German legal forms: Unternehmergesellschaft UG (haftungsbeschränkt)

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German answer to the Limited: “Unternehmergesellschaft” (UG)

The entrepreneurs’ company as Micro-GmbH – or Saving Capital Incorporated

The name of the newest legal form in Germany is not misleading. Similar to easy forms in other countries a simple form has been legally established in 2008 in Germany.

Investing not more than 1 € + costs it can be established by one or more founders and registered at court by anyone. But the minimum capital is intended to rise. So at least 25% of the annual income have to be transferred into the company’s basic capital until a basic capital (same as for the usual GmbH) has been accumulated. After that it can easily be transferred to the “normal” basic form of German trade law.

To warn everybody that capital is low the legal form is only complete with the addition “haftungsbeschränkt” (limited), crucial for an effective limitation of liability.

Further Features of UG

The obligation to save capital has some exclusions. So, earnings can be used to compensate losses. Earnings can be posted in a depository as well as rise capital after a formal decision.

All other rules correspond to the ones for the “big sister” GmbH, like the legal frame for its constitutional agreement and its representation by the “Geschäftsführer” – managing director.

He or she is responsible for basic action like filing insolvency in case of perpetual minus capital or – within 3 weeks – a lack of cash.

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