The Limited Liability Company under German Law (the GmbH). Dr Alexander Schröder-Frerkes
may provide for a business year which deviates from the calendar year, as long as it does not exceed a period of 12 months.24
23. Other typical provisions: representative powers of the managing directors
According to the Act on Limited Liability Companies, a GmbH under German law is represented jointly by all of its managing directors.25 If the company has only one managing director, he or she represents the company individually. However, the articles of association typically stipulate that a company is either represented by only one managing director, or, in the case of there being several managing directors, by either two managing directors or a managing director together with an authorised signatory (Prokurist). Furthermore, the articles often stipulate that the managing directors are exempted from the prohibition of self-dealing in order to be able to enter into agreements between themselves and the GmbH.26
24. Other typical provisions: powers of the shareholders’ meeting and consent requirements
Very often, the articles of association also contain information regarding the powers of the shareholders’ meeting. The responsibilities of the shareholders’ meeting of a GmbH are set forth under section 46 of the Act on Limited Liability Companies. However, these powers may to a large extent be amended by the articles of association.
Typically, the articles provide for two different possible amendments of the powers of the shareholders’ meeting. First, the articles usually provide for certain types of transactions the managing directors may not enter into without the prior consent of the shareholders’ meeting. In this case, the powers of the shareholders’ meeting are extended in the articles. Secondly, the articles may also stipulate that powers of the shareholders’ meeting are shifted to another corporate body such as a supervisory board or even the managing directors. The articles may thus reduce the powers of the shareholders’ meeting.
24a. Other typical provisions: formal requirements for the shareholders’ meeting
Very often the articles contain provisions regarding formal procedures and rules pertaining to the calling and holding of a shareholders’ meeting.27 These typically set forth who is responsible for calling a meeting, the notice period for calling regular and extraordinary shareholders’ meetings, the means of communication by which the invitation must be extended, the majority which is required to pass a resolution, whether or not a resolution may also be passed outside a shareholders’ meeting and if yes, which means of communications are acceptable to do so (telephone, facsimile, email, etc), what must be contained in the minutes of the meeting and, in some cases, which formal requirements must be observed when objecting to shareholders’ resolutions.
25. Other typical provisions: change in the shareholder structure
The articles often contain provisions with respect to a change in the shareholdings in the company. The articles may stipulate that transferring shares in the company requires the prior consent of the GmbH.28 Furthermore, a typical provision pertains to a pre-emptive right on the part of the other shareholders in the event that a shareholder wishes to sell its share to a third party. This enables the prevention of third-party access to the company, and allows the shareholder structure to remain homogeneous.
25a. Other typical provisions: finances
Provisions regarding the financial situation may also often be found in the articles. They set forth, first, certain formal requirements with regard to the establishment of the financial statements on behalf of the company. Secondly, the articles often contain provisions on the use and distribution of the profits of the GmbH.
26. Sample articles (Musterprotokoll)
Since the Act to Modernise the Law Governing GmbHs and Combat Abuses entered into force, the Act on Limited Liability Companies now also provides sample articles of association which may be used as an alternative to individually drafted articles when establishing a GmbH. The sample articles contain all the information mandatorily required according to the Act on Limited Liability Companies.29 They contain provisions pertaining to the firm and the seat of the company, its purpose, the share capital and the names of the shareholders, the nomination of the managing directors and the list of shareholders (Gesellschafterliste). In addition to these mandatory provisions, the sample articles may not contain any other provisions which in any way deviate from the Act on Limited Liability Companies.30 One advantage of using sample provisions is that the notarial fees are lower when a GmbH is established based thereon.31 Additionally, the process of registration in the commercial registers may be faster for these ‘sample GmbHs’, even though there is little empirical data to date in this regard.
The sample articles, however, can only be used by those companies which have up to three shareholders and only one managing director.32 Furthermore, the sample articles may only be used if the share capital is raised in cash and not in the form of contributions in kind.
27. Notarial form requirement
A notarial deed, which must be signed by all shareholders, is required for the articles of association and in order to establish the GmbH.33 This means that all shareholders, whether they are natural persons or legal entities, have to appear in person before the notary or send a duly authorised agent in their place (for further details on agents see Section 30). In order to draw up the notarial deed, the content of the deed of establishment and the articles of association must be read aloud to the present or represented shareholders in the presence of the notary. After the deed has been read aloud, it must be signed by all shareholders (or their representatives) and the notary.
The notarial form described above is also required if any further changes are made to the articles of association in the form of either the addition or deletion of content.34
28. Notarial form requirements: notarisation abroad
Even though they are limited and regulated by statute, notarial fees in Germany can sometimes be rather high compared with other European countries. This sometimes raises the question as to whether a notarisation of certain documents relating to a GmbH – in particular share transfer agreements – may be undertaken by a foreign notary in order to save costs. Under German law, the recognition of notarial deeds issued in a foreign country is subject to very stringent rules and the issue of whether or not a notarisation meets the requirements under German law in specific cases is often highly disputed amongst scholars and courts. If difficulties associated with the validity of notarial deeds are to be avoided, it is advisable to have any deeds in connection with a GmbH notarised by a notary in Germany. In the event that a notarisation shall be carried out by a foreign notary, in each case the parties should assess whether, in view of the transaction or the amendment of the articles in question, the notarisation by the specific foreign notary would be accepted as equivalent to notarisation performed by a German notary. In connection with a transfer of shares, effected in certain Swiss cantons, courts have recognised the notarisation as being equivalent to a notarisation by a German notary.35 The issue of potential equivalence usually only bears relevance in this particular context (share transfer), as