The online formation of a German limited liability company (GmbH)

In implementing the European Digitization Directive, the German Bundestag introduced a law on 10th June, 2021, that will enable the online formation of a limited liability company in the future - the German Act Implementing the Digitization Directive (DiRUG). Starting point is the "Company Law Package" of the European Union. As of 1st August, 2022, it will be possible to form GmbHs and UGs in a digital online procedure. The formation is carried out with a special sample protocol that does not allow individual deviations. The online procedure is therefore best considered for the one-man GmbH. Moreover, the online procedure is only possible for a cash incorporation.

Abuse prevention through digital identification

Also the online formation is carried out with the involvement of a notary. The Chamber of Notaries sets up a special video communication system for the procedure, which ensures reliable identification of the parties involved. The risk of misuse shall be counteracted by using "means of identification of the highest security level": The signature requirement must be met by means of a qualified electronic signature. 

Practice note: A qualified electronic signature (QES) is a certificate that replaces a handwritten signature. The QES can be obtained from various certification service providers (including the certification body of the German Federal Chamber of Notaries), which can be viewed on a list at the German Federal Network Agency. After successful identification, a smart card including PIN is issued, which will replace the handwritten signature in the future by means of a card reader.

In exceptional cases, the notary may require the personal appearance of the parties involved, in particular in order to establish the identity of the founder or the power of representation of the parties involved in a legally secure manner.

Digital registrations at the commercial register

The second major new development introduced as part of the implementation of the Digitization Directive is the possibility to process registrations at the commercial register by means of an online certification. The hitherto required notarization of the applicant’s hand sign for registrations is simplified as it can be carried out in a video communication. For this reason, the applicant’s personal appearance is not necessary any more. The certificates created by means of video communication are submitted online by the notary.

In contrast to the online formation, which is only possible for the GmbH and the UG, online certification of register applications is possible for all German corporations and for sole traders. However, it is not clear why partnerships are excluded.

“Business Registers Interconnection System” (BRIS)

In order to check the basic data of a (foreign) corporation, the notary will in future have access to the "Business Registers Interconnection System" (BRIS), which represents a network of all national business registers. Each European corporation shall receive a so-called EUID, which shall be a uniform European identifier and serve the identification via BRIS.

Register publicity

As a consequence, the implementation of the European Company Law Directive entailed a change to a “register-only” model. This means, that announcement portal www.handelsregisterbekanntmachungen.de will be omitted. In the future, commercial register entries will be announced by making the relevant information available for the first time via the register portal of the German federal states (www.handelsregister.de).

This changeover is also associated with a concept change in financing. In the future, data retrieval from the electronic commercial register will be free of charge. In return, all registered legal entities will have to pay a provision fee.

In addition, the "register-only" model will also be extended to accounting publications. Publication of the annual financial statements in the Federal Gazette will be discontinued. Instead, the accounting documents will be transmitted directly to the company register in the future and will only be accessible there.

Conclusion

With the DiRUG, Germany is only desultorily taking the path to digitization of company and register law. Unfortunately, the law does not go beyond the minimum prescribed by EU law. It is incomprehensible why only limited liability companies can be formed online. Furthermore, it is not comprehensible why commercial register applications for commercial partnerships cannot be made online. Unfortunately, a major digital effort that would also include, for example, amendments to the articles of incorporation and share transfers was missed. The new regulations on register publicity and the bundling of registers are a positive progress.

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