Share capital for GmbH formation in Germany

Minimum share capital, contribution in kind, cash contribution under german law

There are various requirements to be met when founding a GmbH in Germany. The most important one is certainly the payment of the so-called share capital at the foundation of the GmbH. Here you can find out everything you need to know about the share capital when founding a GmbH in Germany:


  1. What does share capital mean in german practice?
  2. What is the (minimum) amount of the GmbH's share capital under german law?
  3. Importance of the share capital in Germany: protection against liability
  4. Correct sequence: 5 steps to the foundation in Germany
  5. Share capital in german practice: Formation in kind or in cash
  6. Obligation to maintain the share capital
  7. Can I use the share capital?
  8. Share capital in accounting
  9. Share capital in liquidation

What does share capital mean in german legal practice?

The so-called share capital of a german GmbH refers to the contribution or also nominal capital of a limited liability company (GmbH). It results from the sum of the nominal amounts of all shares in the GmbH, i.e. those amounts that are attributed to a share in the GmbH. The nominal amount of a GmbH share in Germany must be at least EUR 1. The minimum capital that must be contributed as share capital to a GmbH upon its formation is EUR 25,000 according to german law.

The share capital is to be distinguished from the so-called capital contributions in Germany. These are the contributions of an individual shareholder to the share capital. The sum of the capital contributions is the share capital.

What is the (minimum) amount of the GmbH's share capital according to german law?

The minimum capital that must be contributed as share capital to a GmbH upon formation in Germany is 25,000 EUR. This is the minimum amount that must be contributed by the shareholders at the time of formation in german practice.

However, they can agree on a higher amount in the articles of association. The share capital can also be increased at a later date (for more information, please refer to our corresponding sub-page: Capital increase in the GmbH).

A prerequisite for the registration of the GmbH in the German Commercial Register is that the total amount of all paid-in contributions must be at least 12,500 EUR. Therefore, one often hears that actually only 12,500 EUR are required for the formation of the GmbH in Germany. This is both true and false under german law. The registration and formal incorporation already takes place with 12,500 EUR. However, if the necessary 25,000 EUR are not raised, the partners are liable for the remaining sum, as already explained above, with their private assets in german legal practice.

Who cannot raise this sum, can fall back to the establishment of the entrepreneur company (UG). For this only 1 EUR capital contribution per partner is necessary. However, legal regulations then take effect that oblige the participants to set aside parts of their annual surplus as reserves and thus increase the share capital until the 25,000 EUR is reached.

Importance of share capital in Germany: protection against liability

The importance of the share capital in german legal practice results from the construction of the GmbH as a corporation. In principle, the german company is liable to third parties only with the company assets, but not with the private assets of the participants (most important exception: managing director liability in the GmbH). In german practice, the share capital is intended to protect creditors and establish a certain degree of trust in the company. The latter can thus obtain an impression of the company's financial capacity from the german commercial register.

For the shareholders, the payment of the share capital is therefore, conversely, particularly important in order to free them from personal liability under german law. If it is not paid or not paid in full at the time of formation, the partners are liable with their personal assets. This so-called "Ausfallhaftung" is limited to the amount of the share capital, i.e. as a rule initially to 25,000 EUR. However, the risk can also revive at a later date if the share capital is initially paid in and then subsequently withdrawn in german practice. Then the liability of the shareholders is revived in the amount of the (missing) share capital.

Correct sequence: 5 steps to the foundation in Germany

To avoid liability under german law, you should follow the prescribed procedure for establishing a limited liability company. In german practice, this takes place in the following 5 steps:

  1. Draw up the formation documents
  2. Signature at the geramn notary appointment
  3. Open a bank account
  4. Pay in the capital contribution
  5. Registration of the company with the commercial register

Practical tip: To open the bank account in Germany, you need a GmbH that has already been formed - this is where the cat bites the tail. However, the notary will give you a certificate after the formation date, which you can submit to the bank in Germany. With this, it is possible to open the bank account even before registration.

Share capital in german practice: non-cash or cash foundation

The shareholders in Germany can make their capital contributions to the share capital by cash contribution (cash formation) or by contribution in kind (formation in kind).

Cash contributions in german practice are usually made by transfer to the business account with the appropriate purpose (e.g. "Cash contribution of shareholder A to the share capital of XY GmbH").

Contributions in kind by means of contribution of property to the company in Germany usually entail an elaborate procedure and are riskier than simple cash incorporation. Incorporation in kind can take place through the contribution of tangible or intangible assets. These include in particular:

  1. Movable things, in german practice often machines, tools, vehicles or goods and stocks.
  2. Immovable things such as land and real estate
  3. Rights, patents, trademarks or licenses
  4. Existing businesses or companies
  5. Securities or claims against third parties

It is important in german legal practice that the contributed items have a market value and that this is not only stated but also proven in a so-called non-cash incorporation report at the time of incorporation. This report must be submitted at the time of formation and is often checked very thoroughly by the german registry court.

The value stated in the report on the formation of a company in kind in Germany is based on the replacement value in the case of objects, whereas in the case of rights or licenses it is based on the so-called capitalized earnings value, i.e. the estimated sales price.

Incidentally, a so-called mixed formation, i.e. the combination of cash and non-cash formation, is also possible in german practice as a third alternative.

Duty to maintain the share capital in Germany

Since the share capital ensures the minimum liability of the GmbH in Germany, the shareholders are generally obliged to maintain it. This means that if other company assets are required to maintain the share capital, these may not be distributed to the shareholders.

If the share capital has nevertheless been touched, Section 49 (3) of the GmbH Act provides for the convocation of all shareholders when half of the share capital has been touched in german practice. If the share capital is no longer available, the german GmbH must file for insolvency. If it fails to do so, the shareholders concerned become liable under german law.

Can I use the share capital in german practice?

Yes, theoretically and from a purely legal point of view, it is possible to use the share capital for corporate purposes in Germany. What these purposes are must be stated in the individual articles of association. In principle, the german GmbH can use it to purchase operating resources, pay suppliers' invoices or pay employees.

However, in german legal practice we strongly advise against using the share capital in view of the following risks: As soon as the company's assets no longer cover its liabilities, the managing director of a GmbH in Germany is obliged to file an application for the opening of insolvency proceedings. If he does not file this application, he is liable for the damage with his private assets.

Caution: In particular, the share capital in Germany may not be returned to the shareholders under any circumstances, not even indirectly. So-called hidden contributions in kind also count here. Example: The capital contribution is made in order to subsequently purchase a car for the shareholder. In case of doubt, the shareholders are liable and the managing director is liable to prosecution under german law.

Share capital in german accounting practice

The share capital in Germany is included in the balance sheet under the item "subscribed capital" in accordance with § 42 I GmbHG. It is on the liabilities side of the balance sheet and is part of equity in german practice. According to § 272 (1) sentence 1 HGB, subscribed capital must always be recorded at its nominal value.

If only 50% of the shareholders' contributions have been paid - which, as already explained, is sufficient for registration - the missing amount is the so-called "outstanding contribution". This must be openly deducted from the "subscribed capital" on the liabilities side of the balance sheet.

Share capital in german liquidation practice

If the GmbH is dissolved & liquidated in Germany, the remaining share capital is divided among the remaining shareholders and paid out. Before that, however, outstanding liabilities are settled in german practice. This may include publication in the Federal Gazette, where creditors can submit their claims. They then have one year to do so. During this blocking year, the share capital is not touched and any remaining amounts are only paid out afterwards.

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