Wednesday, November 12, 2008

German Limited : A New Entrepeneurial Company "Unternehmergesellschaft (haftungsbeschränkt)" or "UG (haftungsbeschränkt)" as of 1 November

Andreas Lindner at Faegre & Benson alerts us to

Significant Changes for German Law on Limited Liability Companies


"A new law bringing significant changes for limited liability companies incorporated in Germany takes effect on November 1, 2008."

In recent years many Germans have set up limited liability companies in the UK because of the outdated nature of German laws pertaining to the incorporation of small companies, laws which have served as severe barriers to entry to prospective start-up companies. Indeed, in the year 2006, one of every four German limited liability companies was set up as a UK limited.

The lawmakers in Germany have finally acted and have tried to change this state of affairs, effective November 1, 2008.

As Jessica Schmidt writes at the German Law Journal (also available as a .pdf):

"One of the probably most groundbreaking – and at the same time also most contentious – issues of the German reform of private limited companies by the Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG – Law for the Modernization of the Private Limited Companies Act and to Combat its Abuse)... is the introduction of the Unternehmergesellschaft (UG – Entrepreneurial Company). This new sub-type of the Gesellschaft mit beschränkter Haftung (GmbH – Private Limited Company) is specifically designed for entrepreneurs and has already unofficially been dubbed the “Mini-GmbH” and “GmbH light”. It can be seen as the centerpiece of the legislator’s overall aim to facilitate and accelerate the formation of companies and the underlying motive of increasing the international competitiveness of the German GmbH."

For better understanding of the what the German UG is, Jessica Scmidt looks at
the Central Features of the New Unternehmergesellschaft (UG)
and compares
the UG (Entrepeneurial Company) with the UK Limited under the Companies Act (CA) of 2006
as regards the following parameters:

I. Company Name
II. Minimum Capital and Capital Contributions
III. Constitution
IV. Speed of Incorporation
V. Number and Qualification of Shareholders
VI. Internal Structure
VII. Shareholder Decision-making
1. General
2. In Particular: New § 5a (4) GmbHG
VIII. Maintenance of Capital
1. Distributions
2. Eigenkapitalersatzrecht

See the article at the German Law Journal or the .pdf.

See also:
Faegre & Benson (Mondaq)
DLA Piper (Legal Week)
Gregor Bachmann at the German Law Journal
Michael Beurskens and Ulrich Noack at the German Law Journal

See also:
the discussion at
avocado rechtsanwälte
Corporate Law and Governance

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