What is the main source of law authorising this entity form?

German Limited Liability Company Act (Gesetz betreffend die Gesellschaften mit beschränkter Haftung – GmbHG).

Give a brief summary of this entity form, including

Does the entity possess separate legal personality?

The GmbH has legal personality.

(Maximum) period of existence

There is no maximum period of existence. Typically a GmbH is incorporated for an indefinite period, but a limited period may be stipulated in the Articles of Association.

Governing document(s)

The GmbH is governed by its Articles of Association.

Liability of incorporators / shareholders

There is no personal liability for shareholders after registration of the GmbH in the commercial register, except for their own and other shareholder’s shareholder contributions; or for liabilities that have arisen from business before registration (this problem can be solved by usage of shelf companies); or in case statutory shares have been paid back to the shareholder.

(Governing) bodies

The bodies of the GmbH are: Managing Director(s); if applicable Supervisory Board; and Shareholders' Meeting.

Other particularities

NA

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

Acquisition of assets, equity etc. located abroad is possible without limitation.

Cross-border structuring is possible inside the EU based on legislation (mergers, demergers, change of legal form) or jurisdiction of the ECJ (e.g. cross-border relocations with change of legal form).

Can this type of entity be publicly listed or held?

No.

Can this type of entity be used for a non-profit or charitable organization?

Principally, yes (“GmbH” – “gemeinnützige GmbH ”). Sometimes used e.g. for hospitals..

Give a brief summary of the process of incorporation, formation, or organization, including

Main documents required

Notarization of the deed of establishment and of the articles of association of the GmbH before a German notary. Share capital should be at least 25,000 Euro (by contributions in cash or contributions in kind).

A description of the purpose of the business required, but not elaborate. Appointment of at least one Managing Director (“Geschäftsführer”) by the shareholders.

Involvement of notary, company register, governmental authorities

Notarial certified filing with the Commercial Register by the Managing Director.

Timing (estimate)

If there are no peculiarities in exceptional cases (e.g. certain approvals needed), incorporation may take between a few days and a few weeks, particularly depending on the workload of the Commercial Register.

Main costs, including registration and similar fees (excluding legal fees)

Costs of incorporation are dependent on the share capital (e.g. minimum share capital of 25,000 Euro may lead to costs for notary and registration of about 800 - 900 Euro).

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

Description of the purpose of the business required, but not elaborate.

Minimum number of incorporators / shareholders and residency requirements

The minimum is one (1). No residency requirements.

Minimum number of directors (or other applicable officers) and residency requirements

The minimum is one (1). No residency requirements.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

25,000 Euro in cash or in kind.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

Incorporation without physical presence is possible electronically by means of video communication with the notary (specific ID required, only for cash incorporation) or by virtue of a Power of Attorney of shareholder(s) (The Power of Attoreny needs to be notarially certified and, in case some cases, legalized).

Managing Directors need to apply for registration, and their signature(s) must be notarially certified, representation is not possible. Legally it is possible that the Managing Director signs abroad (foreign notary to certify signature, in case legalization required) or electronically, by means of video communication with the notary (specific ID required). However, particularly banks tend to require physical presence for opening of bank account (for anti-money-laundering verification).

Is a tax identification number, or equivalent, required? If so, how is it obtained?

Tax identification number will be provided by tax authorities on registration. VAT-ID will be provided by tax authorities on request.

What is the title of the applicable company registry?

Commercial Register (Handelsregister). Additionally, companies and their shareholders might need to be registered under anti-money-laundering regulation with the transparency register (Transparenzregister).

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles , Ownership identification (direct and/or indirect ownership, 'beneficial owners') , Group structure , Share capital , Directors , Accounts , Insolvency, good-standing, liquidation , Liens and encumbrances on the shares , Liens and encumbrances on assets of the entity , Other (e.g. litigation, tax matters)

Articles of Association.

Share capital.

List of shareholders and the respective shareholdings.

Managing Directors.

Further representatives (authorised signatories – Prokuristen).

Representation rights (joint/sole; in-self-transactions).

Liquidation resolution.

Insolvency proceedings.

All information is publicly available.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

Managing Director(s) is/are (solely or jointly) representing the company entirely, are responsible for all matters and obliged to act diligently and managing directors who violate their duties are liable for damages to the company.

How are the members of the executive body appointed, dismissed and replaced?

By shareholders’ resolution, Managing Directors may be appointed or dismissed at any time (notwithstanding their ongoing employment contracts). The resolutions have to be filed with the Commercial Register but are effective immediately.

Is it possible to appoint corporate directors or must all directors be natural persons?

No.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

In German corporate law, the concept of non-executive directors does not exist. It is possible to voluntarily appoint a Supervisory Board (Aufsichtsrat) by amending the Articles of Association and define its competences freely. However, that does not change the responsibility of the Managing Directors. Depending on the number of employees, a Supervisory Board (including employee representatives) may be mandatory.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

Shareholders’ Meeting (Gesellschafterversammlung). The main competences according to the GmbHG are the appointment and dismission of company representatives (Managing Directors and authorized signatories), the adoption of financial statements, profit distribution and share-related measures. The Shareholders' Meeting has the right to instruct the Managing Directors, however they have no representation rights.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

50% + 1 vote for ordinary decisions; 75% of the votes for extraordinary decisions; 100% of the votes for increases of obligations of the shareholders. A quorum and/or different majorities may be stipulated in the Articles.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Whether a Supervisory Board is required depends on number of employees (critical from 500 onwards).

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

Annual financial statements. To be filed with the Business Register (Unternehmensregister), extent depending on balance sheet total, turnover, and number of employees.

Is the entity permitted to determine its own financial year?

Yes.

Is the entity subject to any statutory (external) auditor obligations?

Depending on balance sheet total, turnover, and number of employees.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

None.

What is the title designated for ‘ownership interests' (e.g. shares, quota, interests, membership)?

Shares.

Are different classes of ownership interests possible? If so, what are some examples of different classes?

Not legally regulated, but possible (e.g. preferred shares, share participation rights (Genussrechte)).

What documentation is required for the transfer of ownership interests?

Notarized share purchase agreement.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

Approval by the Shareholders’ Meeting may be stipulated in the Articles. Transfer agreements which are not notarized are void.

Are there any applicable stamp duties imposed when transferring ownership interests?

No.

How are shares issued? (including information on payment obligations, registration requirements)

No physical issuance required.

Further information on equity contributions, e.g. , Non-cash payments on shares; (Share premium) contributions without issuance of shares , Can partially paid shares/ownership interests permitted and what are the restrictions on them?

Contributions in kind are possible.

Shareholder’s contributions into the capital reserves are possible without issuing shares.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

Share cancellation (redemption) is possible if shares are fully paid up.

Share repurchase is possible if shares are fully paid up; and the company can set aside a reserve for own shares (in the amount of the price for the repayment) without affecting the statutory share capital. Share capital can be reduced by formal proceedings (in general notarized shareholders’ resolution, registration with the Commercial Register and an one-year-waiting period required).

Any requirements with respect to distributions to shareholders?

Funds needed for coverage of share capital must not be distributed to shareholders.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, depending on the contents, notarization may be required.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

Main costs are the annual financial statements. Costs for filings are negligible.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

For 2023: 15% corporate tax (“Körperschaftsteuer”) plus solidarity surcharge (“Solidaritätszuschlag ”, 5,5% of tax burden) plus local trade tax (“ Gewerbesteuer”). In total about 30% tax rate.

Summary of any specific matters, e.g. recent or prospective major legal developments

There are no corporate law changes expected in the near future.