Legal framework of the GmbH : chapter 2

• Date: 01 January 2008
• Published date: 01 January 2008
• Pages: 7-42
• Author: Christoph Jaehne
• DOI: 10.10520/EJC74093

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CHAPTER 2

LEGAL FRAMEWORK OF THE GMBH

2.1 Introduction

The GmbH is the subject of its own specif‌ic Act, called the ‘Gesetz

betreffend die Gesellschaften mit beschränkter Haftung’ of 1892, which

came into force on 19 May 1892.1

This chapter introduces the legal framework surrounding the GmbH.

Being a legal form which in the beginning was viewed rather suspi-

ciously, it quickly satisf‌ied the specif‌ic needs of its target community.

Within the GmbH context it is important to also mention other legal

forms to conduct business, the most relevant being the partnerships

and the Aktiengesellschaft. Other developments to be mentioned

regarding business forms will be on the one hand those within the

German legal system. However, with Germany being a major player

within the European Union, on the other hand very relevant for the

future of the GmbH are developments on the European level through

ECJ judgments on the legal form of companies. These cause a

heated discussion on the competition of jurisdictions within Europe.

This discussion also brings about reform ideas regarding some fea-

tures of the GmbH, i.a., on minimum share capital. Also inf‌luencing

company law developments in Germany are the f‌indings of the High

Level Group of Advisors and the discussion regarding good govern-

ance. For a reader not so familiar with these aspects of European

legal integration it is therefore important to introduce some facets of

this virulent discussion. Accordingly, in the following chapter these

aspects will also be discussed.

2.2 GmbH: From ‘off limits’ to ‘no limits’

At the beginning of its inception the entity was viewed upon critically

by some who thought it would be a fast track to bankruptcy.2

However, the GmbH has proven its critics to be wrong. This entity is

regarded as the outstanding German contribution to the f‌ield of com-

pany law.3 Its concept of a closely held corporation has been adopted

by many other nations and has been copied by legislatures all over

1 ‘GmbH-Gesetz’ (Act concerning companies with limited liability), sub-

sequent usage will be abbreviated to GmbHG. For a brief overview re-

garding amendments, see Lutter-Hommelhoff, GmbHG introduction,

note 6 et seqq.

2 See, e.g., Lutter-Hommelhoff, GmbHG introduction, note 3.

3 Ribbens, 1982, TSAR 50, 52 et seq. with further references.

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the world.4 It has also been declared as Germany’s “most successful

export article in the f‌ield of law.”5

After the fall of the iron curtain, the GmbH was introduced or reintro-

duced in a number of Middle and Eastern European countries (e.g.,

in Hungary).6

However, it is interesting to note that there are different developments

in France and The Netherlands, which are two of Germany’s big-

gest trading partners. In France the ‘société à responsabilité limitée’

(SARL), deviating from the original GmbH, i.a., in that it has a f‌ixed

time scale of 99 years and a maximum membership of 50, was al-

ready enacted in 1925 (now contained in the Law on Commercial

Companies 1966 and the subsequent Decree on Commercial Com-

4 Cf. also Lutter, “Die Entwicklung der GmbH in Europa und in der Welt”,

Festschrift 100 Jahre GmbH-Gesetz (Lutter/Ulmer/Zöllner (eds.)

1992), 49 et seqq. Cf. also Scholz-Westermann, GmbHG introduc-

tion, note 136 et seqq., in particular 143 et seqq. See Lutter, 49 et

seqq., for the number of countries adopting this idea. For a European

perspective, cf. Schmidt (ed.), Die GmbH-Rechte in den EG-Staaten

(1993). Regarding the current position of the GmbH in Turkey, where it

was introduced already in 1956, cf. Rumpf, “Die GmbH in der Türkei”,

2002, GmbHR 835 et seqq. For the recent situation in Austria, see Ar-

nold, “Die GmbH und die GmbH & Co. KG im österreichischen Recht

— ein Update”, 2004, GmbHR 43 et seqq. See also Curschmann/Jolo-

wicz, “Das neue brasilianische GmbH-Recht”, 2003, GmbHR 1185 et

seqq. For a comparative list from the off‌ice of revenue viewpoint, see a

decree of the Finanzministerium Nordrhein-Westfalen (Ministry of Fi-

nance North Rhine-Westphalia) in which international business-related

legal forms are assigned to their German counterpar ts. In connection

with South Africa, however, the close corporation is not mentioned in

this decree, “Vergleichende Zusammenstellung aus- und inländischer

Rechtsformen”, 1993, RIW 1052 et seq. See also Lutter-Hommelhoff,

GmbHG §12, note 11 for a list (the contents of the regulations in §12

GmbHG have been transferred into §§13-13(h) ‘Handels gesetzbuch’,

abbr. HGB (Commercial Code) since 1 November 1993).

5 Lutter-Hommelhoff, GmbHG introduction, note 26.

6 Regarding the renaissance of the GmbH in the reform countries in

Middle and Eastern Europe, see Lutter, 1992, 54. Pavlova-Mirtcheva,

“Gründung und allgemeine Merkmale der GmbH in Bulgarien”, 2004,

GmbHR 786 et seqq.; Günther/Miskolczi, “Die GmbH in Ungarn”, 2003,

GmbHR 885 et seqq.; Driesen, “Die ‘GmbH’ in den baltischen Staaten

im Überblick. Estland, Lettland, Litauen”, 2003, GmbHR 342 et seqq.;

Gustavus, Handelsrecht der Republik Estland (2000); Menzer/Poenaru,

“Die GmbH in Rumänien”, 2003, GmbHR 285 et seqq.; Heidemann,

“Die GmbH in der Russischen Föderation”, 2002, GmbHR 732 et seqq.;

Kuklis, “Die GmbH in der Tschechischen Republik”, 2002, GmbHR 687

et seqq.; Stessl, “Das neue slowakische GmbH-Recht”, 2002, GmbHR

638 et seqq.; Pörnbacher, “Die GmbH nach polnischem Recht”, 2002,

GmbHR 370 et seqq.

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panies 1967). The Netherlands introduced the ‘Besloten Vennootsc-

hap met Beperkte Aansprakelijkheid’ (BV) in 1971 only in response

to EU-legislation regarding annual f‌inancial statements of compa-

nies and publicity.7

2.3 German business forms

As mentioned above, in Germany and South Africa the other forms

in which business can be conducted were aimed at or developed

for purposes inappropriate for “smaller” businesses, be it to conduct

business in the form of a sole proprietorship, partnership, trading

co-operative or company.8

2.3.1 Distinction between ‘Personen- and Kapitalgesellschaften’

German law distinguishes between ‘Personengesellschaften’,9 which

are partnerships, and ‘Kapitalgesellschaften’, which are companies

with a share capital.10 In this study the Ger man terminology is used

to highlight necessary distinctions.11

2.3.1.1 ‘Personengesellschaften’

‘Personengesellschaften’ (partnerships) rely on personal involvement,

management and liability.

7 For further reading, see Sonnenberger, Französisches Handels- und

Wirtschaftsrecht (1991), 179 et seqq.; Behrens (ed.), Die Gesellschaft

mit beschränkter Haftung im internationalen und europäischen Recht

(1997), chapters on France (p. 254 et seqq.) and The Netherlands (p.

638 et seqq.). See also Lutter (ed.), Die Gründung einer Tochtergesell-

schaft im Ausland (1995), chapters on France and The Netherlands,

203 et seqq.; Van der Heijden/Van der Grinten, Handboek van de naam-

loze en de besloten vennootschap (1992). See also Jordan, An inter-

national survey of companies law in the Commonwealth, North Amer-

ica, Asia and Europe (1998), for France and Germany at 5.2 et seqq.;

available at , a survey prepared for the

UK DTI. Cf. also another survey prepared for the UK DTI by Milman

et al., Company law in Europe: Recent developments — A sur vey of

recent developments in core principles of companies regulation in

selected national systems (1999), for France and Germany at 22 et

seqq.; available at .dti.gov.uk/cld/review.htm>.

8 Only the most commonly used forms to conduct business are mentioned.

Regarding alternatives to the GmbH, cf. Beck GmbH-HB (1995), §1

note 15 et seqq., note 73.

9 The term ‘Gesellschaft’ encompasses both incorporated and unincor-

porated associations.

10 Instead of “share capital” the expression “capital stock” is also used in

the legal terminology.

11 For a short introduction, see Foster/Sule, German legal system & laws

(2003), 492 et seqq.