Meaning
Statutory provisions in Germany establish the legal framework for the creation, governance, and dissolution of limited liability companies. This legislative act, known as gmbh-gesetz, governs the rights of shareholders, the duties of managing directors, and the protection of corporate creditors. It sets the baseline rules for corporate capitalisation, including the minimum share capital requirement of twenty-five thousand euros.
Corporate Formation
Incorporators must execute a formal deed before a German notary to initiate the establishment of a limited liability company. Under the gmbh-gesetz, the company only acquires its legal personality upon its registration in the commercial register. Prior to this registration, the founders operate as an association and bear personal liability for any transactions undertaken in the name of the company.
Governance Structure
Shareholders exercise collective control through resolutions adopted at general meetings, unless the articles of association prescribe a different decision-making process. The statute requires the appointment of at least one managing director, who owes a strict duty of care to the company and must execute their duties with the diligence of a prudent businessperson. Failure to act in accordance with these statutory duties exposes the directors to personal liability for losses incurred by the corporation.
Capital Maintenance
Strict rules prevent the distribution of corporate assets to shareholders if such distributions would cause the net assets of the company to fall below the registered share capital. These provisions are designed to protect third-party creditors who rely on the statutory minimum capital as their primary recourse. Managing directors must monitor the financial health of the company constantly and file for insolvency within three weeks if the company becomes overindebted or illiquid.
Any breach of these capital preservation rules triggers joint and several liability among the shareholders to restore the lost capital, and directors face criminal liability for delayed filing.
