David Hole

Setting up a GmbH

The formation of a GmbH is more involved than forming a limited company under English law. It requires the preparation of a constitution for the company - the Satzung, which in turn requires certification by a Notary. Minimum start-up capital is € 25,000, of which half must have been paid before the company can be registered. The company comes into being only upon registration, - a procedure that can last a little longer than in the UK, depending on the work load of the local companies' court, and how pernickety the Registrar is. The subscribers to the company in formation are personally liable for any transactions done in the company's name prior to registration at the local companies' court.

The cost of formation, where a Notary alone is engaged, is usually in the region of € 2,000. Where lawyers are engaged to work alongside the Notary, then this will increase the cost.

A GmbH does not have share capital in the conventional UK sense. Members of the company, the Gesellschafter, own a proportion of the share capital. It is common for each € 100 of that portion of share capital to entitle to one vote at a members' meeting.

The external embodiment of the GmbH is the Geschäftsführer, a term frequently and misleadingly translated into English as Managing Director. There is no board of directors for a GmbH, although it is possible, but not essential, to appoint a supervisory body - the Aufsichtsrat. The responsibilities and functions of the Geschäftsführer are recognisably similar to those of a director of a limited company in the UK, but often with greater autonomy and greater potential for personal liability. The position of Geschäftsführer of a GmbH in Germany should never be taken on without extensive advice as to the nature and range of this liability.