Relocate a UK Company to Germany after Brexit

Determining the proper corporate structure to implement with your business will decide many factors about registering the company when relocating your business to Germany. The GmbH model is similar to the British limited company as it provides those involved with limited liability. The GmbH is Germany’s most prevalent limited liability business form and is used by many small to medium-sized enterprises. This model carries a certain amount of respect with investors due to its reputation for reliability. When establishing a GmbH, there is a requirement for a minimum of €25,000 in share capital and a minimum of €12,500 in cash. Other fees also need to be paid at the stage of incorporation.

The UG model is seen as the “mini-GmbH” approach, whereby the company receives many of the same benefits as a GmbH but has reduced establishment costs. The UG (“die Unternehmungsgesellschaft  – or “entrepreneurial company”) model is most appropriate for “start-up companies“, and it does not carry the same respect as the GmbH model. It is provided for under § 5a Limited Liability Companies Act. It is common for successful UGs to become GmbHs upon establishing themselves.

The AG (“die Aktiengesellschaft”) is the stock corporation in Germany. This model allows companies to become truly global players. Establishing a stock corporation in Germany requires at least 50,000 euros of share capital, of which one quarter (12,500 euros) must be provided upon registration. The company must then be registered with the Tax Office, Commercial Register and the Trade Office. Forming an AG also involves drafting the Articles of Association as the company’s founding document. Like the GmbH model, the AG has a long and respected history in Germany and is, therefore, a suitable model for attracting outside investment and support.

Germany also offers a range of partnership options with varying degrees of liability.

The registration process will depend on the model of business pursued. Limited liability companies such as the AG and the GmbH provide stronger protections for those involved in their establishment but also have a more complex registration system. New companies in Germany need to be filed and registered with the Trade Register, the Tax Office and the Commercial Register. The company also need to prepare its Articles of Association and ensure that the business plan is ready for investors and banks. Documents for registration will vary based on the company’s industry and whether it is a limited liability company, a company with unlimited liability or a partnership arrangement with elements of both – such as a GmbH & Co. KG.

At Schlun & Elseven Rechtsanwälte, our corporate law team is vastly experienced when dealing with German bureaucracy, and they are ready to oversee the registration of businesses. Our lawyers will advise your company on the necessary registration process and oversee its completion. Our lawyers will also advise regarding the required licences and standards applicable to operating a business in Germany.

Determining whether to relocate to Germany entirely or open a branch office or a subsidiary in Germany is essential for your business. At Schlun & Elseven Rechtsanwälte, our corporate lawyers provide clear insight regarding which model – branch, subsidiary or representative office – may be suitable for your situation. Here is a brief outline of the differences between some of these different options.

Subsidiary companies under German law refer to legally independent companies with their own legal personality, in which the parent company holds a majority stake. The subsidiary company, therefore, has a German legal form. This German form allows subsidiaries to have a degree of independence when conducting commercial activity on the German market. Such independence will enable them to make entrepreneurial decisions specifically for the German market.

However, there are risks involved, and pursuing the subsidiary model brings higher bureaucratic burdens such as commercial register entry and business registration. There are additional financial requirements for its establishment, as where a GmbH or an AG has been established, the minimum share capital (AG 50.000,00 €/ GmbH 25.000,00 €) needs to be financed. The subsidiary model is particularly suited to longer-term commitments in Germany.

The branch office is dependent on having a head office, but it can take part in business dealings independently. The branch office is viewed as an establishment separate from the head office, but it carries out its own legal transactions for a temporary purpose. These activities must be within the scope of the business activities of the head office. The branch office has a certain degree of organizational independence from the head office, but it does not have the status of a legal entity. The branch office represents a part of the company dependent on the head office without its own legal personality. It is therefore subject to the (foreign) law applicable to the head office.

A branch office in Germany allows for independent business activity, and there are low economic efforts to establish it. However, it does have a high bureaucratic burden as it needs an entry into the commercial registry and business registration, and its trade name is the same as that of the head office.

The representative office is entirely dependent on the head office abroad. This establishment may not run under a separate trading name in Germany, and invoices are issued in the trading name of the head office. Consequently, it does not take part in business transactions independently. The bureaucratic elements are low for establishing a representative office as an entry into the commercial register is not required. There is also no share capital requirement for opening such an office.

The representative office is only suitable for temporary access to the German market, as it provides less entrepreneurial flexibility.

At Schlun & Elseven Rechtsanwälte, our corporate lawyers advise British Limited Companies based in Germany concerning legal requirements to be aware of after Brexit. Before Brexit, British Ltd. companies founded in the United Kingdom but operating mainly in Germany used freedom of establishment under European law per Art. 54 TFEU for recognition. However, the EU and UK’s failure to come to an agreement on the future recognition of British company forms in EU member states meant that British Limited companies have been left with some difficult decisions.

Our legal team advises companies of all sizes regarding transferring the registered office to the UK, cross-border mergers, establishing holding companies, mergers and acquisition law in Germany, conversion options, and liquidation of companies.