RIYADH, 3 October 2004 — Germany offers potential overseas businessmen many investment opportunities ranging from acquisition of an existing company to investment in shares and setting up of joint ventures. One of the attractive features of the investment scenario is that there are no discriminatory investment laws in the country, according to Dr. Achim Mehrlein, counselor at the German Embassy.
Speaking on the occasion of the Day of German Unity, he said Saudi Basic Industries Corporation (SABIC) has become a major investor in Germany with a 7 million euro investment in Ruhr. In the Kingdom, he said, Germany ranks third after the US and Japan with foreign direct investment (FDI) valued at 142 million euros in 2002.
Speaking on the investment opportunities, Dr. Mehrlein said that among the options open to investors is the endowment of a company, branch or a production plant with capital assets or by granting subsidies or loans. Moreover, foreign investors are treated on a par with their German counterparts. The federal government, he pointed out, is scouting for foreign capital, particularly in the wake of the reunification of Germany.
Businesses can be set up in Germany in all the legal forms provided for under law. The German company law distinguishes between joint stock companies and partnerships. The investment regulations are the same for both overseas investors and German nationals. The most popular method of floating a company in Germany is the private limited company, or GmbH. Such companies are governed by the GmbH Act.
Dr. Mehrlein explained that under the German law, a GmbH can be founded by an individual or, alternatively, its shares could also be owned by legal entities (corporate bodies). Foreign legal entities are recognized in Germany provided they are domiciled in the foreign country concerned and recognition of them is not contrary to any German law.
The nominal capital of a GmbH must be at least 50,000 marks or 25,000 euros. The minimum amount of any share is 500 marks. To register a GmbH, at least half the nominal capital of 25,000 marks, including non-cash contribution, must be paid up. In the case of one-man GmbH, the capital must be paid up immediately, in full.
Where the capital is contributed in kind, a statement of the contributions in kind must be submitted to the court where the relevant commercial register is kept to allow the value of the contributed assets to be verified.
To set up a GmbH, a company agreement (Memorandum of Understanding) needs to be drawn up and notarized. The company only comes into existence on being entered in the commercial register. If the founding members do any business acts on behalf of the company before it has been finally registered, they bear personal liability for them. The name of the company must be either related to the business objects or formed from the names of the shareholders.
He said that because of the simplicity of the formation procedure, a GmbH is often the most suitable form of company for foreign firms wishing to limit the risk of their business activities to the amount of their capital invested in Germany.
Another mode of investment, according to Dr. Mehrlein, is via the public limited company, AG, the German abbreviation of “Aktiengesellschaft”. It provides an ideal basis in particular for multinational corporate operations. An AG requires at five founding members, whether German nationals or corporate bodies. The minimum capital required is 100,000 marks or 50,000 euros. The capital is raised through the issue of shares, which may be in the form of bearer shares or registered shares.
To form an AG, a Memorandum of Understanding and Articles of Association have to be drawn up and certified by a court or a public notary. The company only comes into being as a legal entity when it has acquired a commercial license. The name of the company is usually related to the object of the enterprise, and it must also include the initial AG.
The company must be entered in the commercial register kept at the local court with jurisdiction for the place where the company has its registered office. This can only be done when the necessary capital contributions have been duly made. In the case of contributions in cash, at least a quarter of the nominal capital must be paid up. Contributions in kind (non-cash contribution) must be made in full.
An AG is represented both in and out of court by its management board which can consist of one or several persons. The members of the management board are appointed and dismissed by the supervisory board, which must have at least three members, who in turn are appointed and dismissed by the general meeting of shareholders. Its main task is to supervise and monitor the acts of the management board.
Dr. Mehrlein said an “Offene Handelsgesellschaft” (OHG), or ordinary partnership, must consist of at least two partners, who can also be legal entities (such as a GmbH). Each partner has unlimited liability.
A “Kommanditgesellschaft” (KG), or limited partnership, differs from an OHG in that only one or more unlimited partners have unlimited liability for the firm’s debts, while the other partners are only liable with the amount of their capital contribution. The amount of the liable capital is not regulated by law.