Gesellschaft mit beschränkter Haftung & Co. Kommanditgesellschaft auf Aktien (GmbH & Co. KGaA)

Definition and legal basis:

The GmbH & Co. KGaA is a special form of partnership limited by shares (KGaA) in which a GmbH acts as the sole personally liable partner (general partner). This legal form combines elements of the GmbH, the KG and the AG and is mainly regulated by the German Stock Corporation Act (AktG) and the German Limited Liability Companies Act (GmbHG). The GmbH & Co. KGaA combines the advantages of raising capital via the stock market with the flexible management structure of a GmbH. It is a legal entity and trading company in which the liability of the general partner (GmbH) is limited to the company assets of the GmbH, while the limited liability shareholders are only liable for their contribution.

Structure and organs:

The GmbH & Co. KGaA has the following characteristic structural elements: 1. general partner GmbH: A GmbH as general partner that assumes the management and representation of the KGaA. 2. limited liability shareholders: shareholders who hold shares in the KGaA and whose liability is limited to their contribution. 3. general meeting: meeting of limited liability shareholders that decides on fundamental matters of the company. 4. supervisory board: Supervisory body that monitors the management but does not appoint the managing director of the general partner GmbH. 5. management of the general partner GmbH: manages the business of the KGaA and represents it externally.

Foundation and raising of capital:

The formation of a GmbH & Co. KGaA requires two separate formation processes: 1. Formation of the general partner GmbH in accordance with the provisions of the GmbHG
2. Formation of the KGaA in accordance with the provisions of the AktG The share capital of the KGaA must be at least EUR 50,000 and is divided into shares. The general partner GmbH must have a share capital of at least EUR 25,000.

Management and representation:

The management and representation of the GmbH & Co. KGaA is the responsibility of the general partner GmbH, represented by its managing directors. These have a very strong position, as they: – Cannot be dismissed by the general meeting of the KGaA
– Have extensive decision-making freedom in the management
– Have a veto right against resolutions of the general meeting (if provided for in the articles of association) The supervisory board of the KGaA monitors the management, but has limited powers compared to the AG, as it cannot appoint or dismiss the managing directors of the general partner GmbH.

Liability and profit distribution:

The liability structure of the GmbH & Co. KGaA is divided into three parts: – General partner GmbH: unlimited liability, but only with its company assets
– Partners of the general partner GmbH: no personal liability
– Limited liability shareholders: limited liability to their contribution (share value) Profits are generally distributed in such a way that the limited liability shareholders receive a dividend first. The remaining profit is divided between the general partner GmbH and the limited liability shareholders, whereby the exact distribution is regulated in the articles of association.

Tax treatment:

The tax treatment of the GmbH & Co. KGaA is complex: – At the level of the KGaA: subject to corporation tax
– At the level of the general partner GmbH: subject to corporation tax for its share of profits
– At the level of the limited liability shareholders: dividends are subject to withholding tax or the partial income method The GmbH & Co. KGaA is generally subject to trade tax, whereby trade tax is incurred at the level of the company.

Advantages and disadvantages of the GmbH & Co. KGaA:

Advantages:
– Combination of GmbH management structure and capital market financing – Limitation of personal liability – Possibility of stock exchange listing while retaining control – Flexibility in the design of the capital structure Disadvantages:
– High complexity of the legal form
– Increased administrative and cost expenditure
– Potential conflicts of interest between general partner GmbH and limited liability shareholders
– Less attractive to investors due to the complex structure

Practical significance and areas of application:

The GmbH & Co. KGaA is relatively rare in practice, but can be advantageous in certain situations: – Family companies that use capital market financing but want to retain control
– Companies that want to combine the limited liability of the GmbH with the capital market orientation of the AG
– Special constructions in the private equity sector or for company takeovers Well-known examples of GmbH & Co. KGaAs in Germany are relatively rare, but some soccer clubs such as Borussia Dortmund have chosen this legal form.

Summary:

The GmbH & Co. KGaA is a highly specialized legal form that offers a unique combination of a GmbH structure and a stock corporation. It offers companies the opportunity to raise capital via the stock market, while management control remains in the hands of a GmbH. Despite its complexity, the GmbH & Co. KGaA can be an attractive option in certain situations for companies that want to combine a flexible management structure with the advantages of a stock market listing. However, the decision to opt for this legal form should be carefully considered, taking into account the specific business objectives, the governance structure, the tax implications and the increased administrative burden.