• Varied Intended Uses of the German Limited Liability Company
  • June 25, 2013 | Author: Michael Rainer
  • Law Firm: GRP Rainer LLP - Hamburg Office
  • The intended use of a German limited liability company can be based on commercial, non-commercial or non-material activity.

    GRP Rainer Lawyers Tax Advisors, Cologne, Berlin, Bonn, Bremen, Düsseldorf, Essen, Frankfurt, Hamburg, Hanover, Munich, Nuremberg, Stuttgart and London www.grprainer.com/en explains: The intended use of a German limited liability (GmbH) does not necessarily have to be based on generating profit. A multitude of other determinations are conceivable. Lawyers, tax advisors and engineers are now also able to manage a GmbH, the so-called “freelancer-GmbH” (Freiberufler-GmbH). The fiscal authorities are also often happy to embrace the advantages of the GmbH, since they can exert influence on business notwithstanding the exclusion of liability.

    However, not all intended uses of a GmbH are permissible. For example, the business objective of the GmbH may not contravene legal prohibitions or public morality. A legal prohibition always exists if an essentially permissible legal transaction may not be carried out because of its content. It is not required that there be an express rule concerning the prohibition.

    If the company is geared towards an impermissible purpose, this gives rise to the nullity of the memorandum of association. Before the company is registered in the commercial register, its nullity can be asserted by anyone. This results in the registration court refraining from registering the company. The situation is different if registration has already been carried out. In this instance, the only possibilities are a plea for annulment or cancellation of office, as the company has nonetheless initially come into existence. In the event that the company objective is impermissible but the business purpose is permissible, the shareholders are at the most entitled to a right of withdrawal. Additionally, an action for dissolution can be submitted. The possibility of dissolution of office exists if there is a danger to public welfare.

    Company law is a very complex matter that is often difficult for laymen and shareholders to stay on top of. It can be advantageous with a view to the purpose of the company to seek the advice of a lawyer before the establishment of the company regarding said company and together formulate the best possible memorandum of association.