Virtual becomes reality: online formation of a German limited liability company

Hubertus Leo

Leo Schmidt-Hollburg Witte & Frank Rechtsanwälte, Hamburg

h.leo@lswf.de

The German legislator has taken a step forward towards digitising German corporate law by introducing an online formation procedure for limited liability companies, which balances practical improvements and security needs. While the new procedure may help to save time and costs for certain non-German founders, the scope is limited, as only specific European identification documents are compatible and, furthermore, original (ie, paper) versions of certain documents are still required in some cases.

Online formation procedure

Normally, any German limited liability company (Gesellschaft mit beschränkter Haftung or GmbH)[1] formation requires that either the founders themselves or persons authorised by them based on a notarial certified power of attorney personally meet with a German notary for the signing of certain formation documents. Additionally, every new managing director (Geschäftsführer) must personally sign an application to the commercial register (Handelsregister) before a German notary. For foreign investors, the administrative effort for the GmbH formation is, therefore, often a bottleneck in the process of setting up a business structure in Germany.

Since 1 August 2022, it is possible to establish a GmbH fully remotely without an in-person meeting with a German notary. The founders of a German GmbH can use a video communication and authentication platform established by the Federal Chamber of Notaries (Bundes­notar­kammer) to interact with a notary without a physical meeting. This system (the ‘Notary Platform’) also enables its users to generate qualified electronic signatures for digital formation documents.

The online formation is currently limited to the GmbH formation in case of a ‘cash’ contribution of the registered share capital (a minimum EUR 12,500 of which must be paid into a bank account prior to the registration).

Online access with standard hardware and mobile devices

Users can access the Notary Platform via the website of the Federal Chamber of Notaries[2]. Each user needs the following hardware: a standard computer with a camera, microphone and internet access, and a smartphone (iOS or Android) with a standard near-field communication (NFC) interface. The smartphone is required for the verification of the user’s identification documents through a verification app (‘Notary App’, downloadable from the Notary Platform).

Required identification documents

To participate in the online formation procedure, each founder or founder’s representative and, in addition (unless the managing director is one of the founders), each managing director, needs, firstly, an identification document with an activated electronic identification function in the form of an integrated chip that complies with the EU requirements[3], especially the high-level security requirements. Thus, only European electronic identification cards (eIDs) and equivalent national identification documents can be used. As set out on the Notary Platform, the following countries comply with the eID standards as of 15 March 2023: Belgium, Croatia, the Czech Republic, Estonia, Germany, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia and Spain.

In addition, each participating person must be able to present an NFC-readable photo for photo comparison, which may either be integrated in the identification document described above or a separate document.

The Notary Platform allows users to test the compatibility of their identification documents in advance. Potential founders can also contact a German notary in advance for confirmation that their identification documents are compatible.

Online registration and further coordination with the Notary

After the log-in and registration of personal information, including information on the identification documents, the user can select a competent German notary (eg, a notary located at the statutory seat of the future GmbH) and coordinate a date for the formation of the GmbH. The Notary Platform offers online scheduling, but users may also contact a preferred competent notary using any other forms of communication. Users should then provide the notary with the details of the future GmbH. The Notary Platform enables the notary to share drafts of the articles of association with the users.

Digital power of attorney for the formation process

The online procedure can also be used for the notarization of a power of attorney (Vollmacht) for the formation of a GmbH on behalf of a founder.

Caveats

For certain non-German founders, German notaries and authorities require some kind of proof of existence and representation of the legal entity, often in the form of a confirmation by a local notary, to be apostilled or otherwise legalised.[4] The new law does not contain an online process for such confirmation by a non-German notary. In an online notarisation, the proof of existence and representation of the non-German entity would, therefore, still need to be submitted to the German notary in paper form.

In most cases, the power of attorney for the formation of a GmbH notarised by a non-German notary will be subject to additional formalities, ie, it must be apostilled or otherwise legalised or certified in a German consulate. Thus, when a representative of a non-German founder presents such a power of attorney, the representative must mail or courier the original paper documents (notarial certificate with apostille or other legalisation, as applicable) to the acting German notary. Only in a few cases will notarised documents without these additional form requirements be acceptable in Germany under bilateral certification treaties, such as the treaties with Austria, Belgium, Denmark, France and Italy.[5]

A bottleneck in the process of establishing a GmbH often is the coordination with the bank. A GmbH needs an account in its own name, normally with a German bank or a German branch of an EU bank, to which the founder(s) must wire transfer the share capital. The GmbH’s managing directors must be the authorised signatories for the company bank account. Given the strict anti-money laundering laws, banks are sometimes reluctant to open bank accounts for clients without an in-person meeting with the managing director(s). Thus, the advantages of the online formation procedure may be frustrated by the need to set up the subsidiary’s bank account.

Further online notary services

The Notary Platform is also available for commercial register applications of any kind, eg, for registration of the appointment or removal of a managing director.

The scope will be extended on 1 August 2023, when an online formation with a contribution ‘in kind’ and the (unanimous) adoption of shareholders’ resolutions on changes of the articles of associations online will become available.