Successful together. Stefan Sieferer Budapest

Transcription

1 Successful together START UP SCENE IN BAVARIA Information and Best Practices Legal and tax framework conditions for startups in Bavaria Stefan Sieferer Budapest

2 Agenda 1 Choice of legal form 2 Preparation phase 3 Establishment phase 4 Organizational structure of the GmbH 5 Participation of investors 6 Tax framework conditions 2

3 1. Choice of legal form Criteria of the choice of legal form Partnerships German private partnership (GbR), General commercial partnership (OHG), Limited partnership (KG); Special form: GmbH & Co. KG Corporations In particular GmbH, AG; Special form: Unternehmergesellschaft(UG) Decision criteria: Limitation of liability Capital requirements Organizational structure Third-party managing director / Principle of self-managed company Taxation Image 3

4 1. Choice of legal form Comparison of the GmbH with other legal forms Stock corporation (AG) The capital requirement is higher at the establishment (Share capital amounts to min. EUR 50,000.-, half of it at the time of establishment) Supervisory board: mandatory requirement with min. 3 persons higher personnel effort Establishment and practical handling, more expensive and higher administrative and advisory fees 4

5 1. Choice of legal form Comparison of the GmbH with other legal forms General commercial partnership (OHG), limited partnership (KG) No total limitation of liability is possible; KG also requires min. 1 personally liable partner In partnerships closer personal bond of the partner GmbH & Co. KG Limitation of liability is possible In particular tax-related criteria might be relevant English Limited Foreign legal system Image is damaged in the legal affairs; possible mistrust of clients and business partners Tax criteria / permanent establishments in Germany 5

6 1. Choice of legal form Comparison of the GmbH with other legal forms Unternehmergesellschaft (UG haftungsbeschränkt) Special form of the GmbH: in response to Ltd.-establishments haftungsbeschränkt = limited liability = mandatory reference Advantage: No minimum capital but a 1- establishment is not the case in practice; problem: bad image Capital saving obligation: if the assets of the UG reaches to EUR 25,000,- the UG can be renamed to GmbH Minimum content of the articles of association Sample articles of association (max. 3 members, max. 1 managing director) Business registration, more exact scope of activities (cf. TEÁOR) IHK compulsory membership (EUR /year) 6

7 1. Choice of legal form Conclusion Advantages of the GmbH: Limitation of liability Moderate minimum capital Flexibility at the preparation of the articles of association Relatively flexible handling in practice (compared to AG) Good standing/ Image, trust of the legal affairs (limited liability compared to UG) Conclusion: The GmbH is an appropriate company form for start-up-companies 7

8 2. Preparation phase Considerations about provision of capital Share capital of the GmbH Minimum capital is EUR 25,000,- At least half of the capital shall be provided at the time of establishment Types of the capital contribution Cash contribution Contribution in kind Problem: valuableness The establishment through cash contribution is basically simpler and faster The valuableness verification is necessary in case of the establishment through contribution in kind Liability risks at hidden contribution in kind or repayment of paid-in amounts Caution with businesses between the company and the shareholders near to the date of establishment! 8

9 2. Preparation phase Further preliminary considerations Who shall be shareholder? Distribution of the shareholding structures, voting rights etc. Choice of location / seat of the Company? Regional differences regarding the business tax! Which name shall the GmbH bear? Preliminary examination of the availability of the Preferred company name : are there already any companies with this company name? Preliminary examination of the name and brand permissibility Note: the preliminary examination of the company name is possible at the local Chamber of Commerce and Industry (IHK) the future seat of the company (indicating the company name, seat, planned scope of activity and name of the shareholders) 9

10 2. Preparation phase Further preliminary considerations Which financing possibilities are available? Own funds of the shareholders / shareholder loan, loan from the family or from friends ( family & friends - financing), bank loan Are there any funding opportunities through funding programs? Can or must the Company be already established at the time of application for funds? What are the requirements in this regard? Shall the shareholders provide services or equipments (tangible / intangible) additionally to the contributions? 10

11 3. Establishment phase 11

12 3. Establishment phase Steps after notarization Payment of the cash contribution to the opened business bank account / provision of contribution in kind Company register application (trough the notary public after verification of the payments) Installation of the company name on the mailbox Business registration and membership obligation in the local Chamber of Commerce and Industry (IHK) Tax registration Opening balance, questionnaire regarding taxation Issuance of the tax number and of the VAT-number Note: Beware of fictitious register invoices or company register entries, popular fraud cases! (You will receive a lot of mail!) 12

13 4. Organizational structure GmbH Managing director Shareholders meeting Optional: advisory board Organs Relationship Shareholders meeting vs. management The shareholders meeting is basically authorized to give instructions But: no restriction of the power of representation is possible in the external relationship Solution: List of the legal issues requiring consent in the Articles of Association or in the employment agreement of the managing director Rules of procedure 13

14 4. Organizational structure GmbH Advantages of an advisory board It is more relevant in multi-shareholder companies The tasks / functions of the advisory board can be stated in the Articles of Association Mediating instance in the event of opinion differences/ disputes between shareholders In case of parity companies: potential solution possibility of stalemate situations Voluntary control body Management can be bound through regulation of the right of approval 14

15 4. Organizational structure GmbH Regulatory possibilities on shareholder level Articles of Association Notarial certification is necessary at the time of establishment(<--> in Hungary: attorney at law has this function) Requirement of notarization of later modification of the articles of association; The modifications of the articles of association require at least a threefourth majority and a company register entry Transparency: the insight of third persons into the company register is possible 15

16 4. Organizational structure GmbH Typical content of the Articles of Association Name, Seat of the Company Business purpose Share capital Business year Duration of the company Management Poss. Reservation of consent Poss. Special rights Shareholders meeting Competence Convocation Passing of a resolution Voting rights / majorities Poss. advisory board (function, procedure) Annual financial statement / appropriation of profits Disposal of shares Reservation of consent Pre-emption rights Drag along / tag along Matrimonial property Succession Termination / withdrawal Redemption Compensation Non-competition Publications Final provisions 16

17 4. Organizational structure GmbH Regulatory possibilities on shareholder level Shareholders agreement civil law agreement Makes it possible to conclude additional agreements between the shareholders no formal requirements, i.e. a private written one is possible Exception: Regulation of the obligations regarding the acquisition and sale of shares Advantage: non-public ( in Hungary: so called syndicate agreement Szindikátusi Szerződés ) 17

18 4. Organizational structure GmbH Regulatory possibilities on shareholder level Examples regarding possible contents of the shareholders agreement Obligation of conduct of the shareholders Performance obligations Financing agreements Pooled voting rights / - exclusions Approval requirements Optional rights (Call / Put Option), Pre-emption rights (in Germany: no similar legal pre-emption rights are available like in Hungary) Common means at Joint Ventures or entry of investors into the regulation of the conditions of the future cooperation and financing liability of the parties concerned 18

19 4. Organizational structure GmbH Regulatory possibilities on shareholder level In case of multi-shareholder companies, the shareholders shall think about the future already before the establishment and shall state the main points of the future cooperation in the articles of association or in a shareholders agreement. The prior agreement on the rules can save trouble later. Conflict-solving measures should be determined in the articles of association already at the time of establishment. If the conflict has already occurred it is too late! 19

20 4. Organizational structure GmbH Special organizational possibilities Management Sole power of representation / joint power of representation/ mixed joint power of representation Release from the self-contracting restrictions (Section 181 BGB) Reservation of consent of the shareholders meeting, for example for extraordinary businesses Rules of procedure for the management 20

21 4. Organizational structure GmbH Special organizational possibilities Limitation of the right to dispose Basically the shares can be sold without the consent of the co-shareholders In practice, the shareholders have interest in keeping the shareholders circle closed Solution: Exclusion on the basis of the Articles of Association or limitation of the possibilities of disposal (restriction on transferability) Caution: However, in case of the full exclusion of the possibilities of disposal, the shareholder have the right to withdraw even if there are no articles of association provisions allowing it. 21

22 4. Organizational structure GmbH Special organizational possibilities Possible regulations (examples): Limitation of the right to dispose Determination of the group of persons in whose favor it can be disposed (for example spouses, descendants, parents, partners) Shares can be transferred only with the consent of all shareholders, of the shareholders meeting (i.e. of the shareholders resolution) or of the company (represented by the management) 22

23 4. Organizational structure GmbH Special organizational possibilities Pre-emption right If a shareholder wants to sell his/her share the other/ all other shareholder(s) shall have a pre-emption right The co-shareholder(s) can acquire shares on the conditions under which the Purchaser would have been willing to acquire them (with the exception of different regulation of the articles of association) If the shareholder exercises his/her pre-emption right, the share cannot be sold to any third person Problem: there is a risk of breach of contract against third persons Solution of the conflict of interest of the shareholders wishing to sell the shares in practice: sale and purchase agreement under condition subsequent/ condition precedent 23

24 4. Organizational structure GmbH Liability risks Shareholders liability Difference: liability of the shareholders against private creditors / liability of the shareholders for the liabilities of the company The liability for the debts of the company is basically limited to the equity Only the equity and the entire company assets formed in the current business operation are liable to the creditors of the company If the equity has been effectively provided by the shareholders: liability shield against creditors of the company 24

25 4. Organizational structure GmbH Liability risks Shareholders liability Exceptionally further liability of the shareholders: Liability in the establishment phase: liability for prior losses or charges / liability for difference Caution in the course of businesses concluded before the registration of the GmbH in the company register! carry out of business issues which lead to a hidden contribution reimbursement Payments to the shareholder through which the share capital of the company will be breached, Section 30 GmbHG (capital maintenance rules) Contingent liability: subsidiary liability of the co-shareholders if the contribution of a shareholder cannot be obtained 25

26 4. Organizational structure GmbH Liability risks Managing director s liability General scale of fault: Due care of a prudent businessman (Section 43 Subsection 1 GmbHG) Due care of an independent fiduciary managers of foreign asset interest in a responsible executive position taking into account also the type and size of the undertaking Objective view; the managing director cannot refer to lack of individual skills 26

27 4. Organizational structure GmbH Liability risks External liability State Internal liability Managing director Company Third persons/ Creditors 27

28 4. Organizational structure GmbH Liability against the Company Liability against third persons Criminal liability In particular, liability for damages in connection with the breach of the due care obligation Sec. 43 Subs. 2 GmbHG Breach of duty of legality/ Compliancebreaches Breach against supervisory and control obligations Non-competition Drawing of business opportunities to himself Payments after insolvency Section 64 GmbHG Payments by violating the capital maintenance requirements Sections 30, 31 GmbHG Prohibited actions, From Section 823 BGB Liability for appearance Accounting law Sections 331,334 HGB Embezzlement Section 246 StGB Breach of trust Section 266 StGB Bankruptcy Section 283 StGB Delayed filing for insolvency Section 15a InsO Failure to make social insurance payments 28

29 5. Participation of investors Preliminary considerations Are there any alternative possibilities regarding the inclusion of an investor for the purpose of coverage of the financial requirement? Bank loan Funding programs Silent partnership etc. 29

30 5. Participation of investors Form of participation Purchase of shares by the existing shareholders Problem: capital inflow at the shareholders and not at the GmbH Creation of new shares by capital increase Notarized shareholders resolution about the capital increase Authorization of the investor to the takeover of the newly created shares against provision of a contribution If necessary, obligation of the investor to provide an additional amount into the free reserves of the company Take-over declaration of the investor Registration of the capital increase with the company register 30

31 5. Participation of investors Participation agreement Regulation of the implementation of the capital increase and of the liabilities of the existing shareholders and of the investor normally within the framework of a participation agreement The participation agreement is a supplemental agreement under civil law, cf. Shareholders agreements (Syndicate agreement) It requires notarization in case of the regulation of an obligation to sale or disposition of shares 31

32 5. Participation of investors Participation agreement Content of the participation agreement: Obligation to carry out the capital increase / acquisition of shares Financial contribution of the investor: contributions Other services of the investor, for example loan, payments into the free reserve, transfer Management authorities / influence opportunities Control options / reporting obligation Often requested from the investors side: exit scenarios for the investor, for example through options or tag along/ drag along 32

33 5. Participation of investors Special creation possibilities Options Put Option: A shareholder is granted the right to sell his shares to a co-shareholder; in the course of the exertion of the option, the co-shareholder is obliged to take over the share of the other for a purchase price calculated on the basis of the previously determined valuation method. Call Option: A shareholder is granted the right to take over the shares of a coshareholder on his request for a purchase price calculated on the basis of the previously determined valuation method. 33

34 5. Participation of investors Special creation possibilities Tag along / Drag along Drag along: If a shareholder wants to sell his shares to a third person the co-shareholder (usually the minority shareholder) is obliged to also sell his shares. Purpose: Enabling of the sale of the undertaking as a whole Tag along: If a shareholder wants to sell his shares to a third person the co-shareholder is entitled to do the same. The shareholder wishing to sell his shares shall ensure that his Purchaser is also ready to take over the shares of the shareholders entitled to tag along. Purpose: No obtrusion of a foreign (majority) shareholder 34

35 6. Tax framework conditions Overview: 1. Corporate tax 2. Business tax 3. Income tax 4. VAT 5. Capital gains tax 6. Binding information/ request 35

36 6. Tax framework conditions 6.1 Corporate tax Taxpayer: legal persons, AG, GmbH not: partnerships, GmbH & Co KG, OHG, GbR taxation is carry out on a shareholder level = personal income tax Tax rate: 15 %, plus 5,5 % of the tax amount Solidarity surcharge 15,825 % Assessment basis: the profit to be achieved in the business year/ calender year according to the balance sheet / annual financial statement Assessment: Principle of self-assessment Calculation of the corporate tax amounts and the corporate tax advance payments: quarterly, 10. March / 10. June / 10. September / 10. December Electronic data transmission: ELSTER 36

37 6. Tax framework conditions 6.2 Business tax Taxpayer: business enterprise Tax rate: differing, depending on the municipality: 7,5 15 % (in DE), according to the assessment rate = Multiplier Company profit x 3,5 (general business tax rate) x assessment rate (depending on the municipality) in Bavaria: 337,7 % Assessment basis: profit (to be) achieved in calendar year Allowance EUR 24,500,- at sole proprietorships/ partnerships but not at: GmbH/ AG Business tax advance payments: quarterly, / / / of the given calendar year 37

38 6. Tax framework conditions 6.3 Income tax Taxpayer: private persons, shareholders of partnerships (KG, OHG, GbR, Sole proprietors) Tax rate: progressive up to 42 % maximum tax rate and 45 % wealth tax from around EUR 250,000,- annual income Assessment rate: total earned personal income of the private person in the calendar year Assessment: until of the year Submission of the declaration regarding the previous year, self-assessment, electronic access ELSTER. 38

39 6. Tax framework conditions 6.4 VAT Taxpayer: all undertakings selling products or providing services. Exception: small enterprises Tax rate: 19 % deliveries and services; reduced tax rate regarding certain products/services: 7 % VAT-accounting/assessment: VAT accounting period quarterly but in case of start-ups: monthly + payment until the 10th day of the following month; possibility of requesting a permanent extension of deadline. 39

40 6. Tax framework conditions 6.5 Capital gains tax Dividends from participations Taxpayer: recipient of the dividends Tax rate: 25 % + 5,5 % Solidarity contribution 26,375 % in case of natural persons In case of limited companies as recipient of the distribution: up to 95 % taxexempt, 5 % as non-deductible operating expenses Dividends on participations abroad: considering DBA (for example DE-HU) 40

41 6. Tax framework conditions 6.6 Binding information in tax matters Preliminary request to the tax authority (competent: tax authority at the seat of the company or from abroad: Federal Central Tax Office BfS) Exact description of the situation Liable to pay the costs: 0,9 % of the subject value; in bagatelle cases= subject value < EUR 10,000: free of cost Binding effect: if the situation will be implemented equally / has not changed meanwhile No request for information if the claim is aimed at tax planning abuse. 41

42 Thank you for your attention 42

43 Your contact person Stefan Sieferer Rödl & Partner Andrássy út 121. H-1062 Budapest Telefon Fax stefan.sieferer@roedl.hu Each and every person counts to the Castellers and to us. Human towers symbolize in a unique way the Rödl & Partner corporate culture. They personify our philosophy of solidarity, balance, courage and team spirit. They stand for the growth that is based on own resources, the growth which has made Rödl & Partner the company we are today. Força, Equilibri, Valor i Seny (strength, equilibrium, valour and common sense) is the Catalan motto of all Castellers, describing their fundamental values very accurately. It is to our liking and also reflects our mentality. Therefore Rödl & Partner embarked on a collaborative journey with the representatives of this long-standing tradition of human towers Castellers de Barcelona in May The association from Barcelona stands, among many other things, for this intangible cultural heritage. Rödl & Partner November 21,