the publication of this application in the 'Bundesanzeiger' (the Federal Gazette), and for possible publication in further state announcement papers. Costs in the region of €60 should be calculated per publication. Not included in the costs so far mentioned are those arising from recourse to notarial assistance for any specific wording, or indeed for writing the articles of association in preference to a standardised contract.