A GmbH that is newly founded needs a managing director. The managing director, also known as managing director or CEO, represents the GmbH. This means that he acts on behalf of the GmbH. He concludes contracts for the GmbH and manages the business. He bears entrepreneurial responsibility and decides which business the GmbH carries out. A foreigner can also be a managing director in Germany. However, there are special features that need to be taken into account when setting up a GmbH. However, a non-EU citizen may not simply be a shareholder in a GmbH. I advise you as a lawyer, Specialist lawyer for commercial and corporate law and Specialist lawyer for international business law for all questions on the topic of “founding a GmbH with foreign participation”.
Information on the role of the shareholders
The shareholders of a GmbH are the owners of the shares. You own the GmbH. They decide who is the managing director, they can distribute the profits among themselves and they vote in shareholders' meetings. The shareholders also decide which company the GmbH operates, i.e. how it operates economically, and what is written in the partnership agreement. The GmbH shareholders have no personal liability. The shareholders do not run the company and do not make any business decisions. The CEO negotiates with contractual partners, concludes contracts and hires employees. He must observe the provisions of the partnership agreement and adhere to the law. If he violates his duties, he is personally liable with his private assets. The shareholders, on the other hand, do not take any entrepreneurial measures. You cannot act for the GmbH. However, you can give the managing directors instructions about what measures they must take and not take. A partner can be any natural person, but also corporations.
Process of founding a GmbH with a foreign CEO
If several people establish a limited liability company in Germany, some special features arise when a foreign CEO is to be appointed. For me as a lawyer, it is always important to know whether the CEO lives in Germany, otherwise in the European Union or in a third country such as the United Kingdom. The law firm andrelang law will take these special features into account and advise you accordingly when setting up your limited liability company.
- Step: Coordination of the partnership agreement
The Shareholders found the GmbH. The managing directors are not involved in this. The shareholders discuss what company the GmbH should be and how it should generate sales. This is set out in the partnership agreement. The partnership agreement can be designed differently for each GmbH. The drafting of GmbH statutes, the coordination of the company's purpose and the process of founding a GmbH are the main focuses of my work as a lawyer. Every individual partnership agreement should regulate at least the following things when founding a GmbH:
- The company, i.e. the name of the company
- The fiscal year
- Headquarters of the company
- Corporate object
- Powers of representation of the managing directors
- The share capital, the number of shares and their amount
- Payments to the share capital (at least 50% per share
- Transactions by the managing directors that require approval and in which the shareholders would like to have a say
- The manner in which resolutions are passed and majority relationships
- The holding of shareholder meetings
- Exit from the company and the confiscation of shares
- Non-Compete Agreements
The GmbH law regulates many things. However, you can largely deviate from this in the partnership agreement when setting up a business. However, it is mandatory that the required share capital must be at least EUR 25,000. In addition, each share must be denominated in full euros. Incidentally, all of this also applies to a one-man GmbH. In the case of a one-man GmbH, however, the partnership agreement can usually be very concise because no regulations are necessary that regulate the relationship between several partners. When it comes to the exact structure, a lawyer can give you the legal advice you need to take precautions in the GmbH statutes and thus avoid conflicts. From a lawyer's perspective, it is also advisable that these issues are fully discussed and clarified before founding the company. After the GmbH has been founded, adapting the partnership agreement is a somewhat laborious step because, as with the founding, an appointment with the notary is required to change the GmbH partnership agreement.
- Step: Notarized establishment of the GmbH
In Germany, a new GmbH must be founded before a notary. It doesn't work without a notarial certification. For this purpose, the notary draws up a founding document, which, like the partnership agreement, is prepared by a lawyer. The shareholders can be represented by a lawyer when setting up a business. This is particularly true if you do not want to travel from far away, for example from another EU country. If the founding partners do not speak German, it is even necessary to appoint a German-speaking lawyer. The notary has to make sure that the shareholders can follow the founding of the GmbH in German, otherwise the notary has to translate the documents, which significantly increases the costs.
In the founding document, the shareholders decide on the partnership agreement or the GmbH statutes and also appoint the CEO. It also regulates who takes over which shares and what capital contribution each shareholder has to pay in euros for his share in the company. From a lawyer's perspective, it is therefore advisable to set the share capital at EUR 25,000 and divide it into 25,000 shares with an amount of EUR 1 each. The capital contribution is then also EUR 1 per share.
After signing the certificate of incorporation, the managing directors must open a business account for the GmbH at a bank. The partners must pay their share of the share capital into this business account. It is therefore advisable to decide before setting up a GmbH with which bank the account will be opened in order to pay in the necessary share capital.
If the managing director does not live in Germany, he or she must travel to open the bank account. It doesn't matter whether it is an EU citizen arriving from another EU country or whether he or she is resident in a third country. A foreign managing director should therefore plan his entry and take care of an appropriate visa if one is required. It is imperative that the share capital is fully paid into the business account. It may not be paid back to the shareholders afterwards.
- Step: commercial register
After the shareholders have paid in the share capital, the managing director must request a payment receipt from the bank and present this receipt to the notary. Only then can the notary register the founding of the GmbH for entry in the commercial register. This is mandatory GmbH law. And without entry in the commercial register, the GmbH does not come into being (pre-GmbH) and the personal liability of the shareholders continues. In the commercial register registration, the managing director must confirm with his signature that the share capital has been fully paid in, is still available in the business account and that he is not prevented from being a managing director due to a criminal conviction in Germany or abroad. For this purpose, the managing director must also appear in person at the notary. Registration in the commercial register requires the signature of the GmbH managing director to be certified by a notary.
In my experience as a lawyer, proof should be prepared when setting up a GmbH that the managing director can enter Germany at any time. Sometimes notaries request this, especially for people from non-EU countries. The commercial register often refuses to register the GmbH if this proof is not provided. As a lawyer, I therefore regularly check in advance with the notary's office whether such difficulties are to be expected with the commercial register at the registered office of the GmbH being founded.
Sometimes the commercial register has concerns about setting up a GmbH and initially refuses to register it until the objections have been resolved. As a lawyer, I take over communication with the commercial register, if necessary via the notary, and clarify issues that were not fully taken into account when the company was founded. However, the shareholders should establish the GmbH in such a way that such complaints do not arise.
- Step: The start of the GmbH
After entry in the commercial register, the GmbH formation is completed and the GmbH is ready to start its business. However, from my practical experience as a lawyer, it is advisable to contact a tax advisor at short notice and apply for a tax number. This can take several months, and without a tax number the GmbH cannot issue invoices. Registration with the relevant trade office is also required.
Special duties of a foreign CEO
If the management consists partly of foreign people, the following must be taken into account: In general, there are no restrictions in German GmbH law for a foreign person to become the manager. In particular, citizenship of EU countries is not required. From the perspective of GmbH law, it doesn't matter whether the manager lives in Germany or not. However, every managing director must be able to enter Germany at any time from the time they are founded. Because there are legal obligations that the GmbH managing director must be able to fulfill immediately, such as providing information or securing the share capital.
In addition, unpleasant consequences can arise outside of corporate law. On the one hand, the requirements of immigration or entry law and visa requirements must be followed. On the other hand, tax consequences can arise if a company only has one managing director who permanently lives outside the EU, for example in the United Kingdom, or moves there. In this case, the tax offices can claim that the actual management was relocated from Germany to another country and that the exit tax therefore applies. From a lawyer's perspective, it is therefore highly recommended to take this into account when setting up the company.
As a lawyer, I can help you and your company in many areas when setting up a corporation, which also includes a limited liability company, with a foreign CEO. Please feel free to contact us for further information Contact up to me.