German parliament agrees on online formation of GmbH
An article by attorney Dr. Boris Jan Schiemzik, certified specialist in commercial and corporate law
The German legislator is taking the next step towards the digitalization of corporate law. In June 2021, the Bundestag passed the implementation of the EU Digitization Directive (EU - 2019/1151). This paves the way for the nationwide online formation of the GmbH. Online formation from abroad will also be made possible.
From when will it be possible to form a german GmbH online?
In Germany, it will be possible to form a GmbH online from August 2022. The EU has already made online formation possible in all member states as of August 2021, but the German government has exercised an extension option and is now aiming for the digitalization of the company register and the formation of the GmbH via the Internet as of August 2022.
What does it mean to form a GmbH online?
The high german standards are to be maintained when forming a GmbH online. Therefore, Germany will continue to adhere to the notary system. The notary remains the gatekeeper for the formation of a GmbH. He remains the guardian of the 125-year-old GmbH law and is to continue - according to the German legislator - to ensure the high level of legal certainty in Germany. Starting next year, however, managing directors and shareholders will be able to form a GmbH over the Internet via a video conference with the notary. The participants will be spared the trip to the notary.
The notary will essentially ensure the identity of the participants and the representation relationships by means of a video conference. Shareholder resolutions and commercial register applications are transmitted electronically to the commercial register.
Is it also possible to establish a UG online?
The german Unternehmergesellschaft, also known in practice as UG (haftungsbeschränkt), is a variant of the GmbH. It is not an independent legal form. Therefore, it will also be possible to found the UG online in the future. The special provisions of the GmbH Act on formation and capitalization also apply to UGs formed online. The notary will be able to establish a UG by way of a video conference in accordance with a GmbH online formation.
Will there be only a notary video conference for the GmbH formation?
No, the online formation of the GmbH will be introduced as a new option for the startup scene and corporations. The presence certification will remain. Going to a notary for a formation certification is still an option, even for complex structuring.
Moreover, in the case of complex formations, e.g. by way of so-called non-cash formations, there will be no way around presence certification. Only cash formations are possible online, i.e. GmbH formations in which the share capital is provided in the form of a cash contribution.
Legal assessment and practical tips
The digitization initiative is to be welcomed. Above all, the EU deserves praise. With its Company Law Package, the EU Commission is bringing movement to the digitization of company law. Even member states like Germany, which maintain their high legal security standards that are hostile to digitization, are simplifying their procedures for market participants. The EU is proving to be a driver for the start-up scene in particular.
The new initiative will significantly streamline procedures under commercial register law and work processes in the notary's office. The implementation of the digitalization directive will considerably reduce the costs, time and administrative effort involved in setting up a limited liability company.
Founders are advised to continue to make the physical visit to the notary's office if they require individually tailored and complex GmbH partnership agreements. An analogous notarization appointment remains obligatory if, for example, VC participation agreements are concluded during the formation of the GmbH or a formation in kind is intended.
It should be noted that the substantive provisions of GmbH law have not changed. All capital raising and capital maintenance regulations continue to apply to a GmbH founded online.
Finally, one point of criticism: the German legislator has spoken out against the online formation of a GmbH and has reser ved formation via the Internet only for GmbHs. Since the notary remains as a controlling authority, it is not clear to me why non-complex small stock corporations are not also prevented from forming online. In any case, the EU Digitization Directive would also permit the online formation of a stock corporation.