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The Company Act in Germany

Updated on Tuesday 05th March 2019

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The Company Act in Germany is based on several texts of the law regarding each and every type of business structure that can be established in Germany. However, the Commercial Code is a general legislation that must be observed, too. In addition to that, Germany also falls under the European directives as a member state of the European Union.
 
Limited liability companies in Germany are regulated by a company act called the Act Concerning Companies with Limited Liability or Gesetzbetreffend die GesellschaftenmitbeschränkterHaftung, in short GmbHG. Joint stock companies fall under the rules of the Stock Corporation Act or Aktiengesetz, also known as AktG, while partnerships must submit to the rules of the Civil Code and Commercial Code.

When starting a company in Germany, you will have to choose a legal structure for your future business and our local agents can help you make the right decision. The regulations for the chosen business type are included in the German Acts that concern the relevant business form and it is recommended to seek guidance when opening a company particularly in order to understand the differences between the legal forms. Our team of agents who specialize in company formation in Germany can give you updated and accurate information.
 

The German Companies Act 

 
The Limited Liability Companies Act and the German Stock Corporation Act are the two main legal resources for the top types of companies in Germany. The German company law is comprehensive and these two Acts describe the named business forms and the legal basis for incorporating these types of legal entities.
 
These two business forms are widely spread in Germany, with the private limited liability company, the GmbH, accounting for the majority of operating businesses.  The Limited Liability Companies Act is composed of several parts, described below:
  • Part 1: the formation of the company includes the requirements for choosing a purpose and a name for the business, having a registered office and appointing directors as well as the process for company registration in Germany.
  • Part 2: the shareholders and the company includes information about the liabilities of the shareholders, the payment of capital and the ownership of shares.
  • Part 3: representation and management, included here is information about the appointment of directors, the rights and duties as well as their evocation; also included here are the general principles for company representation as well as general accounting requirements like bookkeeping and balance sheet.
  • Part 4: the amendments brought to the company’s Articles of Association presents the ways in which changes to the company can be performed (a share capital increase, the allocation of shares, the distribution of profits and others).
  • Part 5: winding up a company presents the process needed to dissolve a company and render it null; the liquidation procedure is also presented as well as the requirements for the distribution of assets.
  • Part 6: administrative, regulatory and criminal provisions in relation to managing a limited liability company; included here are the situations that concern a breach of confidentiality, the breach of duty in regards to statutory audits and others.
 
The Limited Liability Companies Act also includes a set of annexes. One of our agents specialized in company formation in Germany  can help you open a company in this country if the GmbH is the chosen business form.
 
The German Stock Corporation Act is structured in a similar way to the Limited Liability Companies Act, however, investors should know that this Act contains more provisions because of the higher regulations for this particular business form. The Act is structured as follows:
  • Part 1: general regulations include the general requirements for this type of company, the nature of the stock company is defined as well as the regulations for listing on the stock exchange and the shared capital; included here are also a number of details about the voting rights.
  • Part 2: the incorporation of the stock company refers to the preparation of the company’s documents, the contributions and the founders of the company; special consideration is given to the appointment of the supervisory and the management board.
  • Part 3: the relationship between the shareholders and the company includes the main duties and liabilities of the shareholders as well as the manner in which the distribution of profits is to take place.
  • Part 4: includes information about the manner in which a joint stock company operates and is divided into chapters, with chapter 1 referring to the management board, chapter 2 about the supervisory board, chapter 3 about the exploitation of influence over the company, chapter 4 the general meeting (with various subchapters).
  • Part 5: accounting and profits distribution in case of the joint stock company is a comprehensive chapter that includes information about the company’s annual accounts and management report, the requirements for audit and the appropriation of profits.
  • Part 6: changes brought to the company’s constitutive documents; like in the case of the limited liability company, this chapter refers to the amendments that can be brought to the AG, more comprehensive in this case.
  • Part 7: refers to the situation in which the resolutions of the general meeting are null and the special audit that can be performed.
  • Part 8: the dissolution of the company, the winding up of the AG, the duties of the liquidators, the distribution of the assets and the final statement on the company’s nullity. The final parts of the Stock Corporation Act refer to the possible punitive and administrative fines in case of violating the reporting obligations or those that concern the auditing of the accounts as well as several other situations.
 
Because the joint stock company is a complex business form, the Act includes several chapters that refer to issues like the securitization of the company and the creditors, the securitization of external stockholders, information about controlled enterprises as well as integrated companies.
 

Other relevant laws for doing business in Germany

 
Together with the Company Act in Germany, the labor legislation contributes to the well-being of the commercial businesses. As far as the employment contracts are regarded, they are formed based on the relationship between the employer and the employee, with the possibility to negotiate the terms of the company so that the text is convenient to both parties. Employment contracts are regulated by the Federal Labor Court.
 
When it comes to the rights and obligations of the employer and the employee in Germany, one can find information regarding all aspects of the employment in laws such as:
  • the German Civil Code,
  • the Working-Time Act,
  • the Act Concerning Paid Vacations,
  • the Act Against Unfair Dismissal,
  • the Act Concerning Trainees,
  • the Act Concerning Disabled Employees, Maternity Leaves and Remuneration During Sickness.
The employment law is good support for the Company Act in Germany, providing a legal environment for business and ensuring all parties of good collaboration, as well as good company management and organization.
 
Setting up a company in Germany is not an easy task, so please feel free to contact our company formation specialists in Germany for more information in regards to the Company Act in this country, as well as step-by-step assistance for the launch of your local start-up. We are specialized in providing qualified legal consultancy to foreign investors interested in starting a company in Germany.

 

Meet us in Germany


Marco Rössel is a Partner at Liesegang & Partner and an experienced Attorney at Law. He is specialized in commercial and corporate law and can help you open your company in Germany as fast as possible.

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Call us now at +49 69 71 67 2 67 0 to set up an appointment with our company formation experts in Germany. Alternatively you can incorporate your company without traveling to Germany.

As our client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Germany.

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