INVESTOR’S BASICS

Business Establishment
There are different ways to enter the German market. Expanding foreign companies normally opt to establish a local subsidiary or register a local branch office. Foreign companies
often choose the private limited liability company option(Gesellschaft mit beschränkter Haftung – GmbH) for local
subsidiary formation.

Setting Up a GmbHThe GmbH is the most widely used legal form for corporations in Germany. It combines high flexibility with relatively
few obligations and enjoys a good reputation. Anotheradvantage of the GmbH is the limitation of liability to its
corporate assets. At least one shareholder (private individual or legal entity) and one managing director (privateindividual) are required for the establishment of a GmbH.
The shareholder and the managing director can be the sameperson. The nationality and residence of the shareholder(s)and the managing director(s) of a GmbH are irrelevant.
However, the company must have a German businessaddress and a local representative. The GmbH requires aminimum share capital of EUR 25,000. It can be contributedin cash or in kind.
Online Formation
The online formation procedure of a GmbH is applicable toformations with contributions in cash and in kind (except forthe contribution of objects whose transfer itself is subject tonotarization). The online notarization takes place in a videoconference between the notary and the parties involved. The
German Federal Chamber of Notaries provides a video communication system with a two-step identification procedure,
which requires an electronic proof of identity (eID from
Germany or other EU member state). The signatures required
for the incorporation are obtained by means of a qualified
electronic signature.
Necessary Documentation
In order to successfully register a business in Germany, certain
documentation verifying the existence of any parent company
as well as the power of representation for persons acting on
behalf of it is needed. Generally, an excerpt of the foreigncommercial register as well as articles of association of theforeign parent company will be required. The documentationmust be notarized and either legalized or issued with an apostille. It should also be accompanied by a certified translation
into German language. Please notice that the documentation
required can differ depending on the legal form and originof the foreign company. It is advisable to consult a German
notary at an early stage for individual advice.

GmbH Incorporation Procedure
Step 1
Drafting of Articles of Association
The articles of association shape the identity and constitution of the company. Thanks to the large scope for contractual design, the GmbH is a very flexible corporation
form. Mandatory content includes share capital, shareholders and respective shares held, business name, registered office, and company purpose.
Step 2
Notarization of Articles of Association
The drafting and notarization of the articles of association
are normally performed in one session by a German notary.
The founding shareholder(s) adopt(s) its articles of association and appoint(s) one or more managing directors in anotarial deed.
Step 3
Payment of Share CapitalOnce the articles of association have been notarized, acompany bank account must be opened and the sharecapital contributed. A payment of EUR 12,500 in total issufficient for registration with the commercial register ofa standard EUR 25,000 GmbH (cash contribution).
Step 4
Commercial Register Registration
When the required share capital has been verifiable contributed to the GmbH, the managing director(s) apply forthe registration of the GmbH in the commercial register(Handelsregister) via a German notary. If the commercial
register considers all formation requirements to be fulfilled,
the GmbH is registered and starts to exist as a legal entitywith limited liability.
Step 5Trade Office Registration
Before business operations are started, the trade office(Gewerbe-/Ordnungsamt) of the municipality in which
the business is located, must be notified about the planned
activity. A business license or permit is not necessary forregistering the business in the majority of cases. However,a permit or authorization may be required for some business sectors. The trade office registration requires at least
one local representative.

→ For details on the procedure, please refer to:

www.gtai.com/company-set-up

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INVESTOR’S BASICS

Setting Up a Branch Office
Any foreign company with a head office and registeredbusiness operations abroad can establish a German branch
office. There are two different categories of branch offices:
the autonomous branch office (selbständige Zweigniederlassung) and the dependent branch office (unselbständigeZweigniederlassung). A branch office has no independent or
separate legal personality distinct from the head office itself.
In legal terms, it is part of the head office business, which
also is liable for any of its business obligations. A formation
procedure is therefore not applicable – only the registrationof the branch with German business registers is required.
The autonomous branch office is dependent upon the headoffice company at the internal level but engages in businessactivities independently. At the organizational level, autonomous branch offices are to a certain extent independent
from the head office company: The autonomous branchusually has its own management with executive powers, aseparate bank account, business assets and accounting (onits own or via the head office company). The dependent
branch office focuses on maintaining contacts and initiating
business in Germany. It performs support and implementation-related tasks without having any individual businessdiscretion and is entirely dependent on the head office.

Legal Certainty
Business establishment procedures in Germany provide
entrepreneurs legal certainty in the commercial law field –creating transparency and offering companies the highest
level of security in their day-to-day business activities.
Important functions are fulfilled by German civil law notaries, and Germany's unique commercial register.
German Notaries
Civil law notaries are appointed lawyers sworn to impartiality and entrusted with public functions. Depending on
where in Germany the notary is appointed, he or she practices either as a “single profession notary” or as an “attorney-notary.” The number of notaries in each federal stateis limited in order to ensure independence and impartiality.
In Germany notarization is required, amongst other things,
for establishment of corporations and applications for entry
in the commercial register. Notary fees are stipulated bylaw and subject to the value of the transaction. The notary
fees for a GmbH establishment depend, among otherthings, on the share capital.
→ www.notar.de

Branch Office Registration
Commercial Register Registration
Registration in the commercial register (Handelsregister) is only required by the autonomous branch office.
The application, which is electronically filed by a German
notary, must include detailed information pertaining to
the foreign head office company and the branch office.
This includes, for example, documentation verifying theexistence of the foreign company as well as the power ofrepresentation for persons acting on its behalf. Please notethat the documentation required can differ subject to thelegal form and country of origin of the foreign company.
It is also advisable to consult a German notary at an earlystage. A dependent branch office only requires registration
with the trade office.

Trade Office Registration
Before starting their business operations, all business operators must inform the competent local trade
office (Gewerbe-/Ordnungsamt). This applies to all companies regardless of company form (excluding freelanceprofessionals). Accordingly, both the autonomous anddependent branch must register in the trade office before
business operations are started. Generally, the same procedure applies as for the GmbH. As with registering a GmbH,
trade office registration of a branch office requires atleast one local representative in Germany. A businesslicense or permit is not required in the majority of cases.
However, it may be required for some business sectors.

Commercial Register
The public commercial register (Handelsregister) ensureslegal certainty in the area of commercial law by providing
important information about registered companies. It isadministered by the local courts (Amtsgericht). Some of thecompany data is also available online. This means that it isfairly quick and easy to check the existence and power ofrepresentation of any given company. All corporations – aswell as many other enterprises requiring business operations
to be set up in a commercial manner – have to be registeredin the commercial register. Any application for registrationin the commercial register must be submitted by a German
notary. Notarial online procedures are in place, for example,
for applications for entry in the commercial register.
→ www.unternehmensregister.de

FACTS & FIGURES 2024 | gtai.com

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