Of Tradition and Change - The Modernization of the German GmbH in the Face of European Competition

Abstract

The landscape of business entities for small enterprises is changing - not only in Europe, but around the world. While Japan has abolished the model of separate entitites for small and big enterprises in favor of a US-type single entity model, other states like France, Spain and Switzerland have tried to adapt their specialized business forms to the modern world.

Germany has been rather slow in changing its GmbH, the archetype of the specialized limited liability company, which has been left largely unchanged for over a hundred years. After such a long time, significant changes can be expected - and are indeed planned. In a reform bill (MoMiG) which has been in the planning stages for more than three years, the legislature intends to change the face of the GmbH forever. The proposed changes affect not only the (heavily debated) minimum capital requirement, but also the rules on distribution of assets, the transfer and distribution of shares, the requirements for being a director, liability rules, formalities and many other areas.

The article outlines those changes and discusses briefly their expected effects on existing and future incorporations. It hints at the possible future competition among European regulators as well as the opportunities for the European Private Company desired by the European Parliament and Germany's role in that process.

Keywords: GmbH, German Limited Companies, reform, MoMiG, limited, company, Ltd, minimum capital requirement, asset distribution, share distribution, liability rule, director, amendment, German legislature, private limited companies, Gesellschaft mit beschränkter Haftung, German Law, Mindestkapitalgesetz

JEL Classification: K22, G38, G30, G39, G32, K19, K20, K29, P51, P52