A. The ‘re corporations 1
They include three types of companies: the AG ( Aktiengesellschaft ) or public limited company; the GmbH ( Gesellschaft mit beschränkter Haftung ) the equivalent of the SARL in France; the KgaA ( Kommanditgesellschaft auf Aktien ) or limited partnership with shares. (As this company is used very little in Germany, it will not be the subject of this study 2 ).
For these companies, registration in the trade register is very important because it fixes the date of incorporation of the company, gives it legal personality and limits the liability of the partners (before this act, the partners are personally bound by the commitments made) .
It is important to mention here, even if only very briefly, the existence of co-management ( Mitbestimmung ) applying to German capital companies. Company personnel are represented through employee representatives, with rights comparable to those of shareholders’ representatives, on the supervisory board. The applicable rules vary depending on whether the company counts more ( Mitbestimmungsgesetz of 4 May 1976 ) or less ( Betriebsverfassugsgesetz of 1957 and 1972) of 2,000 employees. In companies with more than 500 but less than 2,000 employees, one third of the members of the supervisory board must be employees. In companies equal to or more than 2,000 employees, the law requires that the supervisory board be composed in equal parts of representatives of shareholders and representatives of employees.
1) The AG (Aktiengesellschaft) or public limited company
GAs are few. It should be noted, by way of comparison, that France has 50 times more public limited companies than there are AGs in Germany. The trend is reversed with regard to limited liability companies ( GmbH ), the number of which is almost three times higher in Germany than in France.
The GA is defined by Article 1 st of the law of 6 September 1965 as the company with “only the heritage meets against creditors of the Company’s commitments and whose capital is divided into shares.”
To be validly constituted, an AG had to have a number of five shareholders. However, a law of 2 August 1994 called deregulation law, has modified this condition authorizing the creation of a one-person limited company , subject to the obligations of the GmbH -man under the 12 th European Directive 3 on LLCs single partner . This is an originality of German law, in France SAs must always be made up of a minimum of 7 partners.
The share capital is at least 100,000 DM or 50,000 Euros since 01/01/99 (divided into shares or bonds, the shares must individually have a minimum nominal value of 5 DM or 1 Euro, if this amount is higher, will be a multiple of 5). The capital must be released for at least a quarter when the company is incorporated. No maximum amount is imposed.
To be a partner, the status of trader or non-trader is irrelevant. The partners are not personally liable for social debts. They will be responsible within the limit of their contribution (these rules are identical to French law).
The AG can make a public call for savings and stock market listing.
The AG has 3 management bodies:
-The general meeting of shareholders (Hauptversammlung) :
It is organized in a manner close to French law. Indeed, the meeting only gives the main orientations to be followed by the company but does not participate directly in its management.
– The management board (Vorstand ):
Its powers include: the direction and management of the company, the convening of the meeting, the representation of the company to third parties.
The management board is made up of at least two natural persons if the share capital exceeds DM 3 million, in other cases a single person is sufficient.
For France: 2 to 5 natural persons in general and if the share capital is less than one million, there will be a single managing director.
– The supervisory board (Aufsichtstrat) :
It is made up of representatives of employees and shareholders elected by the general meeting.
It appoints the members of the management board and oversees the management of the company.
It is made up of a minimum of 3 natural person members, in companies whose capital is less than or equal to DM 3 million, this number will be increased to 9 and 15 if the capital is between 3 and 20 million DM. For a higher amount, the board will include a minimum of 21 people.
- Tax system
The GA is subject to corporation tax, it therefore falls under an opaque tax regime.
If in France, public limited companies are subject to a single rate of 33.33%, this is not the case for AGs in Germany.
In fact, capital companies with their registered office in Germany are subject to a double tax rate : 40% on retained earnings (placed in reserve) and 30% on distributed profits. 4
The German double rate aims to eliminate double taxation of distributed profits. Initially, a rate of 40% is applicable to the profits put in reserve. If, subsequently, these profits are distributed, the then applicable rate is 30%. Therefore, to avoid double taxation, the company is entitled to reimbursement of the difference, i.e. 10% (40-30).
2) The GmbH (Gesellschaft mit beschränkter Haftung) or SARL
It is governed by a law of April 20, 1892, amended by the law of October 28, 1994.
The GmbH served as a model for the French SARL which, in its law of March 7, 1925, incorporates the provisions of the German law of April 20, 1892.
- Constitution :
This company can be made up of one or more natural or legal persons , as in French law it does not have a maximum number of partners (50 partners in total).
The minimum share capital is 50,000 DM . The minimum amount of the contribution of each partner is 500 DM and must be paid up to 25% without being less than 25,000 DM (this minimum capital is increased to 50,000 FRF in France, i.e. 3 times less than in Germany) .
The partners’ liability is limited to their contributions (this is also the case in France).
However, a partner can be held personally and indefinitely for the losses of the company if he holds a majority stake (at least 50% of the capital) and in the event that he neglects the activity of the GmbH for the benefit of his own.
The shares are in principle freely transferable except statutory restrictions ( Gesellschaftsvertrag ) which subject the transfer to the authorization of the manager and / or the other partners. This is in line with French law.
The shares of the GmbH may not be listed on the stock exchange or be the subject of an issue with a public offering (identical system in French law). They must be divisible into a fraction of 100 DM.
In France, the SARL is based on a general meeting and a manager (natural person), in Germany, a supervisory board and other corporate officers can be added.
The general meeting determines the commercial policy to be followed and can as such give orders to the manager who executes them while respecting his duty of diligence.
The corporate officers are very close to the legal representatives of the company, they are responsible for representing it for specific matters (there are two types of representatives: the Prokurist (who must be registered in the commercial register) and the Handlungsvollmächtigter, the first has powers broad enough to the extent that he can be sued.
- Tax system:
The GmbH is subject to the same tax regime as the GA.
1) OHG (Offene Handelsgesellschaft) or SNC
In practice, this company enjoys fairly extensive legal capacity (in particular it can sue, enter into contracts, etc.). One will notice here the similarity, with a few exceptions, of the legal regime of the OHG with that of the general partnership.
- Constitution and functioning of the OHG
OHG is similar to the French general partnership, with the difference that it does not have legal personality.
It can be formed by partners who are natural or legal persons or even commercial companies without legal personality (specific provisions exist in the event that the OHG is only formed by companies). As in French law, two partners are sufficient to constitute this company, no maximum is imposed.
German law does not regulate the issue of share capital and again joins the French situation. The statutes govern this matter. Thus, this company could be created with the capital of a DM.
The partners all have the status of trader and are jointly and severally liable for social debts. They cannot limit this liability towards third parties.
The transfer of shares is governed by the articles of association. As a result, this operation, resulting in a modification of the partnership agreement, requires in principle the unanimous agreement of the partners.
All partners are in principle entitled to represent the company . To this end, specific mandates are entrusted: Prokura or Handlungsbevollmächtigung (cf. GmbH ).
2) Limited partnerships 5
There are three types of limited partnerships: the KG ( Kommanditgesellschaft ) or simple limited partnership (a); the GmbH & Co-KG or limited partnership whose only general partner is a SARL (b) and finally the KGaA ( Kommanditgesellschaft auf Aktien ) or limited partnership with shares (for the sake of brevity, we will not analyze the latter company due to its marginal use).
- the KG (Kommanditgesellschaft) or limited partnership
The KG is the French equivalent of the limited partnership. It is made up of two types of partners: general partners and limited partners . The general partners are in the same situation as the partners of the OHG, thus, they are jointly and severally liable for the social debts .
Limited partners are responsible within the limits of their contributions , so they take a lower risk. They are also not authorized to represent the company.
OHG rules generally apply to KG (except for the treatment of limited partners). Thus, this company, although not having a legal personality, nevertheless has significant legal capacity.
As with the OHG, the transfer of shares , including those of limited partners, must in principle be subject to the unanimous agreement of the partners.
- GmbH & Co – KG or limited partnership with a GmbH as general partner 6
It is a limited partnership whose general partner is a GmbH (SARL).
As general partner the GmbH should in principle be jointly and severally liable for the debts of the company, however by definition its liability will be limited to its share capital.
The company must be made up of at least two partners : the general partner, responsible in a personal capacity, who manages both the company but also the GmbH ; the limited liability sponsor . But the GmbH can also be, in fact, a one-person company.
However, according to German doctrine, a distinction must be made between GmbH & Co-KG with “associate identities” and GmbH & Co-KG “without associate identities”. Within the former, the sponsors of the Co-KG are also the partners of the SARL, while in the latter, the sponsors and the partners are distinct.
In practice, it is the tax system which pushes the creation of such forms of companies which still involve, for the general partners, a significant personal risk.
3) Stille Gesellschaft or silent society
We can literally translate this expression as “silent society “. It seems to be able to be compared to French joint-stock companies but there is another company in German law which is more closely related to it: the BGB-Gesellschaft (see below).
The principle is as follows: a “fictitious or tacit” partner makes a cash contribution for a company in order to obtain a share of the profits. This sum goes to the account of the real partner of this company since it has no own assets. The “fictitious” partner does not participate in any way in the management of the company, he is fiscally similar to a creditor and not to a joint entrepreneur.
The real partner can be formed by any commercial enterprise, and the “fictitious partner” can be any natural or legal person.
Fiscally, the Gesellschaft stille is assimilated to an OHG.
4) Partnerschaftgesellschaft or independent civil society
The law of 25 July 1994 (entered into force on 1 st July 1995) establishes for the first time in Germany a civil society for the pursuit of liberal activities .
This new company corresponds to the partnership with a civil object of French law.
As for OHGs, no minimum is indicated for share capital .
Partners can only be natural persons exercising a liberal activity.
The partners’ liability is twofold: they are individually responsible for the services they perform and jointly and severally liable for social debts.
5) The tax regime for German partnerships
They are not subject to IS . The profits are directly taxed in the hands of the partners. In the event of losses, deficits are charged directly to their share of profits. OHG and Partnerschaftgesellschaft cannot opt for IS unlike their counterparts under French law. For the GmbH & Co-KG, all partners are subject to the IR for the Industrial and Commercial Income Tax category (there is a difference here with French law which is based on a dual tax regime differentiating the general partners submitted to IR and sponsors to IS). The IR rate is 45%.
C. Other companies and groups
This is the study of two companies: the BGB-Gesellschaft or civil society (1) and the EWIV or GEIE (2).
The cooperative society will not be studied because of its low practical importance.
1) BGB-Gesellschaft or civil society
This company, used by almost all non-traders , is governed by articles 705 et seq. Of the Civil Code ( BGB ).
Like the French joint-venture company, there are no specific rules in this area, the partners organize this company as they see fit.
There is no minimum share capital (it may well not exist).
The partners are natural or legal persons, they are jointly and severally bound by the contractual obligations entered into by the company.
As in French law, the BGB-Gesellschaft can be occult (here, only the manager will be bound by the commitments he has contracted) or ostensible, that is to say known to third parties (the manager will always be solely responsible except if the partners have acted in full view and known as such).
Briefly, we can recall that the partners are subject to IR on their profits .
The practical interest of this type of grouping lies in its simplicity of constitution and in its flexibility of operation, in particular for large entities wishing to carry out joint actions (example: carrying out work linked to a construction contract, etc.).
2) EWIV (Europäische Wirtschaftliche Interessenvereinigung) or GIE
- Constitution and functioning
The EWIV ( Europäische Wirtschaftliche Interessenvereinigung ) was the subject of a Community directive of July 25, 1985, subsequently supplemented by a law of April 14, 1988.
In French law, the EWIV corresponds to the European Economic Interest Grouping (EEIG), which itself is subject to the applicable Community directive in this area.
Anything that has not been regulated by the directive will be subject to the provisions specific to the OHG.
The EWIV is made up of at least two members of the European community, they can be natural or legal persons to the exclusion of any other EWIV .
The EWIV can be constituted without initial capital and the partners will bear the responsibility of the social debts.
Despite the commercial nature of the group, its members do not necessarily have the quality of traders (this then allows the liberal professions to group together in this social form while they cannot do so in the form of the OHG).
The EWIV cannot make a public call for savings.
The administration of the EWIV depends on an assembly and one or more managers, the latter cannot be a legal person, unlike the GIE place français.
- Tax system
Its regime is similar to that of partnerships .
In practice, the EWIV has had some success, it mainly involves inter-company cooperation in commercial matters (sales promotion, advertising campaigns, etc.), in industrial matters (engineering, scientific research, etc.), but it also attracts the liberal professions. such as: lawyers, accountants …
II. CURRENT TRENDS IN GERMAN COMPANY LAW.
1-One of the trends affecting German company law concerns AGs or public limited companies with the will of the legislator to create, alongside the traditional heavy structure, “eine kleine AG”, a small SA 7 , with the aim of ” attract entrepreneurs from medium-sized businesses. The law of August 2, 1994, known as the deregulation law, establishes this new SA, which may possibly be one-person.
If the German legislator started from a good intention, neither practice nor doctrine gives it satisfaction. In fact, the means implemented, such as the sole shareholder, the freedom to allocate the results and the simplification of the procedures for convening meetings, have not been sufficient in practice to attract a large number of SMEs.
These changes do not take away from the rigor that surrounds the organization of AGs in Germany and do not allow medium-sized companies to have enough flexibility to act and fight against competition from large companies.
The German law on public limited companies is a single regulation which does not make a significant distinction either for small SAs or for SAS. In France, on the other hand, SAS are the subject of a specific law allowing them to escape the heavy control that exists for public limited companies listed on the stock exchange and thus experience significant success linked to the autonomy and flexibility of the SAS. .
It would therefore be interesting for German company law to draw inspiration from the French model on this point, in order to remedy the difficulties associated with the launch of the “small SA”.
2-In addition, for the sake of strengthening the control and transparency of AGs ( Gesetz zur Kontrolle und Transparenz im Unternehmensbereich ), a law of 01/05/1998 was promulgated. Its objective is to strengthen the management board’s alert procedure in the event that it becomes aware of facts likely to compromise the company in its performance or its finances. This has the direct consequence of increasing the supervisory board’s control over the auditor (s).
3-Finally, it is at the fiscal level that we can highlight some novelties:
* First of all, according to the finance law for 1999, the corporate and income tax rates have been modified in order to be closer to European rates.
Thus, corporate tax for distributed profits has been reduced from 45% to 40%, and from 47% to 45% for industrial and commercial income (income tax).
There are plans to institute a single tax rate of 25% which would apply to companies subject to corporate tax as well as to income tax, loss carryforwards should however be limited 8 . In this regard, a bill ( Steuersenkungsgesetz – StSenkG) relating to this reduction in the corporate tax rate has been under discussion in Parliament since February 2000. It would even be a question of making shareholders pay taxes only on half of their profits. a rate of 25% instead of 30%. 9
* In addition, there are currently 90,000 GmbH & Co-KG 10 , a success which can be explained by the tax advantages provided by these structures. Indeed, they allow investors to deduct the losses of the company from their income. More generally, the German arrangement between GmbH and KG makes it possible to successfully combine the advantages offered by capital companies and partnerships.
1 Capital companies are mainly governed by two laws:
– Law of 20 April 1892 on GmbH (Gesellschaft mit beschränkter Haftung) amended by the law of 28 October 1994;
– Law of September 6, 1965 on joint stock companies (Aktiongesellschaft), amended by the law of October 28, 1994.
2 It may be recalled that it falls under Articles 278 to 290 of the Companies Act, AktG.
The limited partnership with shares is subject to corporation tax as a capital company. Partners with unlimited liability are subject to income tax (IR).
3 Directive n ° 89-667 EEC of December 21, 1989 on limited liability companies with only one partner, known as the twelfth company directive (OJEC L 395 of December 30, 1989).
 Ein weites Feld, Thema: “Steuerrn” , GründerZeiten, BMWI – Nachrichten zur Existenzgründung und
-sicherung, Nr. 34, Dezember 1999, p. 2
5 VIANDER (A), “The sponsorship in Federal Germany, the United States and Great Britain” in The limited partnership between its past and its future , Ed. CREDA, Paris.
6 For more information: Jean-Pierre BERTREL, The marriage of the sponsorship and the SARL in French law and German law , Droit & Patrimoine, n ° 79, February 2000, p. 22 – 26; GUINERET-GROBBEL DORSMAN (A), The German GmbH & Co-KG and the French “limited liability sponsorship” , Paris, Ed. LGDJ, 1998
7 Peter HOMMELHOFF, “ Small public limited companies in the German legal system ”, Rev. Societies (2) April-June 1996, p. 245-265; Fabienne JAULT-SESEKE and Christophe SESEKE, “ La petite société anonyme ”, Chroniques du Bulletin Joly, February 1995, p. 139-146
8 Cf . “Germany ” International Files Francis Lefebvre, update 01/01/99, p.9, n ° 1680.
9 Cf. “ Berlin tax boffins set the agenda ”, Euromoney, March 2000, p. 58
10 Cf. “The marriage of the sponsorship and the SARL in French law and German law” by Jean-Pierre Bertrel, Revue Droit et Patrimoine February 2000, n ° 79, p.22.