UG-Gesellschafter: The rights and obligations of UG shareholders

updated on 22. August 2019 6 minutes reading time
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The management of a UG (haftungsbeschränkt) is done by the CEO (Geschäftsführer), who is usually also a shareholder (Gesellschafter). There may be just a single shareholder or several. In the case of several shareholders, the rights and obligations are generally based on their share (Beteiligung), i.e. the amount of the paid share capital in the company.

Distribution of shares

One of the first obligations of a shareholder before incorporating a business is the payment of capital. The share capital (Stammkapital) and the amount of the respective contribution are also used to derive the business shares (Geschäftsanteile) for several partners. For example, if the share capital of a UG (entrepreneurial limited liability company) is € 10,000, of which shareholder A has paid € 8,000 and shareholder B paid € 2,000, shareholder A holds 80% and shareholder B holds 20% of the shares of the UG.

In most cases, the shareholders are directly involved in the formation process. However, it may also happen that a shareholder later enters the company, for example by inheritance or purchase of the shares.

It’s important in this context that partners and CEOs are treated separately. The rights and obligations of the shareholders and CEOs differ from each other (German article).

Above all, the shareholder acts as a lender of the UG and also appoints the CEO. The CEO on the other hand has the task of managing the business of the company and implementing the requirements of the shareholders. If he or she neglects these duties or acts contrary to the instructions of the shareholders, the CEO can be held liable. As a rule, the limitation of liability applies to any damages that may occur. This means that the liability capital (Haftungskapital) is limited to the company assets.

Only in rare cases can a shareholder also be held liable with his private assets: In the event of legal violations that damage the company, the so-called “lifting the corporate veil” (Durchgriffshaftung) can occur in exceptional cases.

You can read more about the liability of UG shareholders in this article (German article).

Who has how much power in the UG? It’s all about the money!

In the case of a UG (haftungsbeschränkt) – assuming no divergent provisions have been made in the articles of association (Satzung) – the business shares (Geschäftsanteile) determine who has the power to determine what is the internal relationship of the company. A shareholder of a UG (haftungsbeschränkt) can actively influence the business activities of the entrepreneurial company. Each shareholder with at least a 10% share in the UG may, under certain conditions, convene a shareholders’ meeting (German article). Here, the interests and rights of the shareholders are gathered. Even with a one-person company, there’s a shareholders’ meeting, but the results are considered resolutions. These have the same legal force as shareholder resolutions by several shareholders. An obligation that concerns the shareholder of a one-person company here is the preparation of a protocol after the shareholders’ meeting.

Once the company has made a profit, the shareholders of UG decide what happens to it. Normally, the taxable profit is paid in proportion to the shares in the business. However, part of it can also be retained as revenue reserves or other costs can be paid. This reserve, unlike the legal reserve, which is mandatory at a UG and which accounts for 25% of the annual profit, is voluntary. It’s, therefore, possible to build additional reserves from the remaining 75%. Thus, the shareholders decide whether the taxed profit is paid in full to the shareholders or whether part of the profit should be used for other purposes, such as the purchase of new equipment or office space.

Further obligations of a partner include but are not limited to the appointment of the CEO and his or her dismissal if necessary. Annual accounts prepared by the CEO must be reviewed and approved by the shareholders. In addition, the shareholders set up measures for the audit of the CEO.

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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.

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