Legislative proposals of the ‘traffic light coalition’ with respect to corporate law – An overview

Simplified company formation through digitalisation

Under the old government still, a law had been passed with the aim of facilitating future company formations on the basis of cash contributions via remote online notarisation; this will apply to GmbHs – [private limited companies] and Unternehmergesellschaften (haftungsbeschränkt) [limited liability enterprise companies, which are less complicated to set up than a GmbH with a share capital requirement of just €1]. Online notarisation will be valid as of 1.8.2022 and is intended to be conducted via a video communication system that has already been made available by the Federal Chamber of Notaries (Bundesnotarkammer). It will thus be possible to execute a company formation without the founders having to be physically present before the notary. The same will then also apply to commercial register entries for corporations that have to be authenticated by a notary. The new coalition would now like to go one step further and likewise allow certification via video communication for company formations on the basis of contributions in kind as well as for other resolutions.

Furthermore, there is an intention to set up so-called one-stop shops as contact points for prospective company founders where they would be able to obtain advice and funding for company formation and also to register their businesses. The aim is to facilitate company formations within 24 hours. It remains to be seen how exactly this will be implemented in this case. Setting up an appropriate online portal, for example, could be considered.

Please note: Other measures aimed at establishing Germany as a location for start-up investments include simplifying IPOs and capital increases, in particular, for growth companies and SMEs, too. Furthermore, the introduction of shares with different voting rights has also been announced. 

New legal forms for businesses

There are moreover plans to introduce new legal forms for businesses such as, e.g., social enterprises or asset-locked organisations. The latter form has been under discussion for a long time already from the perspective of sustainable business practices and corporate social responsibility. In the case of this legal form variant, the profits that are generated remain in the organisation for the long term and may not be accessed by the shareholders. They essentially see themselves as trustees for the next business generation. The legal basis that has to be created for this would however expressly exclude tax planning arrangements. 

Other relevant proposals related to corporate law

Beyond the above-mentioned areas of law, there are plans for changes with respect to the procedure for conducting annual general meetings (AGMs), the co-determination regulations as well as the rules in the field of compliance. 

(1) Online annual general meetings – There are plans to turn the possibility of having a virtual AGM – which was introduced as a pandemic-induced measure – into a permanent option, although shareholders’ rights would have to be fully safeguarded. However, there is no mention of the – desirable – extension of the regulations to also include GmbHs.

(2) Co-determination – There is an intention to further develop co-determination in enterprises. It is envisaged that, e.g., the legal form of the SE (societas europaea) could progressively become subject to the co-determination requirements for supervisory boards; up to now these have only been applicable in exceptional cases.

(3) Compliance – Furthermore, the coalition agreement provides for a revision of the rules on sanctions imposed on businesses for breaches of compliance obligations, including the amount of the penalty. In addition, there is an intention to create a precise legal framework for internal investigations.

Outlook: We will keep you updated about the implementation of the agreed reforms. This could however occasionally call for a degree of patience. The plans for the ‘one-stop shop’ contact points for company founders, for example, had already been included in the coalition agreements of both of the previous governments (!).