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Register of Companies
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Consultancy & Service
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Settlement-Guide
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Go-To-Do
Setup your business in Dortmund, Germany: www.go-to-do.com
Economic Development Dortmund
Legal consequences of the entry in the Register
of Companies
The registration of your business has some far-reaching legal consequences.
You act as a merchant, but you are not subject to the regulations of the
German Civil Code (“Bürgerliches Gesetzbuch”, abbr. “BGB”)
any longer, but those of the German Commercial Code (“Handelsgesetzbuch”,
abbr. “HGB”). Here you will find a short description of the
most important facts to be taken into account.
Firm
As a merchant, you regard your enterprise as a firm (= name of your enterprise).
You may feel free with the choice of its name, but you have to consider
four aspects:
- The business under a name must contain an annex informing on the legal
form of the enterprise.
- The name of the firm must not be misleading, i.e. you are not allowed
to name your firm *Meier Furniture Ltd.*, if you have no furniture to
deal with.
- The business under a name must have distinctive features, i.e. there
must not be any danger of mistake with regard to other local companies.
- Do not impinge upon the other enterprise’s right to bear a
name or a trade mark.
General Power of Attorney (“Prokura”)
As a merchant, you may grant the general power of attorney (“Prokura”),
i.e. to authorize a person acting in the name of the enterprise and representing
it legally. The general power of attorney has to be listed on the Register
of Companies.
Trade business
The German Commercial Code regards the merchant somehow as a *professional*
in business life and imposes extended business duties on him. Here are
some examples:
- Silence after offers
A merchant has the duty to react on business offers. If he does not,
the offer counts as accepted.
- Letter confirming an acceptance
If you negotiate about contract terms with your business partner and
he sends you a written summary, you will have to contradict explicitly
in writing as long as you do not agree on its contents. If you do not
contradict, the contract counts as accepted on your part.
- Payment without agreement
With regard to merchants, law acts on the assumption that they generally
offer services against payment. I.e. the merchant may require a payment
as customary for his services without an explicit agreement.
- Diligence
According to the German Commercial Code, the merchant has the duty of
great diligence with regard to his business activities. That means,
for instance, to keep business letters, to verify signatures, etc.
- Particulars on business letters
Your business correspondence must have the following particulars: the
complete name of the firm (according to the German Commercial Code)
including the legal form, the firm’s location, the Register Law
(“Registergericht”) and the number in the Register of Companies.
A limited liability company (“Gesellschaft mit beschränkter
Haftung“, abbr. „GmbH“)has to specify all executives
by name in addition, at least one of them including his first name.
Account books
The merchant has the duty to keep records of all accountable events and
to keep his books in such a way that they can be understood by competent
third parties. This includes especially
- compulsory bookkeeping (§ 238, German Commercial Code).
The origin and procedure of accountable events must be understood including
the duty to keep the copies of all business letters,
- compulsory stocktaking (§ 240, German Commercial Code).
At the start of your business activities and at the end of each business
year, you will have to take stock in a way that you compile a register
of all items of property and debts including their values,
- compulsory annual financial statement (§ 242, German
Commercial Code). At the start of your business activities and at the
end of each business year, you must have a balance sheet of which the
relation between the assets and the debts of the merchant is the result,
- compulsory keeping (§ 257, 1, German Commercial Code).
The merchant has the duty to keep business books, inventories, and annual
financial statements at least ten years, business letters at least six
years.
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Authority
Introduction