German Act to Modernise the Law on Partnerships (MoPeG)
On 1 January 2024, new rules will apply to civil law partnerships (GbR). The Act to Modernise the Law on Partnerships (MoPeG) also applies to existing companies without transitional provisions.
What are the most important changes and what must you pay particular attention to as an entrepreneur?
1. General information
Why is partnership law being modernised?
Some of the legal rules for this in the German Civil Code (§§ 705 ff BGB) are over 100 years old. At that time it was not thought that the GbR would gradually develop into a legal form with its own legal capacity. Now the law is being brought into line with business life and the GbR is becoming a legal form with clear and understandable rules.
When and for whom will the rules of the GbR change?
The new legal rules will come into force on 1 January 2024. There are no transitional provisions. The rules apply not only to new formations, but also to existing companies.
What are the most important changes?
The new regulations clearly distinguish between a legally capable and a non-legally capable GbR. In future, the GbR can be entered in a register, the newly created company register. A registered GbR bears the legal form suffix “eGbR”.
2. Legal capacity of a GbR
Up to now, the BGB had not provided for a legal capacity of the GbR; this only developed through case law. In future, the BGB will expressly distinguish between a GbR with legal capacity and a GbR without legal capacity.
The non-legally capable GbR, the so-called internal company, does not engage in entrepreneurial activity, it does not participate in legal and business transactions. It serves the sole purpose of establishing legal relationships between partners.
In contrast, the legally capable GbR, also known as an external GbR or external company, participates in legal and business transactions. Legal capacity is presumed if the object of the GbR is the operation of a business. It is also new that the legally capable GbR only comes into existence in relation to third parties as soon as it participates in legal transactions with the consent of all partners.
The GbR is the bearer of rights and obligations; it can, for example, conclude contracts in its own name. The assets of the GbR are assigned to the company. The principle of joint ownership no longer applies. The GbR is capable of being a party in civil proceedings. It can sue or be sued in its own name. In addition, legal action against individual partners is still possible.
3. What does the entry of a GbR in the company register (eGbR) mean?
What is the company register?
The company register is a newly created register for the GbR; it is kept by the district courts, which are also responsible for the commercial, cooperative, partnership and association registers.
Does a GbR have to be entered in the company register?
There is no general obligation to register a GbR. In certain cases, however, registration in the company register becomes a de facto compulsion if the GbR has to register in order to prove its capacity to act. Insofar as registration is not compulsory, the partners generally have the choice of voluntarily entering the GbR in the new company register.
Notarial application for entry in the company register.
Registration, changes, e.g. of the name, the number of partners, the power of representation or the registered office of the registered GbR (eGbR), must be registered with a notary.
It is not possible for the eGbR to revert to an unregistered GbR by deletion from the company register. Rather, the eGbR must be liquidated in order to bring about the deletion in the company register.
The eGbR is now also one of the legal forms capable of conversion under the German Transformation Act (UmwG).
Incidentally, the registration of a GbR in the company register does not change its status as a small business; it does not thereby become a commercial trade within the meaning of the German Commercial Code (HGB).
When is there a de facto obligation to register a GbR?
- Real estate: GbR registered in the land register
The acquisition, sale or disposal of real property rights by a GbR is only effective under substantive law if it is entered in the land register. From 1 January 2024, however, land rights can only be entered in the land register if the GbR is entered in the company register.
Important: For a GbR that is already registered in the land register, however, there is no immediate obligation to be registered in the company register on 1 January 2024. The entry must be made at the latest when a change in the land register becomes necessary.
- GbR as a partnership
The GbR can participate as a partner in other companies, such as an eGbR, OHG, KG, GmbH, etc. What is new is that in future it will be mandatory for a GbR to be registered in the company register so that its shareholder status can be entered in the respective register, such as the commercial register.
Name of the eGbR
With its entry in the company register, the GbR is obliged to use the suffix “eingetragene Gesellschaft bürgerlichen Rechts” (registered civil law partnership) or “eGbR”. Other additions to the legal form are not permitted. If no natural person is liable as a partner, e.g. because all partners are limited liability companies (GmbHs), the limitation of liability must also be indicated, e.g. GmbH & Co. eGbR.
The unregistered GbR should bear the legal form suffix GbR in order to inform legal transactions about the legal form.
Registered office of the eGbR
New: The partners of the eGbR can agree on any place as the seat in Germany (so-called contractual seat). This does not have to be the administrative seat where the business is actually conducted. In this way, the eGbR can move its business activities abroad.
This privilege does not apply to the unregistered GbR. Its seat must be at the domestic place where its business is actually conducted (administrative seat).
Power of representation
Previously, partners only had the power of representation vis-à-vis third parties if they were also authorised to manage the business. The BGB (German Civil Code) assumed that joint management was the rule, unless other arrangements were made.
New: As a rule, the law assumes a joint power of representation without a link to the power of management. The partners may deviate from this rule and agree on other representation arrangements.
Since the partners’ power of representation is entered in the company register, legal transactions can obtain information on the power of representation easily and with legal certainty. In contrast, partners of a non-registered GbR can only prove an existing individual power of representation separately, for example with a power of attorney.
Obligation to notify the Transparency Register
With the registration of the eGbR in the company register, the eGbR is obliged to notify the transparency register of the beneficial owner(s) and any related changes. This still does not apply to the unregistered GbR.
The new GbR and tax law
According to the explanatory memorandum to the MoPeG, there are no changes to the income tax principles for the taxation of partnerships. The uniform and separate determination of profits remains in force. At the level of income tax, the transparency principle, i.e. taxation under income tax law at the level of the partner, remains in force for partnerships.
The MoPeG does not result in any changes with regard to turnover tax. The partnership is an entrepreneur for turnover tax purposes.