Commercial Law in Germany
Commercial Law in GermanyUpdated on Monday 14th September 2015
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The commercial law represents a set of legal rules that determine the rights and duties of parties engaged in trade and commerce. It includes all aspects of business and is applied to both domestic and foreign trade relations.
The German business law makes a clear distinction regarding the types of companies limited by shares and partnerships (general partnership, limited partnership, dormant partnership).
German Limited Liability Company (Gesellschaft mit beschränkter Haftung, GmbH)
In Germany the company with limited liability (GmbH) is the most renowned type of business and it is subject to the Act concerning Companies with Limited Liability. Its shareholders bring capital contributions divided into individual payments on the total investment without being accountable for company debts. The share capital is required to be at least 25, 000 euros. One person is enough to start a GmbH and all documents have to be notarized by a notary then the company must be registered with the commercial register in order to be able to run. The company’s name will always have GmbH at the end. In this type of German company, the shareholders’ most important rights are: the right to vote, to call a meeting with only 20 % of the votes, the right to use the profits from the account, the right to raise or reduce capital and appoint auditors. German directors have two major duties towards the company: the duty of loyalty and the duty to exercise competent judgment.
The German Joint Stock Company (Aktiengesellschaft, AG)
The German joint stock company (AG) is governed by the Stock Corporation Act (AktG) and it is required to have a minimum share capital of 50, 000 euros. Before starting an AG the articles of association have to be authenticated by a court or notary and then register with the commercial register. The name of the company has to contain the expression AG.
Partnerships in Germany are governed by the Civil Code ( Burgerliches Gesetzbuch - BGB) under general rules, while mercantile partnerships have to abide a set of specific rules set by the Commercial Code (Handelsgesetzbuch – HGB).
Most of the times companies prefer to establish subsidiaries or branch offices in Germany rather than setting up independent companies. The German subsidiary is independent up to some degree having its own management, accounting system and business assets, this way it need to register with the commercial register, while branch offices depend almost entirely on the main office and they don’t need to register.