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The Future of Online Company Foundation: what does the implementation of EU Directive 2019/1151 mean for founders?

Online company formation is coming

The resolution of the “company law package” by the European Parliament brings new possibilities for online company formation. They will roll into Germany by August 2021 at the latest. Importantly for founders from abroad, it will be possible to found a company without attending a physical appointment.

Foundation in five days

The system is billed as making it possible to form a company to be founded in only five days. When the system is launched, it will consist of an online form, which must be sumbitted along with the relevant documents, fees, and share capital. Then, entry in the commercial register can be made online after only five working days. At present, the lag time between notarial certification and entry in the register is approximately 14 days to four weeks. But this new system will finally bring Germany more in line with countries like the UK, which allows for companies to be formed in a single day.

This only applies to some companies

The EU Directive does not make it mandatory to use only the online procedure. That means the procedure in Germany will probably be limited to the cash formation of GmbHs. Other forms, or GmbHs which rely on a non-cash contribution, will continue to be founded in the traditional way. However, the system probably will also be available for company types which do not require entry in the commercial register, such as Gesellschaft bürgerlichen Rechts (GbR/BGB-Gesellschaft).

Advantages of online formation

The main advantages  of online company formation are

  • Speed, with no compromise on liability protection.
  • Avoiding mandatory notary appointments, which are often difficult to obtain and coordinate.
  • Faster entry in the commercial register – the point at which limited liability protection begins.

Why should we be wary?

This system is new, so there will no doubt be teething issues. The formation of a company is complex and should be well thought out from a legal and tax point of view. It is not uncommon for differences between the shareholders to have far-reaching consequences if they are not covered by an personalized company agreement. That is to say, despite the future possibility of a quick online foundation, the fundamental need for advice on the internal structure of a company remains the same.

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