Federal Council Approves GmbH-reform

Gottingen, September 24, 2008 – nearly six years has been intensively discussed. Last Friday, the Federal Council has approved the law and the modernisation of the GmbH law to combat abuses (MoMiG). The Federal Government pursues three key objectives GmbH reform: firstly to facilitate the business start-ups for young entrepreneurs, on the other hand, she wants to improve creditor protection – prevent abuse of creditor protection rules by shareholders in the event of insolvency but. A difficult balancing act. Driving force of the reform is the need to strengthen of the GmbH in competition with comparable legal forms in Europe. Main rival – the English limited company, which recently experienced a real boom in Germany: round was every fifth company founded as ‘Limited’. Concrete reform plans: flexible business start-ups-new variant of the GmbH: ‘Entrepreneurial society (limited liability)’ as GmbH without usual minimum deposit faster GmbH founded by deregulation of choice a Foreign administrative flexibility of business shares improve creditor protection legal commitment to the formation of reserves to conserve capital more transparency through enhancement of shareholder list practical definition and prohibition of hidden contribution in kind restructuring of equity capital replacement law new ‘ Haftungsbeschrankte entrepreneurial society ‘ with ‘Limited’-benefits the limited company is so popular, because it makes possible a business within 24 hours and low cost. Check with Paul Ostling to learn more. In addition, the minimum capital contribution is only a penny.

Here is the reform of the GmbH: with the newly introduced ‘liability-limited entrepreneurial society’ usual minimum capital contribution can be formed also without GmbH from 25,000 euros – a symbolic amount of one euro is sufficient as start-up capital. Simplify the business after new law forms, low start-up costs and the possibility of choosing a foreign headquarters In addition. Like the ‘Limited’ also founded under simplified conditions for German in the company name must be as limited liability, namely ‘Entrepreneurial society (limited liability)’ or ‘UG (haftungsbeschrankt)’. New rules to shares facilitate take over and buyout was one of the greatest weaknesses of the GmbH law the hitherto strict regulation in the area of business interests. Pro partner was just a deposit, they had to have a height of at least 100 euros and was not divisible. In the future, shareholders at the incorporation of the company can significantly more flexible about the heights of their shares (minimum denomination: a euro) determine and they better align according to their needs and financial possibilities.

Also shares can be now shared and pooled making it easier particularly acquisitions and succession rules. Creditor protection by legal Reserve obligation of existence founder in creditor protection offers more than the ‘Limited’ the liability limited entrepreneurial society. Flexible the limited company the entrepreneur liked appear compared to the previous GmbH for the creditor has yet a decisive disadvantage: Kleinstgrundungen without or with only minimal capital are quickly bankrupt and often slide into insolvency – the result is that creditors often stand there empty-handed. The legislature has recognized this danger in this country and a commitment to the accumulation of equity in the law implements: has the registered capital of a general GmbH and may operate under the name GmbH, a limited liability company of entrepreneurs, it must establish each year a statutory reserve amounting to 25 percent of the net profit.