IHK Berlin

GmbHs and UGs with limited liability


Limited liability companies (referred to in this document as ‘GmbHs’) and entrepreneurial companies (‘UGs with limited liability’) are corporations with their own legal personality (i.e. legal entities), whose liability is restricted to the level of company assets. Entrepreneurial companies (UGs with limited liability) – Unternehmergesellschaften (haftungsbeschränkt) in German – came about as a result of legislative reform to the GmbH Act. They are another type of GmbH, but not a legal form in their own right. Consequently the law which applies to GmbHs (the GmbHG) also applies to UGs with limited liability. This document explains the law as it applies to both corporate forms. Unless different rules are specified for UGs with limited liability, it can be assumed that those described in relation to GmbHs apply equally to both. Special rules relating to these latter companies are to be found in Art. 5a of the Limited Liability Companies Act (GmbHG), and mostly relate to the founding of the company and to its capital. UGs with limited liability are primarily intended to offer new start-ups which have a low level of capital resources with the speediest, most cost-effective way of adopting a legal form with limited liability.

Corporations with their own legal personality

If it has its own legal personality, this means that the company is itself a holder of rights and obligations. It can – as represented by its management – act autonomously in legal matters, bring its own lawsuits and be sued, acquire property and own its own assets. It is independently responsible for paying its taxes. All business-related activities are the responsibility of the company. The company’s own rights and obligations exist in isolation from those of the shareholders and managing directors.

Limitation of liability

Liability is limited from the time the company is listed in the Commercial Register. Limited liability means that if the company has debts, liability shall extend only to the company assets and not to the personal assets of the shareholders. This rigid distinction between private and corporate assets means that if the worst comes to the worst, the shareholders only risk losing the contribution they agreed to pay in the articles of incorporation. If this contribution has not yet been made in full, the shareholders must, if need be, pay in the outstanding amount.
As a matter of principle, the company is liable up to the level of its total assets, i.e. not just the level of its share capital. For instance, if a GmbH was established with share capital of Euro 25,000 and this was lost as a result of unwise investments, there would no longer be any corporate assets from which to pay any liabilities. If the same GmbH had corporate assets of Euro 100,000, however, the entire amount would be recoverable by creditors. Exemptions from this limitation of liability include, for instance, cases of malpractice or the delayed filing of insolvency, or failure to forward social security contributions which have been deducted to the relevant insurer. In such cases, claims may also be made against the personal assets of shareholders and managing directors.

IHK Berlin publishes professional articles as a service for its member companies. These are intended to provide a brief introduction to the legal principles involved, and do not claim to be exhaustive. They are no substitute for the extensive advice available from a lawyer/tax advisor who has carried out a detailed assessment of your individual circumstances.