Corporate Entities in Germany

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Types of Legal Enterprises in

Germany

Prepared by Zokirjon Abdusattarov,

Institute for Law and Finance, Frankfurt

April 10, 2008

Course: Law of Project and Acquisition Finance II


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Partnerships

(Personengesellschaften)

Corporations

(Kapitalgessell-

schaften)

The Types of Enterprisesin Germany


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Corporations(Kapitalgessellschaten):

- Limited Liability Company(Gesellschaft mit beschrnkter Haftung -GmbH);

- Stock Corporation(Aktiengesellschaft -AG);

- Partnership Limited by Shares(Kommanditgesellschaft auf Aktien -

KGaA); - European Stock Corporation (Europische

Gesellschaft SE)


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Partnerships(Personengesellschaften):

- Partnership under Civil Law (Gesellschaft des brgerlichen

Rechts- GbR);

- General Commercial Partnership (offene Handelsgesellschaft -

OHG);

- Limited Commercial Partnership (Kommanditgesellschaft -KG);

- Composite Limited Partnership with a Limited Liability

Company Acting as a General Partner

(GmbH & Co.KG)

-Sole Proprietorship(Einzelunternehmen) - Silent Partnership (Stille Gesellschaft)

- Euroische Wirtschaftliche Interessenvereinigung (EWIV) - a

business form for multinational enterprises, comparable to the

general partnership.


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1. The GmbH

Limited Liability Company

The most widespread form

of corporation in Germany

Regulated by the Limited

Liability Companies Act

Its shares are

dematerialized and can

thus not be traded on a

stock exchange

Has a legal personality and

itself possesses rights and

obligations and is liable

for all of its debts to thefull extent of its corporate

assets. It also may pursue

and defend legal actions in

its own name.


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Management: managing director(s);

shareholders;

supervisory board.

Representation:

Managing director is the

only person entitled to

represent the company

in and out of court.

1. The GmbH Limited Liability Company

Founders or InitialShareholders:

natural or legal entities,residents or non-residents,

German or foreign citizens


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1. The GmbH Formation Procedure:

the first step in the process of forming a GmbH is the drafting of its ofincorporation by its founders (shareholders). The articles must be signed byeach of the shareholders and approved by a notary;

articles of incorporation include the name, location, purpose of the companytogether with the total amount of the nominal capital (Stammkapital) and thepercent or share of it that each shareholder has agreed to pay in return forshares in the business;

the company name must directly relate to the company's purpose or contain thenames of at least one of the shareholders. It is further required that thecompany name contain the designation "GmbH". (Article 4, GmbHG);

registration in the district court of the company's place of business; in order to register the combined amount of cash and non-cash assets required

by law before the GmbH can be legally registered has indeed been paid into thecompany and is available for use by its management. The law requires that atleast 25 % of each share and 50 % of the nominal capital must be paid inbefore the company can be registered unless non-cash investments have been

arranged and agreed upon; in the case of a one person GmbH the cash and non-cash contained in the

company must equal 25 000 euros at the time of registration; assurance that the total amount of investment shares ( the nominal capital of

the business, or Stammkapital) equals at least 25 000 euros; if all the requirements are met, the GmbH will be registered and the registration

automatically announced in a nation-wide publication.


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2. The AG

Stock Corporation

Thebestbusinessorganizational

forminGermanyforlarge

enterprises. Itoffersthebest

legalbasisforaninternational

business.

RegulatedbyStockCorporationAct(Aktiengesetz)

Its shares can be traded

on a stock exchange

Has a legal personality and

itself possesses rights and

obligations and is liable

for all of its debts to the

full extent of its corporate

assets. It also may pursue

and defend legal actions in

its own name.


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Management: General meeting

(Hauptversammlung);

board of directors

(Vorstand); supervisory board.

Representation:

2. The AG Stock Corporation:

Founders or InitialShareholders:

natural or legal entities,residents or non-residents,

German or foreign citizens

The board of directors is responsible for managing the business, handling allgeneral administrative matters and representing the corporation in its dealing with

third parties as well as in all judicial actions. The power of its authority may not be

limited in its dealing with third parties. It is possible, however, to provide in the

articles of incorporation that certain actions require the approval of another organ

of the AG


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2. The AG Formation Procedure:

Draft articles of incorporation (Satzung) which primarily must include:the AG's name, location, business objectives and amount of stockcapital (face amount as well as the number of stock certificates issuedand their initial subscription price).

The company's name usually reflects its activities and must be followedby the acronym "AG".

The place of establishment must be where management will be located. The articles of incorporation must have been recorded by a Germannotary before the corporation can be officially formed and registered.

The AG must apply to for registration in the commercial register(Handelsregister) of the local court responsible for the district in whichthe company is located.

The registration will be granted only if the required percentage of theinitial stock subscription has been duly paid-in. That amounts to at least

25 % of the par value of the stocks in the case of cash subscriptions and100 % in the case of non-cash investments.

The AG comes into existence as a legal entity upon entry in thecommercial register.


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3. The KG and

GmbH & Co.KG

Limited Partnership

Incorporatedtoconduct

commercialactivities

RegulatedbyArt161-177oftheCommercialCode(Handelgezetsbuch)

It doesnt have shares.Doesnt have legal personality.

However it may acquire rights

and obligations and own

assets, and is by operation oflaw treated for commercial and

procedural purposes as if it

were a legal person.


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Management & Representation:

The general partner is responsible for themanagement and the externalrepresentation of the partnership, whilstthe limited partner provides an equitycontribution and, having paid in therelevant amount of liable capital in full

bears no further personal liability forobligations of the partnership.

3.The KG and GmbH & Co.KG

Founders :- at least one partner is

only limitedly liable;

- at least one general orunlimited partner(Komplementr)

In the case ofGmbH&Co.KG, the

general partner is GmbH


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Corporate Entities in Germany

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