The Gazette 1981

APRIL 1981

GAZETTE

GmbH is regulated less by German statute law and more by its Articles of Association. In the case of a GmbH there is a minimum capital of 50,000 DM. There are similar rules to those of the AG for the maintenance of its capital. The GmbH has at least two organs. These are the Board of Management and the General Meeting. In contrast to the AG, the areas of competence of these bodies are not laid down in statute law, but regulated by the company's Articles of Association. The Board of Management (Geschaeftsfuehrer) may be one person or several. The Board of Management of the GmbH is capable of acting on the company's behalf. As in the case of the AG, the Board of Management must act together as a body, unless the Articles of Association provide that one member or several members, acting alone or together, may represent the company. In contrast to the AG, there is no maximum time limit to their term of office. This is obviously more suitable to small undertakings, where one person may be the sole director and shareholder. The General Meeting of the members, in contrast to the AG, is more like the Irish General Meeting. The German Statute (GmbHGesetz), Section 45, provides that the GmbH General Meeting has power to make deci- sions in respect of the company in so far as statute law or the Articles of Association do not otherwise provide. When a GmbH has more than 500 employees, the company must have a Board of Supervisors, of which one-third are employees' representatives, and two-thirds are shareholders' representatives. As in the case of the AG, when there are more than 2,000 employees, the ratio is 50:50. Partnerships In Germany, business is conducted, other than through companies, by the use of partnerships. There are two basic types of partnership used, the Limited Partnership (Kommanditgesellschaft) and the Unlimited Partnership (Offenehandelsgesellschaft). The Unlimited Partnership (OHG) is not, in its own right, a separate legal entity. It is granted by statute (Handelsgesetzbuch) the right to sue and be sued, the capacity to own property, both real and personal, and it is also liable in tort. The fundamental point about the OHG is that vis-á-vis third parties, the partners are all liable personally and there is no limit to their liability. The partners all possess, individually, the capacity to bind the partnership in any contract what- soever, even though it may have no relevance to the business of the partnership. Despite this very heavy burden on partners, the OHG is a common form used to run businesses. As to the partners' relationship, inter se , it is regulated by contract (Gesellschaftsvertrag). This may provide that individually partners may only bind the partnership in certain areas, but any such provision will only affect their liability to each other and will not affect third parties. The Gesellschaftsvertrag gives the partners the right to sue each other should a partner make a foolish mistake in an area in which he is not competent. The partners also owe a duty to each other, which is similar to our common law duty of care ( treu und glauben). The Limited Partnership (Kommanditgesellschaft) is a derivative of the Unlimited Partnership. The difference between them is that only one partner in the Limited

Partnership has unlimited liability (the general partner). The liability of any other partner is limited to the amount which he has paid or has contracted to pay (the limited partner). Only the general partner has the power of management or representation. The limited partner has no power of management or representation. He has the right to be consulted on all transactions which are outside the normal sphere of business, but the consequence of the general partner omitting to do this is not to make the contract void with respect to a third party, but to make the general partner liable in damages to the limited partner. The limited partner, further, has the right to inspect the balance sheet and, when there are profits, he is entitled to 4% of his original contribution. Figures show that the number of limited partnerships in Germany has risen and the number of unlimited partner- ships has decreased. Thip is evidence of the general economic development since the second world war; the Unlimited Parnership concedes rights which are considered too great for a businessman, with the result that Limited Partnerships are increasing in number. [For full statistics of the number of companies in each category see Table 1 below.]

Table 1

1/1/1970

1/1/1975

1/1/1980

OHG

36,204 107,203

67,083 57,323 5,333 79,446

47,105 103,330

KG AG

6,564

5,455

GmbH

211,261

123,573

A further development of the Limited Partnership (Kommanditgesellschaft) is the GmbH & Co. KG. This is, in reality, a Limited Partnership, but the general partner is a GmbH, which means in effect that no partner is liable to an unlimited extent, as the GmbH is automati cally limited in liability to the amount of its share capital (minimum 50,000 DM). This form of partnership is regarded as a corruption of the Limited Partnership and not to be in the spirit of the concept; it is much criticised and rarely used. FLAC- Legal Advice Bureau The Society's Education Committee has agreed to a request from FLAC that apprentices willing to parti- cipate in the Bureau should be released from their offices for one morning or one afternoon per week subject to the consent of their masters.

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