Gesellschaft mit beschränkter Haftung
Encyclopedia
Gesellschaft mit beschränkter Haftung (abbrevated GmbH, GesmbH or Ges.m.b.H.) (English: company with limited liability
) is a type of legal entity
very common in Germany
, Austria
, Switzerland
, and other Central Europe
an 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. GmbHs are considered legal persons under German law.
form in other countries, although the concept of a limited liability company already existed in the United Kingdom. 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.
) 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. 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, or may omit the suffix haftungsbeschränkt.
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 common law
systems. A number of business transactions have to be notarized
, such as transfer of shares, issuing of stock, and amendments to the articles of association. Many of those measures have to be filed with the company registry where they are checked by special judges or other judicial officers. This can be a tiresome and time-consuming process as in most cases the desired measures are only legally valid when entered into the registry. Because there is no central company registry in Germany but rather several hundred connected to regional courts, the administration of the law can be rather different between German states
. Since 2007 there has been an internet-based central company register for the whole of Germany, called "Unternehmensregister".
Limited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
) is a type of legal entity
very common in Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
, and other Central Europe
Central Europe
Central Europe or alternatively Middle Europe is a region of the European continent lying between the variously defined areas of Eastern and Western Europe...
an 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. GmbHs are considered legal persons under German law.
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 companyLimited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
form in other countries, although the concept of a limited liability company already existed in the United Kingdom. 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
Aktiengesellschaft
Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e. owned by shareholders, and may be traded on a stock market. The term is used in Germany, Austria and Switzerland...
), the other major company form corresponding to a stock corporation, was until recently much more complicated to form and operate.
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 (HandelsregisterGerman Trade Register
The Trade Register in Germany is a public register that contains details of all tradespeople and legal entities in the district of the registrar The Trade Register in Germany is a public register that contains details of all tradespeople and legal entities in the district of the registrar The...
) provides the GmbH with its full legal status.
The founding act and the articles of association have to be notarized
Civil law notary
Civil-law notaries, or Latin notaries, are lawyers of noncontentious private civil law who draft, take, and record legal instruments for private parties, provide legal advice and give attendance in person, and are vested as public officers with the authentication power of the State...
. 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. 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, or may omit the suffix haftungsbeschränkt.
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 common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
systems. A number of business transactions have to be notarized
Civil law notary
Civil-law notaries, or Latin notaries, are lawyers of noncontentious private civil law who draft, take, and record legal instruments for private parties, provide legal advice and give attendance in person, and are vested as public officers with the authentication power of the State...
, such as transfer of shares, issuing of stock, and amendments to the articles of association. Many of those measures have to be filed with the company registry where they are checked by special judges or other judicial officers. This can be a tiresome and time-consuming process as in most cases the desired measures are only legally valid when entered into the registry. Because there is no central company registry in Germany but rather several hundred connected to regional courts, the administration of the law can be rather different between German states
States of Germany
Germany is made up of sixteen which are partly sovereign constituent states of the Federal Republic of Germany. Land literally translates as "country", and constitutionally speaking, they are constituent countries...
. Since 2007 there has been an internet-based central company register for the whole of Germany, called "Unternehmensregister".
Differences between GmbH in Germany, Austria, Switzerland and Liechtenstein
| Differences | Germany | Austria | Switzerland | Liechtenstein |
|---|---|---|---|---|
| Minimum share capital Share capital Share capital or issued capital or capital stock refers to the portion of a company's equity that has been obtained by trading stock to a shareholder for cash or an equivalent item of capital value... |
€25,000.00 | €35,000.00 | CHF20,000.00 | CHF30,000.00 |
| Mandatory supervisory board Supervisory board A supervisory board or supervisory committee, often called board of directors, is a group of individuals chosen by the stockholders of a company to promote their interests through the governance of the company and to hire and supervise the executive directors and CEO.Corporate governance varies... |
500 employees | 300 employees |
See also
- AktiengesellschaftAktiengesellschaftAktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e. owned by shareholders, and may be traded on a stock market. The term is used in Germany, Austria and Switzerland...
(AG) - Business organizations
- CorporationCorporationA corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
- Kommanditgesellschaft auf AktienKommanditgesellschaft auf AktienFor the radio station formerly known as KGAA, see KARR Kommanditgesellschaft auf Aktien – abbreviated KGaA – is a German corporate designation standing for 'partnership limited by shares', a form of corporate organization roughly equivalent to a master limited partnership. A...
(KGaA) - Società a responsabilità limitata (SRL) (ItalyItalyItaly , officially the Italian Republic languages]] under the European Charter for Regional or Minority Languages. In each of these, Italy's official name is as follows:;;;;;;;;), is a unitary parliamentary republic in South-Central Europe. To the north it borders France, Switzerland, Austria and...
) - Société à responsabilité limitéeSociété à responsabilité limitéeA Société à responsabilité limitée, also known by the acronym SARL , is a private limited liability corporate entity that exists in France, Switzerland, Luxembourg, Macau, Algeria, Morocco, Tunisia, and Lebanon and has commerce as its purpose.A SARL is a company whose liability is limited to the...
(sarl) (FranceFranceThe French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
) - Korlátolt felelősségű társaság (Kft.) (HungaryHungaryHungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
) - Spółka z ograniczoną odpowiedzialnością (Sp. z o.o.) (PolandPolandPoland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
) - Društvo s ograničenom odgovornošću (d.o.o.) or (doo) or (D.O.O.) or (DOO) (Bosnia and HerzegovinaBosnia and HerzegovinaBosnia and Herzegovina , sometimes called Bosnia-Herzegovina or simply Bosnia, is a country in Southern Europe, on the Balkan Peninsula. Bordered by Croatia to the north, west and south, Serbia to the east, and Montenegro to the southeast, Bosnia and Herzegovina is almost landlocked, except for the...
, CroatiaCroatiaCroatia , officially the Republic of Croatia , is a unitary democratic parliamentary republic in Europe at the crossroads of the Mitteleuropa, the Balkans, and the Mediterranean. Its capital and largest city is Zagreb. The country is divided into 20 counties and the city of Zagreb. Croatia covers ...
, SerbiaSerbiaSerbia , officially the Republic of Serbia , is a landlocked country located at the crossroads of Central and Southeast Europe, covering the southern part of the Carpathian basin and the central part of the Balkans...
) - Družba z omejeno odgovornostjo (d.o.o.) (SloveniaSloveniaSlovenia , officially the Republic of Slovenia , is a country in Central and Southeastern Europe touching the Alps and bordering the Mediterranean. Slovenia borders Italy to the west, Croatia to the south and east, Hungary to the northeast, and Austria to the north, and also has a small portion of...
) - Товариство з обмеженою відповідальністю (ТОВ) (UkraineUkraineUkraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...
) - Дружество с ограничена отговорност (ООД) (BulgariaBulgariaBulgaria , officially the Republic of Bulgaria , is a parliamentary democracy within a unitary constitutional republic in Southeast Europe. The country borders Romania to the north, Serbia and Macedonia to the west, Greece and Turkey to the south, as well as the Black Sea to the east...
) - Общество с ограниченной ответственностью (ООО) (RussiaRussiaRussia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
) - Sociedad de Responsabilidad Limitada (S.R.L.) (MexicoMexicoThe United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, ArgentinaArgentinaArgentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
) - Εταιρεία Περιορισμένης Ευθύνης (Ε.Π.Ε.) (GreeceGreeceGreece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
) - Друштво со ограничена одговорност (ДОО) (MacedoniaRepublic of MacedoniaMacedonia , officially the Republic of Macedonia , is a country located in the central Balkan peninsula in Southeast Europe. It is one of the successor states of the former Yugoslavia, from which it declared independence in 1991...
) - Společnost s ručením omezeným (s.r.o.) (Czech RepublicCzech RepublicThe Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest....
)
External links
- Anpartsselskab (Denmark)