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GAZETTE
APRIL 1981
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
67,083
47,105
36,204
KG
57,323
103,330
107,203
AG
5,333
6,564
5,455
GmbH
79,446
123,573
211,261
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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