Company law in Germany – reform of partnership law from 1 January 2024

The German Partnership Law Modernization Act (MoPeG), published in the Federal Law Gazette on August 17, 2021, came into force on January 1, 2024. This wide-ranging amending law affects numerous legal aspects, making changes to a total of 136 statutory provisions.

The reform has had the greatest impact on civil partnership law (GbR – Gesellschaft bürgerlichen Rechts). Indeed, codified civil partnership law has remained largely unchanged since the German Civil Code (BGB – Bürgerliches Gesetzbuch) came into force on January 1, 1900. However, case law has evolved considerably, particularly in recent decades. To reflect this evolution and ensure legal certainty, the German legislator has reformed partnership law, largely using the method of codification under constant law.

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Since the modernization law also applies to existing companies, and without any transitional arrangements, it’s in companies’ interests to be aware of the latest developments!

German law distinguishes two main categories of civil company, which are equivalent to three types of company under French law:

• The so-called “external” civil partnership (Außengesellschaft) which, according to the common will of the partners, is intended to participate in legal commerce. This structure corresponds to the classic société civile under French law, known in particular as the société civile immobilière (SCI) and the société civile professionnelle (SCP).

• The so-called “internal” civil partnership (Innengesellschaft), which, according to the common will of the partners, is not intended to participate in legal trade. This category of internal civil company encompasses two different types of company under French law:

– The joint venture: Not wishing to carry out any entrepreneurial activity vis-à-vis third parties, the partners form a civil partnership, the sole purpose of which is to regulate the partners’ internal relations.

– The de facto partnership: Two or more people act as partners, sharing losses and profits from the business activity. Without having expressed their will, the partners form a company without having performed any legal act of creation.

One of the most important changes introduced by the MoPeG concerns the legal capacity of the GbR. This point has been the subject of fierce controversy over the last few decades: in the past, German case law granted partial legal capacity (Teilrechtsfähigkeit) exclusively to external civil companies (Außengesellschaften).

In response to the new requirements of the modern world of partnerships, the law has had to be adapted by clarifying the legal regime:

• The external non-trading company now has unlimited legal capacity (§ 705 para. 2, 1st alternative BGB)

– The external civil company can itself hold rights and obligations, and can enter into contracts independently.

– The external non-trading company has the capacity to sue: it can itself sue and be sued. However, it is still possible to act separately against each partner of a GbR.

• However, an in-house non-trading company which does not engage in entrepreneurial activity and whose sole purpose is to determine the internal legal relationships between its partners remains a non-trading company without legal capacity (§ 705 para. 2, 2nd alternative BGB).

The partners of a civil partnership under German law thus have a genuine option between creating a civil partnership with or without legal capacity.

On the other hand, and in contrast to French law, it is important to specify that registration does not constitute an external civil partnership, since § 705 BGB expressly states that the sole common will of the partners to participate in the legal trade is sufficient, and that in the event that the object of the civil partnership is the operation of a business under a common name, the common will of the partners to participate in the legal trade is presumed.

The MoPeG introduces a new “company register” designed specifically for GbRs (Gesellschaftsregister) when partners register their company. Indeed, the new legislation provides for the principle of optional registration for external GbRs. In practice, however, there is one very important exception: any GbR that owns real estate, trademark rights or stakes in another company and wishes to interact commercially with third parties is de facto obliged to register in this new register.

Such a GbR entered in the company register now carries the additional name “registered civil company” (eGbR – eingetragene Gesellschaft bürgerlichen Rechts). In addition, the beneficial owners of an eGbR must now be listed in the German Transparency Register (Transparenzregister).

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Registration of the GbR in the company register must be carried out before a notary. Other operations relating to the eGbR, such as a change of name, a change of partner, a change in management or a transfer of registered office, also require notarization.

While the German legislator and the case law of the CJEU have hitherto reserved the option of transferring their effective place of management (real seat) from Germany to another country exclusively for joint-stock companies, this is now also possible for registered non-trading companies (eGbR).

Under § 706 BGB, the partners of an eGbR can agree on any location in Germany as the “statutory seat” of their civil partnership, while the “actual seat” (central administration, i.e. the place where business operations are actually carried out) is located abroad. In effect, this is a manifestation of the “theory of incorporation”, according to which the law applicable to a company always remains that of the state of its incorporation, in this case that of Germany, even if the actual seat (central administration) is transferred abroad.

This applies to all member states of the European Union, which must respect the case law of the CJEU on freedom of establishment (notably on the basis of the Centros, Überseering and Inspire Art rulings), as well as to all third countries that adhere to the theory of incorporation. Finally, it should be pointed out that, by virtue of a bilateral agreement between Germany and the United States guaranteeing the application of the incorporation theory between these two countries (10/29/1954), an eGbR can, for example, transfer its administrative headquarters to the United States, as long as its registered office remains on German territory.

N.B.: Directive (EU) 2019/2121 of November 27, 2019 on cross-border mergers, demergers and transformations, which was transposed in France by Ordinance no. 2023-393 of May 24, 2023 and in Germany by the “UmRUG” law that came into force on March 1, 2023, only concerns limited liability companies.