Starting a company in Germany implies respecting the content of the Company Law related to each type of legal entity, and which comes with specific requirements. One of these requisites covers the share capital a business must have in order to be incorporated and to operate after registration.
Below,
our company formation agents explain the main
share capital requirements applicable
in Germany in accordance with the entity one decides to form.
Types of companies with share capital in Germany
Most types of companies foreign investors usually set up in Germany require a share capital. The share capital is the amount of money one or more individuals invest in a company in exchange for shares in the company. In other words, foreign businessmen will invest a certain amount of money that will generate profits they will be entitled to later. The shares issued when the capital is injected in the German company will also grant the shareholders certain powers with respect to the management of the company. Depending on the amount of money an enterpriser wants to invest in a company, the German Commercial Code allows the incorporation of the following types of companies:
- - limited liability companies (Gesellschaft mit beschränkter Haftung, GmbH),
- - joint stock companies (Aktiengesellschaft, AG),
- - limited partnerships (Kommanditgesellschaft).
Foreign investors who need assistance in setting up a company in Germany can rely on our specialists in company incorporation who will guide them through the business setup procedure.
The share capital in accordance with the German Company Act
The contribution or nominal capital of company is referred to as the share capital of a German company. It is determined by adding the notional values of each and every share of the business, or the sum of the values that are given to a share of the respective entity.
For example, in Germany, a private limited liability company or GmbH share must have a nominal value of at least EUR 1. German legislation stipulates that EUR 25,000 must be invested as share capital in order for a GmbH to be formed. This is also the most common business form in this country.
Another important distinction is that capital contributions in Germany must be separated from the share capital. These are the individual shareholders' contributions to the share capital. The share capital is equal to the total capital contributions.
What are the steps to draw up a company’s share capital in Germany?
Here are the steps for a correct draw up of a company’s share capital:
- the creation of the Memorandum and Articles of Association which must contain details about the share capital and its division among the shareholders;
- opening the corporate bank account of the German company to be created;
- depositing the share capital;
- obtaining the bank reference stating the deposit of the capital;
- submitting proof of the share capital with the Trade Register.
Apart from these, there are also other details about the shares issued through the minimum amount established as capital that need to be established. At this point, the Articles of Association are the most important papers that contain information about the share capital in Germany.
If you are interested in opening a business in Germany and having its Articles of Association drawn up, please contact us.
How to determine the share capital of a German business
In Germany, shareholders may contribute to the share capital in cash (money) or in kind (other types of assets) by making a contribution.
Contributions in kind made through various types of goods, other than money, to the company entail a complex process and can imply higher risk than cash incorporation. Contributions of material or intangible assets qualify as incorporation in kind. These in specifically consist of:
- - movable goods, such as machinery, tools, vehicles, or goods and stocks;
- - moveable items like real estate and land;
- - rights, licenses, patents, or trademarks;
- - financial instruments or third-party claims.
If you need more information about the types of share capital requirements in Germany, you can rely on our local agents.
The share capital for GmbH and AG in Germany
The
German limited liability company (GmbH) is the most common business vehicle due to the simple incorporation procedure and the
minimum share capital requirements. The
start-up share capital for a GmbH is 25,000 euros from which at least 12,500 euros must be deposited upon incorporation. The shareholders may contribute with different amounts; however the
minimum share contribution is 1 euro.
The German Commercial Law also allows the share capital to be deposited in cash or any other type of movable and immovable property. The German legislation also allows investors to
set up mini-GmbH companies which require a
minimum share capital of 1 euro.
The share capital of German limited partnerships
Even if not very often employed, the
German limited partnership provides a certain amount of flexibility to its owners and limited liability to one of the owners. The
minimum share capital required for
opening a business in Germany as a limited partnership is 50,000 euros which must be divided into shares. The shares issued upon the
incorporation of the German company may be ordinary shares or preference shares.
Economic forecast for Germany
According to German economic experts, the economic outlook has only slightly improved. The position is still precarious, and inflation is still having a negative impact on economic projections. However, based on
news here:
- - an increase of 0.2% of the Gross Domestic Product is expected in 2023;
- - for 2024, forecasts are more optimist indicating a growth of 1.3%;
- - inflation is expected to remain at 6.6% in 2023, but to decline to 3% in the following year.
For detailed information about the
share capital, please
contact our
German consultants in company registration. They will assist you with the entire process of
starting a company in Germany, from choosing the right legal structure for your business needs and helping you comply with all its requirements to registering it with the Trade Register.
