Gmbh

Gesellschaft mit beschränkter Haftung (abbreviated GmbH, in Austria also GesmbH or Ges.m.b.H.), German for "company with limited liability", is a type of legal entity very common in Germany, Austria, Switzerland, and other German-speaking Central European countries. The name of the GmbH form emphasizes the fact that the owners (Gesellschafter, also known as members) of the entity are not personally liable for the company's debts.[1][2] GmbHs are considered legal persons under German 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, since the AG (Aktiengesellschaft), the other major company form corresponding to a stock corporation, was until recently much more complicated to form and operate.[3][4]

History

The laws governing this type of legal entity were adopted in Germany in 1892, and in Austria in 1906. The concept of limited liability created by these laws inspired the legal establishment of the limited liability company form in other countries,[5] although the concept of a limited liability company already existed in the United Kingdom.

Requirements of formation

It is widely accepted that 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. 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), from which €12,500 have 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 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 association list the business activities for which the directors must obtain prior consent from the members. Under German law, a violation of these duties by a managing director will not affect the validity of a contract with a third party, but the GmbH may hold the managing director in question liable for damages.

As of 2008, a derivate form called Unternehmergesellschaft (haftungsbeschränkt) (English: entrepreneurial company (limited liability)) or short UG (haftungsbeschränkt) was introduced. It does not require a minimum founding capital, and was introduced to assist company founders in setting up a new company. Also, the UG must accumulate 25% of its yearly earnings as legal reserve until it reaches €25,000. The owners may then decide to increase capital and rebrand to GmbH.

Because a legal entity with liability limited to the contributed capital was regarded in the 19th century as something dangerous, German law has many restrictions unknown to "Unternehmensregister".

Differences between GmbH in Germany, Austria, Switzerland and Liechtenstein

Differences Germany Austria Switzerland Liechtenstein
Minimum share capital €2,50,000.00 €10,00,00.00 CHF2,00,000.00 CHF3,00,000.00
Mandatory supervisory board 500 employees 300 employees

See also

References

Further reading

  • Tiede/Ryczewski, "Introduction to the Serbian Law on Limited Liability Companies" in WiRO 2012 (German Law Journal), vol. 5, pp. 140-144

External links

  • Anpartsselskab (Denmark)
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