Entry in the commercial register
I. General matters
With the exception of a petty trade which is not entered and the civil-law partnership (GbR), enterprises of all legal forms must be entered into the Register of Commerce.
It is kept at Local Courts and serves legal security in business dealings, as all factual and legal situations are completely and reliably proven here.
The Register of Commerce is kept in two sections:
All the legal relationships of a company are notified for entry in the Register of Commerce via a Notary Public, examined by the register court, taken on in the Register of Commerce and published in the electronic Federal Gazette.
II. Significance of the Register of Commerce
Similar to the Land Register, the Register of Commerce enjoys public belief, i.e. it protects bona fide legal dealings to a certain scope through trust in the correctness of the entries and publications.
The Register of Commerce gives information about all facts essential for law which can be important for a merchant’s business partner. This includes, for example, the corporate name, the proprietor’s name or that of the personally liable partner of a business partnership, the limited partners’ liability, the share capital of an LLC, granting and withdrawal of signing powers, opening of insolvency proceedings and deletion of the company.
The Register of Commerce is public and therefore offers all interested parties the possibility of insight into the documents submitted, also via the Internet .
Copies can also be requested - at a corresponding charge.
For example, if a holder of a limited commercial power of attorney concludes a contract with a customer on the proprietor’s behalf after his dismissal, but before deletion in the Register of Commerce, and the dismissal is not known to the business partner, the contract is nevertheless completely effective.
Naturally, alterations of entered facts are also subject to entry, for example the change of the address of a merchant’s branch establishment or the move of the company’s headquarters. Recall of a holder of a limited commercial power of attorney or a managing director should be notified for entry without delay, because this is in the company’s own interest - as already stated.
For example, if a merchant moves the headquarters, he can be sued under the old address until the change has been entered in the Register of Commerce. So he could suffer considerable detriments if the Register of Commerce does not reflect the current state of affairs. Likewise, dissolution and liquidation of a company must be reported for entry in the Register of Commerce, as must the deletion of the company. Composition proceedings or insolvency proceedings which have been opened against the company’s assets are likewise entered by the Local Court ex officio.
III. Entry in the Register of Commerce
Sole traders and civil-law partnerships need not be entered in the Register of Commerce as a matter of principle. If a company’s business operation demands a business operation set up in a commercial way with a view to its nature and scope, the enterprise is always deemed a trading company subject to entry in the Register of Commerce, § 1 sub-section 2 German Commercial Code (HGB). This is determined regardless of the commercial activity which the enterprise particularly exercises. Even enterprises which in the literal sense do not sell or buy goods or commodities are merchants, i.e. also industry, craftsmen or miscellaneous service providers.
The decisive criteria for the assessment whether a business operation set up in a commercial way is necessary are above all:
- annual turnover
- amount of the capital used
- nature and quantity of business processes
- use and granting of loans
- size and properties of the business premises
- number of people employed
- nature of accountancy.
One of the criteria is the amount of the annual turnover. As a rule, a duty to entry can be assumed in the retail trade with an annual turnover of € 250,000.-- €. In the wholesale trade and in production, an annual turnover of € 400,000 to € 500,000 is assumed.
If an enterprise does not have itself entered in the Register of Commerce although it is liable to entry as a result of its scope of business, the Local Court can enforce registration - if applicable by imposing penalty payments.
If an enterprise does not require a business operation set up in a commercial way with a view to its nature and scope, there is no obligation, but there is the entitlement to apply for entry in the Register of Commerce. If such an enterprise has itself entered in the Register of Commerce voluntarily, the capacity of a merchant is acquired upon entry. A civil-law partnership (GbR) becomes a general partnership (oHG).
The CCI is obliged by law to support the courts in entries in the Register of Commerce and in the management of the Register of Commerce.
1. Corporate name
In every business, many people refer to a company, also a small one (petty trader) with the term of “Firma” in Germany, e.g. “Firma Maier”. From a legal point of view, this is not correct. According to the German Commercial Code, “Firma” is only the name with which the company is entered in the Register of Commerce and under which it appears in business dealings. But as petty traders are not listed in the Register of Commerce, they also have no corporate name.
Only an enterprise entered in the Register of Commerce can have a corporate name in the legal sense; together with the business operation, this business name can be sold, inherited and leased. This is particularly important for well established companies, as the old corporate designation can be continued if the proprietor changes and it is possible to build on the reputation of the established name with the public.
2. Formation of the corporate name
The corporate name must be suitable for identifying the enterprise and must possess distinctive power.
Customarily, the civilian name of the merchant can take on the identification function. But also factual statements or purely fantasy designations can also be used when forming the corporate name. Mixed corporate names comprising names, factual and/or fantasy designations are also admissible.
In a factual corporate name, the branch or field of activity of the enterprise is reflected by generic terms, e.g. ARTOS Gesellschaft für EDV-Beratung mbH (IT Consultancy LLC)
The corporate name containing a name contains the proprietor’s surname, e.g. Josef Kleinschmidt e.K., or one or more of the partners, Müller & Schmidt oHG. A fantasy corporate name can be formed by invented designations such as PHÖNIX AG, AVALON e.Kfr., Rasende Radler e.Kfm., KUKURUMBA KG or similar or combinations of letters can be formed.
The corporate name must be true all told and in its individual components; it may not deceive above the nature and scope of the business operation or the proprietor’s situation. The decisive thing in this context is the risk of obvious misleading of the public addressed, for example competitors, customers, suppliers or banks.
In addition, the corporate name must contain a suffix of the legal form disclosing the enterprise’s liability situation. Generally comprehensible abbreviations can be used. Some traders bear the designation registered merchant or an abbreviation, in German for example e.K., eK, e. Kfm. or e. Kfr.. A general partnership can use the abbreviation oHG, a limited commercial partnership KG, a limited liability company GmbH or “Unternehmergesellschaft (haftungsbeschränkt)” or “UG (haftungsbeschränkt)”, a joint-stock corporation the abbreviation AG. If no natural entity is personally liable in a general partnership or a limited commercial partnership, the limitation of liability must be recognisable in the corporate name, e.g. by the German suffixes GmbH & Co. KG or GmbH & Co. oHG.
3. Effect of the entry in the Register of Commerce
By the entry in the Register of Commerce, the corporate name is protected against corporate names with an identical or similar sound. as each corporate name must be clearly distinct from all other corporate names already entered in the Register of Commerce of the same borough (§ 30 HGB).
In order to rule out a possible risk of confusion or possible reservations with a view to the identity and clarity of the company at an early stage, contact with the competent Chamber of Commerce and Industry is recommended even before the application for entry in the Register of Commerce.
3.1. Benefits and duties of an entry for the merchant
However, the sense of an entry in the Register of Commerce is not exhausted by the information and organisation functions already described.
In many cases, the entry also proves to be a benefit for the merchant, he is given advance trust. The entry gives business partners and authorities a first impression of the enterprise. The entry in the Register of Commerce means that the fact that the company subjects itself to the application of commercial regulations and mores (in particular the German Commercial Code (HGB)) becomes obvious to the outside.
As every trader has in the meantime become entitled to voluntary entry in the Register of Commerce, the entry does not permit any conclusions concerning the size of the enterprise. Naturally, it also does not portray a statement on the creditworthiness or the soundness of an enterprise.
Many banks and trading companies make the start of a business relationship dependent on an entry in the Register of Commerce. Membership of specialist associations often has entry in the Register of Commerce as a prerequisite.
Only an enterprise entered in the Register of Commerce can appoint holders of a limited commercial power of attorney (§ 48 HGB); only such a company is entitled to found one or more independent branch establishment(s). Only anyone who is or was registered in the Register of Commerce as a merchant, as a member of the Board of Directors of a joint-stock corporation, as a managing director of a limited liability company or any other legal entity and has turned 30 can exercise the honorary office of a commercial judge in a chamber formed for commercial matters at a Regional Court.
However, merchants also have duties. This includes keeping books from which their trade transactions and asset situation can be seen.
As a rule, the merchant has to produce an inventory and a balance sheet at the start of the commercial trade and at the close of each fiscal year. Trade books, inventories and balance sheets must be archived for 10 years, received trade letters and copies of dispatched ones for 6 years.
Sole traders not exceeding certain threshold figures (500,000.-- Euro turnover and 50,000.-- Euro profits per fiscal year) are exempted from the obligation to accountancy, inventory and production of balance sheets according to the commercial law directives.
In addition, the specific directives of the German Commercial Code (HGB) apply to merchants. This in particular means that a merchant entered in the Register of Commerce can no longer make reference to various formal directives. For example, he is bound by a surety taken on orally; if he purchases in instalments, protection of the Consumer Credit Act and the Act concerning revocation of house-door transactions and similar transactions do not apply to him. Increased liability of defects applies to transactions between merchants.
There are also specific regulations with a view to information on letterheads:
As a matter of principle, the corporate name entered in the Register of Commerce (corporate designation) must be stated completely and correctly, including the suffix for the legal form.
The location of the branch establishment or the headquarters as well as the register court and the number in the Register of Commerce must be stated. In addition, the LLC must also state the complete surname and at least one first name of all managing directors.
Similar things apply to the AG and the GmbH & Co. KG, which has to give the matching information on the personally liable LLC on the letterheads in addition to its own information.
3.2. Tasks of the Chamber of Commerce and Industry
Upon request by the Local Court - Register Court - the Chamber of Commerce and Industry must make analytical comments on the admissibility of the corporate name and thus support it in the management of the Register of Commerce. In order to avoid rejection of the application by the Register Court, consultancy by the locally competent CCI before the application is advisable.
In particular, the CCI examines whether enterprises based and entered in the same borough have a corporate name which could lead to confusions. In order to exclude the fact the companies which could make claims to omission according to competition law directives due to a risk of confusion exist nationwide, an additional nationwide examination of risk of confusion can be sensible. A corporate name research can be done free of charge via the electronic Register of Commerce. Registered trademarks can be determined via the Internet appearance of the German Patent and Trademark Office.
For trade companies, the Chamber of Commerce and Industry is requested to make comments by the Local Courts. For craftsmen’s companies making an application for entry in the Register of Commerce, the locally competent Chambers of Crafts are also consulted.
3.3. Costs
The Local Court charges fees for entry in the Register of Commerce. As the applications for entry require public certification, i.e. by a Notary Public, involvement of a Notary Public is necessary. He also charges fees for the certification. The amount of the fees for the court and the Notary Public depend on the number of partners and the corporate capital.
The fee tables have been published in the Act concerning Costs in Matters on Non-Contentious Jurisdiction.
Each change in the Register of Commerce must be published in the Electronic Federal Gazette. The costs are based on the scope of the information to be given.
The costs of publication are exclusively charged by the Local Court. Often, offers for entries in branch directories, made to look like invoices, are sent and can be confused with invoices from the Local Courts.