Germany Business Law

Business Laws in Germany

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Business law in Germany has several levels and encompasses limited shares, partnerships, and larger businesses such as corporations alongside those that transfer into the country from different nations such as the United States. For business considerations and building a company, it is important to understand how business law takes the central role.

Limited Liability Companies in Germany

The most common type of organization in business in the country of Germany is the limited liability company. These entities have governance over them by the Act concerning Companies with Limited Liability or the Gesetz betreffend die Gesellschaften mit beschränkter Haftung known as the GmbH. Shareholders of these entities participate through capital contributions to the company which breaks down into individual payments with the total investment into the entity. However, these shareholders have no responsibility for any debt the business accrues. It only takes one person to create the GmbH. However, it is possible to create one through multiple partners.

Share Capital and the Agreement in Germany

The share capital to create the limited liability company must encompass no less than EURO 25,000. There must also exist an agreement between the shareholders to prepare and notarize the agreement itself through a notary public and to create the business. The existence and visibility of the entity become effective legally after registration in the commercial register in Germany. The name of the GmbH must also always shave the addendum as part of the name with limited liability or the necessary abbreviation mbH. Any deviation from this can invalidate the legality of the company in this nation.

Joint Stock Company in Germany

The Aktiengesellschaft or AG is a joint stock company that is subject to the Stock Corporation Act in Germany which requires a share capital to meet at least DM 100,000. There is the articles of association that a court or notary public will authenticate and also requires the company to set up an AG. This AG turns into a legal entity only when it enters the commercial register similar to the limited liability company. The name of this joint-stock company can take the purpose of the enterprise that the owner wants, but it must also contain the Aktiengesellschaft expression for legal validation.

The Partnership Codes in Germany

Partnerships have general rules through the Civil Code or the Bürgerliches Gesetzbuc known as BGB. Mercantile partnerships are through the Commercial Code Handelsgesetzbuch or HGB. Rather than independent entities without ties, these foreign businesses are often established through non-independent subsidiaries or through a branch office in Germany. This can help someone that owns a company in another country establish it in Germany without needing to reside in the country. However, the owner of the partnership will still need to know the laws of the country to prevent violations that can affect commerce and business interactions.

The Germany Subsidiary

As with other counterparts, the subsidiary is also a legal entity, but it is separate from the parent company without known connections from the outside. It also has a degree of independence from the parent company. It usually has management, accounting employees, procedures through financing and business assets that are normally independent without direct attachment to the parent company and it can operate outside of the standard rules of the owner. This is different from branches because they are not separate legal entities and must depend almost completely on the main branch or head office. The head office is in charge of all central administration for the branches. Any commercial register is necessary for subsidiaries but not for branches because of these procedures.

Joint Venture in Germany

A joint venture does not need to occur only between domestic companies but can also happen with foreign businesses. There is no necessary limitation on special legal commercial enterprises. Joint ventures are possible with nearly any type of business or partnership. If the company has a limitation by shares within it, the foreign or domestic business only has liability with the joint venture through the contribution of the venture rather than when the company is working alone. Partnerships are different because the liability can suffer restriction where only one of the partners is fully liable rather than employees or any others connected to the venture.

When the joint venture occurs with the partnership, the general partner is usually the only fully liable party with other partners only sharing some liability concerns. In these ventures, there are usually no upper limits on sharing capital or licensing procedures necessary to continue through the agreements. Joint ventures in Germany are, however, subject to German and European Antitrust Laws to include the home country laws of all parties if certain requirements are part of the agreement. This involves the turnover rate, market shares and other undertakings of the venture. The merger control and prohibition of cartels is also a subject of issue.

Antitrust Law and Competition in Germany

The Act Against Restraints of Competition or the Gesetz gegen Wettbewerbsbeschränkungen known as GWB is the antitrust law that governs over the business in Germany. There is also the EC Antitrust Law and the EEC Treaty and the Merger Control Regulation which can have the same importance with these matters of doing business. These laws can also govern over joint ventures and programs between foreign and domestic businesses interacting together. The German Federal Cartel Office or Bundeskartellamt enforces the German and EC Antitrust Law and the State Antitrust Offices or the Landeskartellbehörden enforce these matters while the EC Antitrust Law has enforcement through the EC Commission in Germany.

Unfair Trade in Germany

The Act Against Unfair Competition governs over unfair trade practices in the country of Germany, and this is also known as the Gesetz gegen den unlauteren Wettbewerb or the UWG. Most cases will fall under the general prohibition with the UWG and are subject to case law in the country. The § 1 UWG provides those in commerce and engaged in competitive business the act of injunctive relief or damages for unfair trade practices against the entity. The UWG also has enforcement through private parties and competitors along with private organizations of consumers before the courts become involved. These matters do not usually involve government officials.

Regulation of Action in Germany

Branches involved in the competition, antitrust and enforcement over these businesses are in the process of deregulation. Specific regulation may apply to telecommunications with the Telecommunications Act or the Telekommunikationsgesetz. Several ordinances are through enforcement with the Regulatory Authority for Telecommunications and Post or the Regulierungsbehörde für Telekommunikation und Post. The energy sectors have governance through the Energy Act, and other matters progress through antitrust and unfair competition enforcement. Each business must know what section, Act and enforcement organization applies to ensure no violations occur that can stop and prevent future business. Other issues can also apply such as industry regulations and provisions through the GWB and UWG.

Distribution Systems in Germany Business

Regarding the distribution channels with foreign suppliers, they are not the subject of certain regulations. However, these channels do not need to rely on direct distribution but can indirectly sell and use indirect methods. However, these foreign distributors must also learn and understand German domestic rules that can govern over these interactions. For indirect sales, this applies to the sale of goods and items that are through independent traders that can include importers, retailers and those that wholesale products. These interactions can also happen through sales agents, commercial representatives, agents working through commission and independent dealers.

When distribution occurs through wholesalers and retailers, the suppliers that are foreign must also consider the EC antitrust laws that govern over these matters along with the German Antitrust Law. This is to protect the market and prevent a monopoly in a certain industry. Unfair trade, competition and practices applied to these matters can affect the ability and possibility of violating the antitrust laws in this country as well as others. Resale price of products and the maintenance of these matters is not possible because these laws prohibit the action. However, there are several exceptions in place.

Commercial Representatives in Germany

Commercial representatives, commission agents and dealers interacting with businesses are under antitrust law restrictions at least in part. The commercial representatives often work through commissions or are self-employed in the business work or with an entity and will sell on behalf of the company. These are third party agents. The commercial representatives in Germany often work and can even act on behalf of one or multiple companies and can supply these entities with complementary products. However, these agents are subject to the Commercial Code or Handelsgesetzbuch also known as HGB. Those that work for private companies may not reside as an employee but an independent contractor.

The Commission Agent in Germany

The commission agent is someone that is dissimilar to the commercial representative and is under the Commercial Code as well. This person conducts business through his or her own name or through a third party. This person is someone that receives commission rather than an hourly or salary wage. He or she can claim usually only claim commission through the sale when the third party completes the transaction. The commission based agent in Germany has a great motivation to make the sale and ensure it completes with the third party because there is no other money coming in without these transactions.

The Commercial Dealer in Germany

Someone that is the sole or exclusive distributor of products is also known as the dealer in Germany. He or she usually conducts business through a commission basis, but this person often works alone and through his or her own account rather than a third party. This dealer will sell and buy imported goods in his or her own name as an independent importer and not just an agent under German laws. The agent can act on behalf of a company, work with an entity or sell directly to an owner. The person puts his or her name on the line because there is no other party as a go-between in these interactions.

Intellectual Property and Business in Germany

German business interactions require specific laws and acts to govern over intellectual property similar to other countries. These include the patent, registered trademarks and copyrights. The business that creates a new product will need to first understand the Patent Act or Patentgesetz and register the item appropriately. Similar to this, the trademark requires registration to have a valid and working trademark for a brand, product or service. The trademarked item is usually a logo, picture or icon but it can also contain works or a phrase. Both of these and the copyright all require registration and documentation through the proper channels to prevent violations to the corresponding German laws.

German Business Insolvency

When a German business goes bankrupt, it is subject to the German Insolvency Statute or Insolvenzordnung. This is a replacement of the previously used Bankruptcy Statue and other laws. There is now a uniform statute for insolvency with businesses in Germany. This Statute provides for multiple procedures when the business is no longer solvent. This procedure provides for a reorganization of the company or liquidation of the entire business. The person in debt makes a request for insolvency procedures, but the creditor can also make this request if the person in debt is no longer solvent. The Insolvency Court may become involved in the process after the request to appoint a provisional insolvency administrator for the case, issue a prohibition with the creditors in pursuing action and prohibiting the person in debt to transfer rights for the property during this period.

The Need for a German Business Lawyer

The business owner or someone that wants to start a business in the country of Germany will need a business lawyer that works through German laws. This legal representative can help the person through the creation of a company, incorporate intellectual property, understand which German laws apply and how to prevent violations to these laws and, if necessary, how to get through insolvency when the business is no longer capable of staying in the black. The lawyer may need to file paperwork, explain what documentation is necessary and review contracts. The legal professional may also need to communicate the need for certain processes in joint ventures, when working through partnership conflicts and when using a dealer or commercial representative to sell and buy imported products.

The German business lawyer will need to help the owner of a company through the possible issue with environmental complications and labor laws of the country when applied to employees. Legal issues can arise through purchasing property for the company or when the owner wants to either bring in business from a foreign nation or export business to a different country. This lawyer will need to help with litigation problems and pursuing infringement with intellectual property as well. Legal support is necessary for most business owners at least some of the time. The owner may want to purchase real estate and push it through to the company or house assets in the entity that requires certain paperwork. The lawyer can assist with these processes as well as explain what the owner must do to incorporate others in the process.

Hiring a German Business Lawyer

The person engaging in business in Germany will need to consult with a lawyer about various aspects of commercial interactions. He or she will need to interview and then hire a lawyer that matches his or her situation and that can provide the right fit.

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