1. Types of entities.
a) Which are the different types of entities according to the domestic corporate law? (e.g. partnerships vs. companies vs. other legal entities). Please describe the main features of each of those types of entities. Which type/s of entities – if any – is/are more often used in corporate law practice in your country?

Germany has a whole variety of entities used for business purposes. The types of entities can be clustered in partnerships, companies and other legal entities.

i) Companies:
a) Private limited liability company - "Gesellschaft mit beschränkter Haftung" or in short "GmbH"
b) Public limited liability company (or Joint-stock company) - "Aktiengesellschaft" or in short "AG"
Companies are defined as having a limited liability and shares allocated to shareholders.

ii) Partnerships:
a) Civil law partnership - "Gesellschaft des bürgerlichen Rechts" or in short "GbR"
b) General partnership corporation  -"offene Handelsgesellschaft" or in short "OHG"
c) Limited partnership corporation  - "Kommanditgesellschaft" or in short "KG"
Partnerships are characterised as being an association of persons or an unincorporated company. If several people join forces and want to do business together they are either a company "Gesellschaft bürgerlichen Rechts" or in short "GbR" which does not need any kind of legal registration and no capital. However, all partners will face unlimited liability. The other corporations need to be registered with the Commercial Register.

iii) Other legal entities:
There are also other legal entities available and to mention just a few:
a) Entrepeneur - "Einzelunternehmen"
b) Registered entrepreneur - "eingetragener Kaufmann"
c) Partnership corporation - "Partnerschaftsgesellschaft" (this one can be used by accountants, lawyers and gives the option of limiting the liability)
d) Silent partnership - "stille Gesellschaft"
e) Branch of a foreign enterprise - "Niederlassung einer ausländischen Gesellschaft"
There are also cooperative, association or special vehicles for the ownership of a vessel for instance available.

b) Which are the different types of companies? Please describe the main features of each of those types of companies: capital, transfer of shares or stakes, contributions in kind, management, etc. Which type/s of companies – if any – is/are more often used in corporate law practice in your country?

- GmbH
The GmbH is the legal entity most commonly used in Germany. As of 2012 over 500,000 GmbH’s are carrying out business in Germany1 capital
This limited liability company must have a minimum capital of €25,000 but only 25% of the capital subscribed (however, minimum €12,500), must be paid in full prior to registration of the company. The company can be set up with having a single shareholder only. Share certificates are not required by German law as there is a list of shareholders to be registered and kept up to date with the Commercial Register. Sometimes you find a company trading under the name "Unternehmergesellschaft (haftungsbeschränkt)" or in short "UG". This is not a different form of a GmbH but only one with less than the minimum capital being the reason to make that fact public by having a different name. In fact the minimum capital of such a company is €1 but certain rules apply  regarding  the setup and the increase of the capital. For instance it is necessary to have the draft articles of association and you can have at maximum three shareholders.
transfer of shares
The transfer (and sale) of shares must be undertaken by way of a contract and requires mandatory notarisation. This means that any transferor and transferee must appear before a notary and to conclude a deed of transfer formally. It is possible to appoint representatives though. The articles of association can put restrictions on the transfer of shares such as the consent of the other shareholders. The company and the Commercial Register must be notified about the shares.
contribution in kind
It is possible to have a contribution of the capital in kind. The requirement in that case is a full payment and this procedure is subject to an evaluation by the registrar of the commercial court.
The company is legally represented and managed by one or more managing directors. However, the shareholders decide in a meeting about all matters which are outside the ordinary course of business or matters listed in the articles of association. There are no legal restraints on the managing directors' term of office.

 - AG
The public limited company AG is often used for the purpose of raising the funds from the public. This form is not as common as the GmbH with less than  8,000 in existence2. In that instance the company can be listed on the German stock market but it is also possible to use the legal entity AG for a non-public ownership structure.
In any event, the minimum share capital is €50,000. At the time of formation of the public limited company AG all shares have to be fully subscribed and at least 25% of the capital must be paid up front. Each share must have a minimum value of €1. There are two different types of shares available - nominal value shares (or par value shares) and individual share certificates (non-par value).
transfer of shares
Only shares of a stock corporation can be listed and traded on a stock exchange. However, the majority of the AGs are not listed on the stock exchange but  are privately held. The share of a stock corporation can be transferred without a notarised deed. The mere handing over of the stock certificate is sufficient. This makes the stock company attractive for raising funds on capital markets very quickly. If the stock is registered it is necessary to endorse the stock to the new owner. This person needs also to be registered in the list of stockholders.  contribution in kind
It is possible to have a contribution of the capital in kind. The requirement in that case is a full payment and this procedure is subject to an evaluation by the registrar of the commercial court.
The structure of the management of a German public limited company can  best be described as a "two-tier board". On the one hand there is a supervisory board called "Aufsichtsrat". The shareholder[s] will control the board but on  some occasions  employees can also have a (mandatory) seat on that board. This is determined by the size of the company having  at least 500 employees. The shareholder will exercise their rights in general meetings typically held once a year. How many members comprise the Aufsichtsrat depends as well on the size of the company.
On the other hand there is the management board called "Vorstand". The management will run the company on a daily basis. The management can only be appointed for 5 years but they can be re-appointed.

2.   Limited liability companies and stock companies: incorporation steps.
a) What steps are required to incorporate a limited liability company and a stock company?

The incorporation of the GmbH requires the articles of association to be notaries. The notary will also carry out the registration of the GmbH with the Commercial Register holding some of the most important details of the company such as name, capital, management, object, list of shareholders and articles of association). There are several local Commercial Registers spread over Germany and only at the time of registration the GmbH comes into force. Any Commercial Register will check that the name of the company is unique. Otherwise the registration will be put on hold until a suitable name is provided.
The share capital of the company must be deposited (after signing the notarised documents) with a bank and a certificate from the bank must be requested stating the deposit. This document has to be sent alongside  the notarised documents to the Commercial Register. This will be carried out by the notary.
After the incorporation of the company further steps need to be carried out such as the registration with the appropriate tax office and the local office of business as well as the registration at the labour office (including the registration of each employee).

The incorporation of the AG follows the similar procedure as the GmbH. You have to bear in mind that due to the two-tier structure the supervisory board will be established first. In their first board meeting the management will be appointed.

b) Which specific additional steps (if any) are required for said incorporation in case that any of the shareholders is a foreign or non-resident company or individual?

A foreign or non-resident company or individual are allowed to hold shares in a company in Germany or be a director (GmbH) or board member (AG). An individual does not require a working permit carrying out a function in the management as this position is crucial for the representation of the legal entity. In this respect, the management is regarded as a self-employed person and does not require any work permit. Requirement is, however, the right of the individual to enter Germany at any time. For any advice on the entry to Germany and the right to stay, a specialist immigration lawyer should be consulted due to the complexity of that area.

Other than that during the incorporation a few points need to me considered such as participating at the notary with a translator or dealing with a notary having foreign language skills.

3. Limited liability companies and stock companies: steps for appointment of directors and By-laws modification.What steps are required to appoint a new director and to modify the By-laws of a limited liability company and a stock company?

Appointment of director
The director of a GmbH or an AG needs to be a natural person capable and competent to act. This is not the case if the director is  already a member of the supervisory board or in case of a conviction because of a belated application for insolvency proceedings.
The appointment of the director is made by a resolution of the shareholders (GmbH) or the board (AG or big GmbH). The notification of the appointment and an affidavit, signed by the managing director and notarised by a notary public, must be filed with the competent commercial register.

Modification of by-laws
The modification of by-laws can be necessary for several reasons, even for the change of name of the company. Requirement is a decision of the shareholders with a three quarters majority. It is important that the fact of the modification of the by-laws is properly announced in the invitation to the meeting of the shareholders where the decision is to be made.
The decision about the modification needs to be notarised, but for that procedure it is possible that a representative will meet with the notary. The notary will then file the modified by-laws with the Commercial Register and an announcement has to be made in the electronic gazette.

4. Limited liability companies and stock companies: management alternatives.
a) Which are the main alternatives for the management of those companies? For example: Sole Director, Joint Directors, Joint and Several Directors, Board of Directors, etc.

The articles of association may grant one or more directors the power, solely or jointly, to represent the company. It is also possible to have one director acting together with an authorised representative (“Prokurist” - agent with limited power to represent) or even two of them can act on certain matters jointly. 

b) In each alternative which is the power/authority of the director/s to act on behalf of the company? For example: Sole Director has full authority; Board of Directors can empower one (or more) of them with specific or general authority, etc.

The sole director of a company has full authority to represent the company in the daily business. He may be bound by the by-laws to receive authority for a certain matter. However, this is not limiting him in regard to third parties.

In case several directors are representing the company one of them can be the managing director. The by-laws can stipulate that each director is able to represent the company alone. The default position by law however is a joint directorship.

c) Do you have a one or a two-tier board system in your country? Are you able to choose a one or two-tier board systems? Please describe the main features of each system in your country.

The AG has a mandatory two-tier board. However, also for the GmbH this option is available and even mandatory in case the company employs over 500 people.

The management board is responsible for all executive operations and conducts the day-to-day management of the company. This board is an independent body. The function of the supervisory board is to monitor and oversee the management board as well as to appoint and dismiss the management of the company. It also acts as an independent body, it is exclusively made up of outside directors and its members may not be instructed in this capacity by shareholders or by the employer. The supervision, however, does not mean any interference with the company’s day-to-day business as only certain categories of transactions (as set out in the articles of association) may be subject to the prior approval of the supervisory board.

5. Limited liability companies and stock companies: liquidation steps.
What steps are required to liquidate a limited liability company and a stock company?

In general the liquidation of the GmbH results from a decision of the shareholder, sometimes automatically if a duration of time is stipulated in the articles of association. The director of the company will be the liquidator but the articles of association can have a clause requiring an additional liquidator. The liquidation of the GmbH has to be registered with the Commercial Register via a notary and published in the electronic federal gazette.

It is necessary that the liquidator prepares an opening statement of financial position of the company accompanied by an explanatory report.

Earliest after one year and subject to the payment of all debts and disbursement of remaining assets, the company can be dissolved and deregistered via a notarised act. The final statement of the financial positions needs to be prepared for this step.  

1  Source: Federal Statistical Office -

2 See above


This information was compiled by advokatfirma | meyer.