UIA Flrence, Oktber 29 Nvember 2 2014 Favurable Crprate Frms Germany Dr. Mansur Pur Rafsendjani, Nerr LLP
D a t e - C l i c k V i e w / H e a d e r a n d F t e r t e d i t 2 Cntents Establishing f Business Entities in Germany I. Branches (Zweigniederlassungen) II. Lcal Cmpanies
I. Legal Frms I. Branches/Permanent Establishment II. III. Crpratins 1) Private Limited Liability Cmpany (Gesellschaft mit beschränkter Haftung, r GmbH) 2) Unternehmergesellschaft 3) Public limited Cmpany r Jint Stck Cmpany (Aktiengesellschaft, r AG) 4) Partnership limited by shares (Kmmanditgesellschaft auf Aktien, r KGaA) 5) Scietas Eurpae (Eurpean Jint Stck Cmpany) Partnerships 1) General Partnership (Offene Handelsgesellschaft, r HG) 2) Limited (Kmmanditgesellschaft, r HG) 3) Cmbined Limited Partnership (GmbH & C KG)
II. Criterias fr the chice f legal frm Liability f Sharehlders Minimum Capital Csts fr establishing Representatin Accunting Transfer f shares Flexibility Financing C-Determinatin f Emplyees Image Tax Cnsequences Ineritance
III. General Characteristics f German Crpratins 1) Establishment by ntarial deed and registratin with the Cmmercial Register shelf cmpanies very cmmn in Germany (ne day t get started) cncept f minimum stated share capital, i.e the minimum stated share capital must nt be re-distributed t sharehlders (cncept f capital maintenance as quid qu pr fr the limited liability f sharehlders) 2) Recnstructin All frms f crprate cnstructins, e.g. mergers, splits, spin-ffs, drp-dwns and changes f legal frm are regulated by the recnstructins act (Umwandlungsgesetz). In many cases the recnstructin can be dne free f tax, prvided that the frmalities and prcedures f the recnstructin act are bserved. Branches hwever cannt generally be cnverted t crpratins r partnerships
IV. Branches / Permanent Establishements Freign business may carry ut peratins in Germany thrugh a branch N frmal minimum capital requirements (exceptins fr branches subject t specific industry supervisin) Registratin with cmmercial register at the curt fr the area in which the branch is lcated r at which the German activities are fcused, if the German activity cnstitutes an apparently independent business unit, capable f a self-cntained and self-supprting existence. Tax: In the abve case branch is als a permanent establishment (PE) with the effect that all prfits made in Germany are taxable (crprate tax) and prfits may be repatriated withut any German withhlding tax One r mre lcal branch managers must be named. Suits can be brught against the cmpany befre German curts where the branch is lcated ( 21 f the German Civil Prcedure Curt)
V. Jint Stck Cmpany (Aktiengesellschaft, r AG) AG = public limited cmpany apprpriate frm fr entities wned by a large number f sharehlders and under the day-t-day cntrl f emplyed managers Freign investrs tend t AG if they intend a public ffering whereas the GmbH will usually be chsen fr simplicity when it is intended that the German entity remains entirely in grup wnership. AG may be publically traded n the stck exchange (GmbH may nt). AG minimum share capital f EUR 50,000.00 divided int rdinary shares f equal nminal value f at least EUR 1.00 Basically tw-tier-system with respect t Management Management Bard Supervisry Bard Nt pssible: glden share (i.e. share which gives the minrity investr the right t cntrl the vte at a general meeting).
VI. Private Limited Liability Cmpany (Gesellschaft mit beschränkter Haftung, r GmbH) GmbH: designed t suite the circumstances f an wner-managed business with its wn legal persnality GmbH with nly ne sharehlder pssible (Ein-Mann GmbH) Minimum share capital f EUR 25,000 GmbH shares are nt freely transferable (in particular restrictins in the articles f the assciatin, e.g. existing sharehlders right f first refusal befre a sharehlder may transfer his interest t a third party). Special regulatin in the GmbH Act fr registratin f Unternehmensgesellschaften Techically n actual minimum capital Hwever bligatin t disclse its status in its firm name and ne quarter f annual net prfit must be taken t a legal reserve until stated minimum share capital is reached
VII. Sharehlders, directrs and fficers AG and GmbH are managed by ne r mre directrs. Directrs f an AG meet as a bard (Vrstand), take decisins cllectively and recrd their meetings in the bard minutes. The Bard is supervised by the Supervisry Bard Sharehlders f an AG have nly a limited influence n day-t-day business (capital prviders nly) Hwever supervisry bard is in turn appinted by sharehlders The directrs f a GmbH (Geschäftsführer) meet infrmally and take decisins cllectively r n their sle respnsibility as determined in the charter established by the sharehlders. In bth types the management has a certain freedm t take decisins, but has t shw the diligence f a prudent business man (business judgment rule) If the emplyees exceed 2,000, then either frm f the cmpany must appint a secnd directr as labur directr.
VIII.Supervisry Bard Emplyees Participatin Any cmpany with mre than 500 emplyees must appint a supervisry bard. Between 500 and 2,000 emplyees, ne third f the seats fall t the representatives f the emplyees. The remaining tw thirds are then elected by the sharehlders. Mre than 2,000 emplyees the supervisry bard must have 12 seats. Mre than 10,000 emplyees, 16 seats are necessary Mre than 20,000 emplyees, 20 seats necessary In each f these cases half f the seats fall t the sharehlders and the ther half t the representatives f the emplyees. The chairman f the Supervisry Bard is elected by the representatives f the sharehlders (unless the full bard elects bth chairman and deputy chairman with a 2/3 majrity). Small AGs with fewer than 500 emplyees must appint a supervisry bard f at least three members elected by the sharehlders.
VII. Partnership limited by shares (Kmmanditgesellschaft auf Aktien, r KGaA) Effectively treated as an AG, althugh cnstituted as a partnership. Shares can be traded n the stck exchange. KGaA has at least ne partner with unlimited liability. The shares are issued t and held as investments by the partners with limited liability (they have a similar status t that f sharehlders in an AG). All managing rights fall t the unlimited partners (they have the same psitin as members f the Vrstand f an AG). Divisin f prfits and lsses is regulated in the statutes f the KGaA. KGaA is favured by insurance cmpany.
VIII.The Eurpean Cmpany (SE) Since 2005 a Eurpean Cmpany, r SE, can be established in Germany. The SE is based n the Eurpean Cuncil Order (EC) N. 2157/2001 f Octber 8, 2001. The act allws the SE t chse between tw management structures, a dual system f management and supervisry bard, and a single system f a bard f directrs ( Verwaltungsrat) wh in turn shuld elect ne r mre managing directrs. The size f the bard depends n the size f the share capital. The participatin f the emplyees in the SE is watered dwn. Thse invlved negtiatins are prtected against unfair pressure frm the emplyer and are als given rights t cnsult trade unins and ther utside bdies.
VIII. Partnerships Tw German partnership frms: general partnership (Offene Handelsgesellschaft r HG) and the limited partnership (Kmmanditgesellschaft r KG). KG is a variatin f the HG and therefre the rules applicable t a HG apply equally t a KG (with exceptins) Partnership is nt a legal entity, althugh it can acquire rights and assume bligatins in its wn name (e.g. wnership and real estate, t be sued r sue etc.) Day-t-day management f a German partnership is reserved fr general partners (thse with unlimited liability) Limited partners have the right t meet and t be cnsulted n matters f verall imprtance, including business plicy decisins. Rights f the limited partners are usually specified in the partnership agreement. The unlimited liability f a general partner can in fact be limited by installing a GmbH as a general partner (e.g. GmbH & C. KG).
D a t e Yur cntact Dr. Mansur Pur Rafsendjani Rechtsanwalt Partner Munich T +49 89 28628490 mpr@nerr.cm Dr. Mansur Pur Rafsendjani is C-head f Nerr s Internatinal Trade Grup and member f the Practice Grup Distributin & Franchise Systems, E-Cmmerce. He is particularly experienced in drafting internatinal agreements and curt representatin in trade and distributin law and lgistics (Glbal Purchasing, Glbal Supply, Distributin, Franchising and Cmmercial Agency, Lgistic, Warehuse, Transprtatin, Supply Chain Advice) and M&A/Jint Venture. Career Legal studies at the universities f Saarbrücken, Nancy (France), Mntpellier (France) and San Dieg (USA) Chief in-huse cunsel in an asset management cmpany (AG) Lecturer at the University f the Saarland and the Saarland University f Applied Sciences Head f Kiev Office frm 2007 until 2013 C-Head Internatinal Trade & Cmmercial With Nerr since 2001