Limited Companies Flashcards
1
Q
What are Limited Companies?
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A
- unlike partnerships, have an own legal personality (legal entities with a FIXED nominal capital)
- also often referred to as incorporated companies
2
Q
What is a GmbH?
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A
- similar to Ltd., closed cooperation
- is a commercial company with own legal personality
- shareholders contribute to the legally required minimum subscired capital of 25,000€ by at least 1€ per head
3
Q
What are the steps to found a gmbh?
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A
- articles of association needs notarisation by notary public
- business name has to contain the supplement “GmbH”
- needs to be entried into commercial register in order to come into existence
- before registration, people acting on behalf of the company are fully liable as the company is treated as a GbR and called a “Vor-GmbH”
4
Q
What are the organs in a GmbH?
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- Management Board (from 500 employees: supervisory board)
- shareholders meeting
5
Q
What does the shareholders meeting do in a GmbH?
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A
- approve annual financial statemwents
- decision on distribution or tetention on profits
- appoint, dismiss, supervise, instruct , control and approve supervisory board
6
Q
What is the company hierarchy in a gmbH?
A
Supervisory board > executive board > workers
7
Q
What is the One-Third Participation act of a gmbH?
A
- if company has more than 500 employees, one third of the members of the supervisory board are elected by the employees
8
Q
What is the Co-determination act?
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A
- if company has more than 2,000 employees
- workers elect workers director in management board
- and 50/50 co-determination in supervisory board
- in case of tie between sharholders and workers in the supervisory board, the chairman decides
9
Q
What are rights and obligations of a gmbh?
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- share in the profits, voting right in the shareholders meeting (per 1€)
- sdhare in the liquidation proceeds - all in proportion to the capital contribution
- individual capital contribution /quota can be transferred (requires notarisation by notarian public)
- right to “inspect” the books
- no personal liability!!
- (un)limited obligation to make an additional contribution can be agreed upon in the articles of association
10
Q
Some facts concerning Mini-GmbH
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A
- since 2008
- NOT a new legal form in its own right, sub-type of gmbh
- minimum capital to found is 1€
- business name, UG (haftungsbeschränkt)
- entry into commercial register
- notarisatio of articles of association, if official tempkate is used, and only up to three shareholder 20€ notary fees (300€ in case of ordinary gmbH)
11
Q
Traits of Mini-GmbH (2) and Organs (2)
A
- legal obligation to retain at least 25% of the annual profits as retained earnings/ profits (as long as 25k reached)
- when minimum capital of 25,000€ from ordinary gmbh is reached, mini can name itself gmbh
- organs: managing director and shareholder
12
Q
What are the advantages of a Gmbh?
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A
- legally required capital fairly low
- freedom to design and agree individual articles of association
- getting fresh capital by allowing more shareholders in
- risk of shareholders usually limited to capital contribution
- one-man GmbH possible (pretty common actually) - then: substantial room for manoeuvre
13
Q
What are the disadvantages of a gmbh?
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- setting up company somehwat burdensome and costly
- capital markets largely unaccesible (limited liability) - personal guarantees of shareholders often required to obtain financing
- transferring shares might be cumbersome (schwerfällig)
- legally required minimum capital often insufficient to realise a business idea - often prone to go insolvent
14
Q
What is a AG?
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A
- public limited company, commercial company with own legal personality
- legally required minimum subsicred capital 50,000€ in the form of shares
- smallest legally allowed denomination for a (par-value) share is 1€
15
Q
How can you found an AG?
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A
- at least one founder who takes up all shares when putting in the subscribed equity capital
- company statue requires notarisation by a notary public
- companys business name has to contain the compulsory supplement AG
- needs to be entered in commercial register
- before registration, people acting on behalf of the company are fully liable as the company is treated as a GbR and called a Vor-AG
