Introduction
Is it possible to create a GmbH in Germany without going to Germany? This is the topic I am going to deal with in this post. For those who prefer watching a video, here is a short Video on this question.
Background
Popularity of the GmbH
More than one million businesses in Germany operate as a “GmbH” (Gesellschaft mit beschränkter Haftung, or company with limited liability). This makes the GmbH one of the most popular legal forms for conducting business.
The primary feature of a GmbH is that it limits the personal liability of the business owner. A GmbH is a separate legal entity with its own legal personality. Consequently, the GmbH can enter into contracts, and the GmbH itself bears the obligations arising from these contracts. As a result, the person or persons running the business are not personally liable, and their personal assets are shielded from liability.
This makes the GmbH a preferred choice for running a business, including for individuals residing abroad who wish to establish a company in Germany. However, the formation of a GmbH involves many formalities. Many people considering the formation of a German GmbH wonder if they have to travel to Germany to do so.
The short answer is “no.”
Requirement of notarization
Relevance
The key legal point is that the articles of association of a GmbH must be notarized. The articles of association constitute the founding document of the GmbH—the fundamental document that specifies the purpose of the GmbH, its mode of operation, its seat, and so forth. These articles of association must be notarized.
This means that a notary public must confirm that the individuals named in the articles of association genuinely intend to found a GmbH using these specific articles.
In Germany, notaries public play a significant role in many areas of contract law. Their task is, in particular, to ensure that documents are authentic, meaning that the signatures on the documents are genuine. Notaries public verify the identity of the persons who are parties to a contract and confirm that these persons have signed or concluded the contract. A specific law, the German Notarization Act, specifies how notaries must proceed when notarizing and which rules they must follow.
When a document is notarized, public trust in that document is significantly enhanced.
For certain types of documents, the law stipulates that they must be notarized to be valid. The articles of association of a GmbH are among these documents. This means that the articles of association must be notarized; otherwise, they are invalid.
For a long time, notarization required the physical presence of individuals before the notary public. Persons wishing to conclude a contract would meet in the notary’s office. The notary public would inspect their identity documents, such as their passports or identity cards, to verify their identity. He would then witness them signing the contract and confirm with his own signature that they had concluded the contract.
Possibility to notarize online
This changed in 2022. The German legislature introduced the possibility of notarizing the formation of a GmbH online.
The main reason for this change was an EU Directive, specifically the “Directive on digital tools and processes in company law.” This directive aimed to promote the use of digital tools in the context of company formation and to simplify the process of creating companies. Among other things, it obliged EU member states to ensure that companies could be formed entirely online.
This was an EU directive, which means that EU member states had to transpose it into their national law. They were required to pass legislation that was in line with the requirements of the EU directive and that implemented the directive.
Germany has done this and amended certain laws to ensure that a GmbH can be created online, as required by the EU directive.
The German legislature did not abolish the notarization requirement. This means that the notarization of a GmbH’s articles of association is still legally required. However, the legislature added additional methods for conducting notarization to make online notarization possible.
Firstly, the legislature introduced new provisions into the law governing the GmbH, the German Act on Limited Liability Companies. These provisions expressly clarify that notarization can be conducted online.
The legislature also included a template in the law that is specifically designed for the online formation of a GmbH. This template contains articles of association and language for the formation of the GmbH.
If founders wish to create a GmbH online, they and the notary public can follow this template.
In addition, the legislature amended the law governing notarization, the Notarization Act. This act now states that notarization can be conducted via a video communication system and clarifies the procedural requirements.
A specific video communication system must be used. There is a Federal Chamber of Notaries, which is an association overseeing the activities of notaries. This Federal Chamber of Notaries has made a specific video communication system available. This system must be used for the notarization of the formation of a GmbH.
Therefore, the online formation cannot be conducted via Zoom, MS Teams, or any other system, but exclusively via the specific system provided by the Federal Chamber of Notaries.
The founders do not need to concern themselves with this; once they have chosen a notary public and engaged him to carry out the notarization, the notary will send them a link.
The founders will need a computer with a camera and a microphone and a stable internet connection. They will also need a smartphone with NFC functionality and must download an app provided by the Chamber of Notaries, which the notary will specify.
It is crucial that the founders have sufficient identity documents. The purpose of notarization is for the notary public to verify the identities of the parties to a contract and to confirm that they have concluded the contract.
This purpose does not change when notarization is conducted online. Therefore, the notary public is only authorized to proceed with the notarization if he is satisfied that he has verified the identity of the persons entering into the contract.
Within the EU, a number of states have agreed on which identity documents are considered sufficient and will be recognized in other states. The discussions on this matter are ongoing, and the list is being expanded.
For nationals of other countries, it is advisable to discuss early in the process exactly what documents are needed to confirm the identity of the founders.