Establishing and Operating a GmbH in Germany: Key Requirements and Regulations

Formation and Incorporation

When establishing a GmbH (limited liability company) in Germany, there are several key requirements and regulations to be aware of.

No statutory requirement for board meetings: Unlike some other jurisdictions, there is no statutory requirement for the GmbH to hold regular board meetings.
Regulation of quorum requirements: Quorum requirements for shareholder and board meetings can be regulated in the articles of association, but there are no statutory quorum requirements.

Bank Account

When forming a GmbH, the share capital must be paid into an account of the company to be established. It is possible to use a foreign bank account.

Auditing and Financial Statements

The GmbH is obliged to prepare financial statements, including a balance sheet and profit and loss account at the end of every fiscal year. Auditing of the annual financial statements is mandatory for large and medium-sized limited liability companies.

The registered nominal amount must be at least EUR 1 per share and – in case of a higher amount per share – must be a full Euro amount.

Capital Increase

Capital increase can be affected by amending the articles of association, which requires a notarized shareholders’ resolution. Capital increase only becomes legally valid upon registration with the commercial register.

Repatriation of Funds

Funds can be repatriated abroad from Germany via profit withdrawal in accordance with the relevant tax provisions.

Transferability of Shares

Shares are generally transferable, but the articles of association can restrict the transfer (e.g., by implementing approval requirements).

Know Your Client Requirements

The German “Know Your Client” requirements are based on the European provisions. Most common applicable law is the Anti-Money Laundering Act (Geldwäschegesetz), pursuant to which transactions are subject to different identification and reporting requirements, with penalties resulting from non-compliance.

Approval Requirements for Amending Charter Document

The shareholders resolve on amendments. The resolution must have a majority of 3/4 of the votes cast. The articles of association can provide additional approval requirements. The resolution needs to be notarized.

Licenses Required to Conduct Business in Jurisdiction

Before starting their business operations, all business operators must inform the trade office (Gewerbe/Ordnungsamt) of the town or local district in which the business operation is located. In some additional sectors, business licenses are necessary (e.g., pharmacies, property developers, real estate agents, brokers, security firms, pubs and hotels and banks).

Process of Purchasing and Utilizing a Shelf Company

The purchase of a shelf company is feasible and requires a share purchase agreement. After the purchase of the company and its application for registration with the commercial register, you may take up business.

These are the key points to consider when establishing and operating a GmbH in Germany.