Mon, May. 29, 2006

Small Corporation Simplified

CK - Washington.   On May 29, 2006, Berlin Attorney General Brigitte Zypries announced measures to simplify the incorporation and maintenance of the standard corporate form for small business, Gesellschaft mit beschränkter Haftung, GmbH. The capital requirement will be reduced to 10,000 Euros of which 5,000 Euros must be paid in initially. In the future, GmbHs may locate their operational headquarters outside of Germany, just as foreign limited liability companies may have their seat in Germany.

The transfer of shares will become easier, and entries in shareholder lists will assure transferees of clear title. Currently, setting up such limited liability companies takes too long, by comparison with other nations, because administrative approvals must be obtained when the company is formed. The new rules will decouple permit procedures from the incorporation.

The draft bill is now on its way to various other departments for comments and should ultimately be sent to the Berlin Diet for discussion and potential approval. There is general consensus in Germany that the law on GmbHs needs reform and simplification. The current timeline could lead to an effective date of the revisions in early 2008.

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