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Corporate Law

Company Law in the Corporate Context

A brief introduction to the legal basis

Company law forms the legal backbone of our business world and regulates all essential facets of corporate law, from the formation and management of companies to the liquidation (dissolution) of companies.

I. Foundation

Every company founder inevitably has to deal with central questions of company law at a very early stage. As a rule, the first point of contact with company law is the question of the legal form of the company.

German and European company law offers numerous structuring options to choose from. The possible legal forms can be roughly divided into partnerships and corporations.

Partnerships include the following, among others:

- Civil law partnership (GbR)
- General partnership (OHG)
- Limited partnership (KG)
- Partnership company (PartG)

Corporations include the following, among others:

- Limited liability company (GmbH)
- Public limited company (AG)
- Entrepreneurial company (UG)

There are also "hybrid forms" of partnerships and corporations, which combine the tax advantages of a partnership with the limited liability of a corporation. Probably the best-known "hybrid form" is the GmbH & Co. KG. It should be noted at this point that the GmbH & Co. KG is not, strictly speaking, a true "hybrid form". In the external relationship, it is formally a limited partnership. Within the European Union, it is still possible to establish European company forms and have them entered in the respective national commercial registers. One of the best-known legal forms is probably the European Company (Societas Europaea, SE).

Each of these legal forms has advantages and disadvantages. Before choosing the "right" legal form, the client's medium and long-term objectives must be carefully worked out. Choosing the "wrong" legal form can result in considerable tax disadvantages, fines under capital market law or even, in the worst case, financial ruin (if the shareholder is personally liable).

II. Corporate Management

In addition to the choice of legal form, questions of company management play a crucial role for every company founder. Inaccuracies in regulating the modalities of company management can "take revenge", especially in times of crisis.

Partners are only human. Everyone reacts differently under pressure. Some people lose their nerve and just want to get out of the company. Others feel "ignored" and fall into a kind of "blockade attitude", which can lead to every decision being opposed. In this context, it is advisable to draw up shareholder agreements, ideally at the time the company is founded. Such agreements regulate the relationships between the shareholders and, unlike the shareholders' agreement or articles of association, do not have to be filed in the commercial register.

III. Sale of the company / liquidation / restructuring

An entrepreneur is characterised by entrepreneurial risk and entrepreneurial initiative. Entrepreneurial risk often manifests itself in the fact that the company fails or does not develop as hoped.

n addition to liquidation (dissolution) as the classic means of "eliminating" a company, there is also the option of sale (share or asset deal), cancellation by the registry court (see Section 394 of the Family Proceedings Act, FamFG) or transformation (merger). In recent years, reorganisation law in particular has become increasingly important in corporate law practice. Groups in particular prefer to "swallow" subsidiaries with uneconomical divisions instead of selling or liquidating them in a way that attracts media attention.

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