Corporate law is a complex area of law that primarily deals with the law of corporations and partnerships. With so many different legal forms, it is difficult to keep an overview. That's why I would like to offer you as Specialist lawyer for commercial and corporate law In the following “corporate law overview” the existing legal forms and their characteristics are clearly presented.
Corporate law overview – the legal forms
Corporate law regulates the formation, trading, conversion, transfer and dissolution of companies. In order for a company to exist, three requirements must be met:
- Several people must come together through a contract.
- The association of people must serve a permitted purpose.
- The contracting parties undertake to promote the common purpose.
This characterizes the basic form of society, the so-called civil law society (GbR for short, also BGB society).
There are also many other different types of companies. The shareholders can largely design the form of the company individually, although no new company form may be created. Corporate law deals with the following issues:
- Legal capacity
- Independence of membership
- Liability
- Powers of management and representation
In Germany there is no uniform law for society, but rather it is made up of many norms and laws. The main sources of corporate law are primarily the BGB, HGB, PartGG, AktG, GmbHG, GenG, VVaG, UmwG and Art. 9 GG.
The following summary is divided into partnerships (such as GbR, OHG, KG) and corporations (such as GmbH, UG, AG) and only deals with the most important companies, so it is not complete.
About partnerships
The partnership is a special legal form of company. A partnership is the merger of at least two partners to jointly achieve a specific purpose. These can be either natural or legal persons. A partnership is itself a legal entity. In a general partnership (oHG), all partners are personally liable, in a limited partnership the limited partners are not liable, only the so-called personal liable partner, which can also be a GmbH, hence the short form GmbH & Co. KG.
A partnership has legal capacity and therefore bears rights and obligations, although this varies depending on the country and type of company. In contrast to a corporation, the liability of the partners of a partnership is unlimited, which means they are liable both with the company's assets and with their private assets. The exception is the limited partner of a KG. His liability is limited to the liability amount entered in the commercial register. Another exception is the partnership, where liability is limited to professional errors.
Civil law partnership (GbR)
Society to achieve a common goal/purpose:
- Founded by natural or legal persons
- Partnership agreement necessary (informal, oral or written)
- Purpose must be determined and promoted
- Liability: company or partner (unlimited with private assets)
- Common legal form for practices or partnerships
- Legal source civil law society: §§ 705 ff. BGB
Partnership company (PartG)
Members of freelance professions come together to practice them:
- No commercial business
- Only natural persons as shareholders
- Written partnership agreement required
- Application of OHG law
- Liability of personally liable partners and their assets. However, exclusion of personal liability is possible for certain professional groups. Please contact me about your options.
- Legal source for partnership companies: PartGG
General partnership (oHG)
Operating a commercial business:
- Founded by natural or legal persons with a partnership agreement
- Entry in the commercial register
- No minimum capital
- As a rule, all shareholders have individual management authority
- Liability: company or partner, depending on the case. However, the partners are fully liable with their private assets.
- Legal source for partnerships (OHG & KG): §§ 105 ff. HGB
Limited partnership (KG)
Fulfillment of a purpose by operating a commercial business:
- Personal liability of the partners and limited partners liable with assets, but only up to the amount of their contribution
- Previously determined liability amount for the limited partners, whereby this amount must be paid in so that there is no personal liability beyond this
- Application of the oHG law with special regulations for the KG
- No management by limited partners alone
- No minimum capital
- A special form is the GmbH & Co. KG. In it, the personally liable partner is a GmbH, which in turn is only liable with its share capital
- Legal source for limited partnerships (GmbH & Co. KG & KG): §§ 161 ff. HGB and §§ 105 ff. HGB
Silent Society (StG/sG)
Partner participates in external trading with capital contribution, which is transferred to the owner's assets:
- Pure internal society
- Involvement of legal and natural persons
- Silent partner has the right to share in the profits
- Silent partners can only claim their contribution as an insolvency creditor
- Legal source for silent companies: §§ 230 to 236 HGB
European Economic Interest Grouping (EEIG)
The shareholders' economic activities are to be facilitated and further developed through the merger:
- Founded by natural or legal persons
- At least two partners from different EU countries
- Founding contract + registration entry
- Full legal capacity within the EU
- Maximum 500 employees
- No minimum capital
- Equal profit sharing
- Legal source for European Economic Interest Grouping: EWIVAG
Of course, there are also special forms of the legal forms mentioned, the list and explanation of the differences would go beyond the scope of our corporate law overview. By and large, all special forms are comparable to the main form.
About corporations
Even in a corporation, the shareholders pursue a common purpose. In contrast to a partnership, a corporation (GmbH and AG) can only have one partner or shareholder. Because not all stock corporations are listed on the stock exchange.
In the case of a corporation, the focus is on the capital participation of the shareholders. It is in contrast to a partnership, where the focus is on the liability and cooperation of the partners as entrepreneurs.
A corporation is an independent legal entity. It can therefore be the bearer of rights and obligations, own assets and sue and be sued under the name of the company.
Limited Liability Company (GmbH)
Commercial company pursuing a specific purpose:
- Founded by a natural or legal person with a partnership agreement that must be notarized
- Commercial register entry required
- €25,000 minimum share capital
- Liability exclusively with business assets
- most common form of company in Germany
- Legal source for limited liability companies: GmbHG
Limited liability company (UG)
Company whose charter capital is less than the minimum share capital:
- Special form of GmbH
- It is mandatory to spell out the term “limited liability” after the company name
- No fixed share capital
- Registration only after full payment of the share capital (no contributions in kind)
- Financial reserves must be created by law in order to build up share capital
- Legal source for limited liability company: GmbHG
Joint-stock company)
Company with its own legal personality
- Founded by natural or legal persons
- €50,000 minimum capital
- Share capital divided into shares
- Liability with company assets; the shareholders are not personally liable
- The AG can, but does not have to, be listed on the stock exchange
- Legal source for stock corporations: AktG
Limited partnership on shares (KGaA)
A company with its own legal personality in which at least one partner has unlimited liability
- Legal relationship between general partners according to KG law
- Total capital consisting of share capital of the limited partners and capital contributions of the general partners
- Legal source for limited partnerships on shares: AktG
European Company (SE)
Public limited company in the EU or EEA whose capital is divided into shares and has legal personality
- Founded only by legal entities as part of a merger of existing companies
- €120,000 minimum capital
- offers advantages when shaping company co-determination
- Legal source for European companies: SEVO, SEAG, SEBG, AktG
Here, too, there are special forms that are not specifically presented in this corporate law overview due to the similarities.
Summary of legal sources
The most important legal sources of corporate law are:
- for civil law companies: §§ 705 ff. BGB
- for partnerships (OHG & KG): §§ 105 ff. HGB
- for partnership companies: PartGG
- for EWIW: EWIVAG
- for silent companies: §§ 230 to 236 HGB
- for GmbH and UG: GmbHG
- for stock corporations and limited partnerships based on shares: AktG
- for SE: SEVO, SEAG, SEBG, AktG
- From a constitutional point of view, Articles 9 and 14 of the Basic Law (GG) are of particular importance.
Corporate Law Overview – Summary
As you can see, the legal forms are divided into partnerships and corporations, each of which has different characteristics and is therefore suitable for different companies and objectives. The corporate law overview contains the most common legal forms and their most important features. Associations and cooperatives have deliberately not been included in this corporate law overview because the focus here is on companies.
I hope I was able to inform you well with this rough overview of corporate law. If you would like to discuss the individual legal forms in a personal conversation with me Specialist lawyer for commercial and corporate law If you would like advice, please feel free to contact me in connection set. I look forward to welcoming you to my office. I would be happy to advise you on the right legal form for your company.
