In its decision of October 6, 2021, the KG Berlin dealt with the obstacles to registration in the case of a new incorporation of a GmbH (Gesellschaft mit beschränkter Haftung –limited liability company) or a MU (Unternehmergesellschaft – entrepreneurial enterprise). In addition to the issue of no advance on registration fees, the decision dealt with the requirement of a domestic business address. The court confirmed this requirement during the formation process and therefore rejected the previous appeal of the notary public notarizing the formation. The decision of KG Berlin, in line with its previous decisions on these issues, also reflects the prevailing opinion in the practice of register law and should therefore – as we will see briefly below – also be taken into account in the advice ongoing on transactions, particularly when they involve special purpose vehicle (SPV) with only domestic founding shareholders.
Firstly, the KG Berlin held that the absence of a serviceable domestic business address constitutes an obstacle to registration on the basis of which the registration court must refuse registration pursuant to Art. 9c para. 1 sec. 1 Law on companies with limited liability (“GmbHG”).
The requirement to provide a domestic business address arises from Sec. 8 par. 4 GmbHG. The domestic business address must be registered in accordance with Sec. 10 par. 1 sec. 1 GmbHG and must also be made public pursuant to Sec. 10 German Commercial Code (“HGB”). This regulation has been included in the GmbHG as part of the law on the modernization of German limited liability company law and the prevention of abuse (“MoMig”). Previously, only the location of business premises had to be filed pursuant to Art. 24 par. 2. s. 1 of the Commercial Register Ordinance (“HRV”). Given the MoMiG’s goal of combating abuse, the requirement to provide a domestic business address was included to enhance creditor protection. In particular, the reason was the difficulties with portions (Zustellungen) that existed before the MoMig, which turned out to be very disadvantageous for the creditors of a GmbH. Therefore, according to the government draft of the MoMig, a service address available via a public register should be included in the GmbHG for increased creditor protection (cf. government draft, BT-Drs. 16/6140, p. 35 ). The national business address can be chosen freely and therefore does not necessarily have to be consistent with the registered office or the administrative office of the company. However, the business address must be located in Germany and reliably enable effective formal notices to the Company. Addresses in other European countries or third countries are not permitted. According to the court, this requires that service, including alternate service (Ersatzzustellung), to the company is actually possible at the designated place, for example because the business premises of the company are located there. If none of the locations is in Germany, the subject matter of Sec. 8 par. 4 GmbHG requires that an alternative address be established at which the company can actually be contacted/served (notwithstanding Art. 4a GmbHG). Such an address may even be the address of an agent for service of proceedings (Zustellungsbevollmächtigter) such as a lawyer, tax advisor or notary. The provision of a “c/o” address is permitted as long as it is not intended to mask the possibility of service or only to falsify it.
For the legal practice of corporate law, the court ruling and the respective registry law are particularly relevant in scenarios where a GmbH or UG is founded entirely by foreign entities or persons, for example to serve as an SPV in a multi-level transaction structure. In this case, the legal advisers must ensure that a national business address – which is actually usable – is in place when registering the training, for example by granting the advisers a respective power of attorney. If the domestic business address changes, there is a requirement to record that change pursuant to Sec. 31 par. 1 HGB and sec. 13 par. GmbHG. To comply with these registration obligations, managing directors may even be liable to a fine under Art. 14 HGB in conjunction with Art. 388 et seq. Law on procedure in family matters and in non-contentious matters (“FamFG”) (cf. Higher Regional Court Hamburg, decision of 27 January 2011 – 11 W 4/11).
Secondly, the KG Berlin ruled that non-payment of the legal advance on costs also constitutes an obstacle to registration and leads to the rejection of the application for registration. In practice, it should be ensured that a domestic business address is available to which a request for advance payment can be served and that this advance payment is duly paid. Indeed, the registration of the GmbH or the UG is decisive for their formation and therefore, prior to the registration, there is no legal limitation of liability (Article 11 GmbHG). The shareholders and the managing director(s) of a GmbH in foundation are fully and personally liable under the general principles of company law. Therefore, an appropriate domestic business address is required for the creation process to limit liability exposure and provide legal certainty.