Shareholders and CEOs: You’ve already heard of both, but do you also understand the differences? Here we’ll explain the difference and tell you why both functions can be performed by the same person.
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Got questions about setting up a business in Germany?
- Startup expert
- 10+ years experience
Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.
The shareholder of a UG
One difference between shareholders and CEOs of a UG is that the shareholder is the investor/shareholder of a company. He or she contributes, alone or with other shareholders, the Stammkapital (share capital) for the ‘UG (haftungsbeschränkt)’ and is as such involved in both profits and losses. That means he or she does not get a fixed salary. The amount of the participation depends in principle on the percentage share in the share capital of the company. As an example, the different shares of three shareholders are shown: Shareholder A, Shareholder B and Shareholder C have each made different contributions in their UG and as such also have different sized shares in the company:
Stammkapital €1,000
Shareholder A: €500 (50%)
Shareholder B: €100 (10%)
Shareholder C: €400 (40%)
At €10,000 in taxed profits, the respective UG shareholders would, therefore, receive the following amounts:
Shareholder A: €5,000
Shareholder B: €1,000
Shareholder C: €4,000
It’s also the obligation of the shareholders of a UG to appoint a CEO who runs the business of the entrepreneurial company.
The Limited Liability Companies Act (GmbH-Gesetz) also stipulates that all shareholders of a UG or GmbH must be included in a so-called list of shareholders. This list of shareholders contains detailed information on each shareholder involved in the company and is required, for example, for entry in the commercial register (Handelsregister). Also, the CEO of a UG must be registered in the Handelsregister, since he or she is responsible for representing the company externally.
Got questions about setting up a business in Germany?
- Startup expert
- 10+ years experience
Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.
The CEO of a UG
Another difference between a UG CEO and a UG shareholder that the CEO is an employee of UG and represents the company’s interests both externally and internally. He or she assumes the leadership position in the company. His or her rights and obligations are laid out in the law, in the articles of association (Gesellschaftsvertrag) and in the managing directors’ contract (Geschäftsführervertrag) of the entrepreneurial company. He or she may, under certain circumstances, be held personally liable if he or she does not fulfil their contractual obligations.
The managing partner of a UG (haftungsbeschränkt)
For a UG, it may be the case that there is only one shareholder. This can also be the CEO. This not only means that he or she appoints themselves, but also that, if a contract is concluded, he or she may receive a fixed salary. At the same time, the CEO, as a managing partner, receives the company’s taxed profits.
Got questions about setting up a business in Germany?
- Startup expert
- 10+ years experience
Hi, I’m Andreas and I’ve been advising businesses in Germany for over a decade. I’d be happy to call you and answer any questions you have in a one-on-one consultation.
