Gesellschaft mit beschränkter Haftung
From Freepedia
Gesellschaft mit beschränkter Haftung (GmbH or GesmbH) is a type of legal entity created in Germany in 1892. Literally translating as company with limited liability, the Gesellschaft mit beschränkter Haftung inspired the creation of the limited liability company entity in other countries. The GmbH model is extremely common in Germany, Austria, and Switzerland. Other variations include mbH (used when the term Gesellschaft is part of the company name itself) and gGmbH (gemeinnützige GmbH) for non-profit companies. It is similar to Limited or Ltd. of India.
The GmbH has been very popular in Germany as until recently the AG (Aktiengesellschaft) as the other major form of a company was much more complicated in founding and running.
It is widely accepted that a GmbH goes to three stages: the founding association which is regarded as a private partnership with full liabilty of the founding partners/shareholders, the founded company (often endorsed with "i.G." meaning "in Gründung") and the fully registered GmbH. Only the registration at the compentent company registry provides the GmbH with its full legal status
The founding act has to be notarized as well as the articles of association. The GmbHG (GmbH Code) outlines the minimum content of the articles of association but it is quite common to have a wide range of additional rules in the articles.
It is compulsory under German law that the GmbH has a minimum share capital of €25,000 upon which 25 % but at least €12,500 have to be paid in by the shareholders (when the GmbH has only one shareholder the law is even stricter on paying up the capital). There is no board as such: the company is run by the managing directors which have unrestricted proxy for the company. The controlling body are the shareholders who may restrict the powers of the managing directors by giving binding orders to them. The articles of associations will in most cases have a catalogue of business affairs in which the directors have to ask prior consent from the shareholders. Due to the German law system a violation of these duties by a managing directors will not affect the validity of a contract with a third party but the GmbH may hold the managing director in question liable for damages.
Because a legal entity with liability limited to the share capital was regarded in the 19th century as something dangerous, German Law has many restrictions unknown to common law systems. Quite a few business transactions have to be notarized such as the transfer of shares, raise of share capital, and changes of or amendments to the articles of association. Many of those measures have to be filed with the company registry where they are checked by special judges or other judicial officers. This can be are tiresome and time-consuming process as in most cases the desired measures are only legally valid when entered into the registry. Taking in account that there is no central company registry but several hunderd in Germany connected to regional courts it is obvious that in practice the administration of the law can be rather different from Bavaria to Lower Saxony or Mecklenburg Vorpommern.
See also
Categories: Germany-related stubs | Economics and finance stubs | Economy of Germany | Types of companies
