Company Formations: A jurisdictional guide to setting up a business

QUESTION ONE – What are the most common structures used when international clients want to form a company in your jurisdiction? Any examples?

Under German law, it is not always possible to easily find the right structure for the company to be founded. There are a lot of individual reasons that influence the choice of a company structure, including tax reasons.

The most popular structure for a new company is the limited liability company (GmbH). Germany has a special law for limited liability companies which defines the guidelines for the shareholders, managing directors and the relationship to civil laws. This legal form is the most popular structure in Germany because it is relatively easy to establish and easy to handle for the shareholders and the management.

Typically, the limited liability company is used for small and medium-sized clients, but there are several other types of incorporated companies used to conduct busi­ness in Germany. These include the stock cooperation (Aktiengesellschaft/AG), the European stock cooperation (Societas Europaea/SE) and the limited liability entrepreneurial company (Unternehmergesellschaft/UG).

Partnerships are also available, including the limited partnership, which is a special form of the GmbH. Some international investors prefer opening a branch office, which is not a separate legal entity, but part of their existing foreign operation.

QUESTION TWO – Please detail some of the favourable and unfavourable legislation that businesses considering establishing a presence in your jurisdiction should be aware of? How can you help them to streamline the process?

The foundation and registration are quite simple because of the strict regulations. The easiest way is to purchase a shell company because it’s already set up and ready to commence business. We provide those companies and related services.

The regulations regarding the company name when it comes to competition law should be considered. We accompany our clients regardless of preference, whether that’s buying a shell company or founding a new company. The civil law framework guarantees stable laws, meaning the protection of liberties and equality before the law is ensured by basic law (Grundgesetz).

In contrast to the Anglo-Saxon common law system, which is based on case law, German legal codes delineate abstract legal principles and the judges have to decide on the basis of these standards. Investors find a business-oriented legal, regulatory and fiscal framework that is a stable basis for business in Germany and Europe.

QUESTION THREE – What due diligence is required to be undertaken by company formations agents under anti-money laundering laws in your jurisdiction?

Our firm does not need company formation agents, only the notary that certifies the foundation. We have been working with a notary for many years and they deal with every possible condition (e.g. the money laundering act and relating questionnaires). By using a shell company a lot of those steps have already been completed beforehand and result in less work for the client. The entry in the com­mercial register has already taken place, bank accounts have been set up and a tax number issued, so the company can commence business activities right away.

The identification of the entity and its verification, plus the proof of identity of the client, must also be carried out. The authorities need to know the structure of own­ership and management and the origin of the financial resources in the business. German banks have strict regulation, following the anti-money laundering laws in Germany, while auditors, tax advisers, notaries and lawyers, also require a lot of data and documents to set up a cooperation.