If you’re a founder of a limited liability company (LLC) in Germany, you should really get to know the inner workings of your company such as its shares. What should be considered when transferring shares and what are the differences between investments? And what taxes are incurred when buying or selling a share? We’re here to provide you with the most important information about ‘GmbH shares’.
Shares, partners and holding: Definition of terms
Persons who hold shares in a company are not only referred to as partners (Teilhaber) but also as shareholders (Gesellschafter) or stockholders (Anteilseigner). A natural or legal person may hold an equity interest as long as it exercises the rights and obligations of an investor in a business. The amount of the business share is determined according to § 14 GmbHG according to the respective transferred share capital contribution.
But, how is it decided what the rights and obligations of lenders should be? And what types of investment are there?
When a GmbH is founded, it’s already decided which shareholder holds which stake in the company. The statutes/Satzung (also known as the articles of association/Gesellschaftsvertrag) then record the percentage shares. The amount of the shares has a variety of legal consequences within the company, such as voting rights and profit sharing.
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Types of shares for GmbH shareholders
In general, a distinction is made between the following types of participation:
- For shares below 10%: This is a ‘scattered holding’ (Streusitzbeteiligung), also called ‘lowest-level holding’ (Kleinstbeteiligung). These shares are relevant only if unanimous decisions are required in votes.
- For shares below 50%: This is a minority holding (Minderheitsbeteiligung).
- For shares of 25 to 50%: This is a blocking minority (Sperrminorität). With a blocking minority, shareholders can prevent resolutions of the shareholders’ meeting, which require a qualified majority (> 75%). For example, investors prefer to get a 25% stake in a company. You do not have to be involved in the company, but they can block changes to statutes, mergers, or the like. Further information on the blocking minority can be found in our guide.
- For shares above 50%: Resolutions requiring a simple majority may be blocked or effected by the stockholder.
- With shares of 75 to 95%: This is a qualified majority holding. This shareholder can enforce many decisions with his or her share alone, which can only be stopped by a blocking minority.
- For shares of 95% to 100%: This is an incorporation holding (Eingliederungsbeteilung). This is especially necessary if a takeover of the company is to be done in order to override the co-owners.
The influence is exclusively dependent on share size if no separation of the capital unit and the voting right was specified in the articles of association.
The intercorporate holding (Schachtelbeteiligung) is a special form of participation. If a capital company (ie a parent corporation) holds a certain minimum share in another capital company (ie a subsidiary), there are special trade and tax advantages to avoid double taxation of profit distributions.
In this way, the intercorporate privilege (Schachtelprivileg) occurs with a minimum share of 10%. This means that dividend income is not subject to corporate income tax (Körperschaftssteuer). However, the recipient of the dividend or the transferor may not be a natural person.
The trade tax intercorporate privilege (das gewerbesteuerliche Schachtelprivileg), on the other hand, applies to every business enterprise that receives dividends from another corporation, however, a minimum holding of 15% at the beginning of the year is required, unless otherwise agreed in the double taxation agreement.
Silent and open business partners
Furthermore, in addition to the shareholding, a distinction must also be made between open and silent partnerships. As the name suggests, this term is about the knowledge of third parties in the partnership. An open partnership (offene Teilhabe) is a partnership, which is evident in the entry in the commercial register and from the annual accounts. Most founding members of a company have an open partnership. By contrast, a silent partnership (stille Beteiligung) is not recorded in the commercial register (Handelsregister) and is not published in the annual accounts (Jahresabschluss).
There are several benefits of a silent partnership for companies and business partners, but it can also have disadvantages for the company.
Direct and indirect partnership
Stockholders are distinguished not only by the percentage of ownership in the company and the knowledge of third parties involved, but also by the directness of the holding.
A direct holding (direkte Beteiligung) is the norm. Here an investor acquires company shares and becomes not only a co-owner, but also a shareholder of the GmbH. A direct partnership in a GmbH is always associated with a risk for the investor (see below). Normally, however, the invested capital is returned to the investor at the end of the participation period through an exit.
In the case of indirect partnership (indirekte Beteiligung), the investor does not buy the shares directly, but, for example, through a trustee (Treuhänder). The investor does not become a co-owner or a shareholder, but a trustor (Treugeber) of the company. Indirect partnership can also take the form of a sub-participation (Unterbeteiligung). The sub-participation is not unlike the silent partnership; however, the contracting party here is not the company itself, but a shareholder.
Buying, selling and transferring shares
According to § 15 GmbHG, shares in a GmbH are always inheritable and freely available for sale. If a shareholder wishes to exit the company, he or she may readily transfer their shares to third parties who are interested in the investment. The transfer of shares must be certified by a notary. However, the free transferability of shares can also be to the detriment of the shareholders, as they have to work together with a new shareholder after the transfer, regardless of whether the relationship is harmonious at the moment or not. A new shareholder has a legal right to be included in the list of shareholders to be submitted to the Handelsregister.
The free transferability can be regulated in the articles of association during the incorporation a GmbH, because this is indeed provided for in the law, but does not necessarily executed or included in the contract according to § 15 para. 1 GmbHG. If a special regulation of such transferability is desired, this paragraph may be amicably amended and “defused” so that the shareholders are not surprised by a sudden change. An amendment of the articles of association may stipulate that a transfer of the shares is subject to the approval of the general meeting, a qualified majority or the management.
Such a transfer in the articles of association is now standard practice. A complete exclusion of the transferability or a restriction on, for example, the family affiliation, the competence or even existing shares is also contractually possible. However, this does not apply in the event of the death of a partner. According to § 15 para. 1 GmbHG, the share of a partner in the event of death passes to his or her heirs. Transfer by inheritance cannot be excluded in the statute. Read more about the particulars of buying shares (German article).
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How are the sale of GmbH shares taxed?
The taxes payable on the sale of shares vary depending on the amount and duration of the shareholding. Similarly, heirs or recipients of a gift must pay attention to what taxes apply.
Before the modernisation of the GmbH Act, explicit attention was paid to the participation rate of the donor, deceased or seller within the last five years, whereas shares sold since 2009 are taxed as income from capital assets in accordance with Section 20 (2) no. 1 EStG. Capital gains are calculated by subtracting the acquisition costs (share capital/Stammkapital, previous purchase of shares) from the selling price and are subject to a 25% income tax in accordance with § 32d EStG. Furthermore, the solidarity surcharge (Solidaritätszuschlag) and church tax (Kirchensteuer), if applicable, are added.
In addition, the saver’s flat tax deduction (Sparerpauschbetrag) is taken into account in the taxation; for singles, this amounts to €801, and €1602 annually for married couples. Anyone whose capital income is below this amount does not have to pay any taxes.
Risks of a GmbH holding
When investing in or buying shares in a limited liability company, there are always risks:
- In principle, every shareholder is liable with their share capital contribution (Kapitaleinlage). In the case of insolvency, the share capital is lost. If the insolvency should occur even before the complete payment of the share capital, the shareholders are liable with their private assets.
- The transfer of a share must always be notarised; otherwise, buyers and sellers risk declaring the entire deal null and void.
- Prior to the purchase, the articles of association/Gesellschaftsvertrag should be reviewed for any restrictions, so as to avoid any unpleasant surprises when attempting to sell them, for example, because shares may only be sold subject to certain conditions.
The information published on our site is all written and checked by experts with the greatest care. Nevertheless, we cannot guarantee the accuracy of this information, as laws and regulations are subject to constant change. Therefore, always consult an expert in a specific case – we would be happy to connect you with the right professional.
firma.de assumes no liability for damages caused by errors in the texts.