Featuring Entrepreneuship: Promoting the GMBH? A Comparision between the Company Limited (NZ) and the Newly Invented "UG (Haftungsbeschränkt)

Abstract

The German legislators undertook the biggest reform of the German company law concerning the GmbH since its introduction in 1892 by passing the Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Missbräuchen (MoMiG – Law for the Modernisation of the GmbH and to stop its Misuse) in 2008. Its centrepiece is the invention of a new entity, the “UG (haftungsbeschränkt)”. This paper looks at the question whether the reform of the GmbH has succeeded and if the GmbH remains a model for the future with the invention of the “UG (haftungsbeschränkt)” in this new form, by comparing it to the company limited in New Zealand. Three aspects are compared, that is the company’s foundation, its structure and handling and the regulations of capital maintenance. The main changes the invention of the UG has brought lie in the company’s foundation. This paper comes to the conclusion that, even though it still might not compete with the limited company model on the same level in this regard, the changes being made in the MoMiG and with the establishment of the UG have lead to a facilitation of formation and a considerable reduction of cost and time. A lot of the effects and instruments implemented in the Company Law with the UG still have yet to be proven to work and their popularity remains to be seen. However, the biggest strength of the UG lies within the flexibility in respect to the internal structure, where almost the same provisions apply as for the GmbH. Disadvantages occur in respect of the obligation to set up reserves at the UG, but are in comparison to the Limited compensated by less strict provisions concerning distributions. The Eigenkapitalkersatzrecht that lacks a counterpart in New Zealand company law remains a burden on the GmbH and the UG, and the Limited is more attractive in this regard. All in all the UG helped to strengthen the attractiveness of the GmbH on the global market of entity options. However, on a more abstract level, the Limited company model remains a better opportunity for entrepreneurs. The UG will certainly be modified in the future and its popularity remains to be seen as well as how effective the measures and novelties implemented in the German Company Law really are.