Modernisation of the German law on partnerships: Key changes and aspects

Comprehensive reform of the civil law partnership (GbR)

Statutory recognition of the legal capacity of the GbR

One of the most significant changes concerns the statutory recognition of the civil law partnership with legal capacity, previously known as the "external GbR". The amended section 705 (2) Alt. 1 BGB now stipulates that, assuming the joint agreement of the partners, the company is entitled to act as an independent holder of rights and obligations. Furthermore, section 705 (2) Alt. 2 BGB provides for a civil law partnership without legal capacity (so-called “internal GbR”).

Establishment of a company register

To enhance transparency, a new company register has been established, where the GbR may be entered on a voluntary basis. On entry, a corresponding name prefix will be added to the registered company (“eingetragene” Gesellschaft bürgerlichen Rechts – eGbR). The registration has a publicity effect comparable to that of an entry in the commercial register, as set out in section 707a (3) of the German Civil Code, which refers to section 15 German Commercial Code. Accordingly, parties to the eGbR may refer to the relevant sections of the commercial register regarding the shareholders and/or powers of representation.

While registration is typically voluntary, there is an obligation on a GbR to register in the company register, if it intends to acquire rights recorded in land registers. For example, the registration of the GbR is not a prerequisite for concluding a property purchase agreement. However, it is required for registering the GbR as owner of the property within the land registry. 

Separation between company and shareholder

One of the key issues for the legislator is to establish a more distinct delineation between the association and its members. This is evident from numerous sections of the MoPeG, in particular in the case of enforcement proceedings. For example, an enforcement action against a GbR or other commercial partnership can only be made against the association, but not against partners. In order to make a claim against the personally liable partners, an additional enforcement action is required under section 722 (2) BGB, which must be obtained in separate legal proceedings – a fact that should always be taken into account when taking legal action against a GbR. Existing actions that include joint liability of the partners within the meaning of section 721 BGB and that were obtained before 31 December 2023 remain enforceable until the expiry of the thirty-year limitation period.

Further adaptations of the GbR to the commercial partnerships

In accordance with the regulations governing general partnerships (Offene Handelsgesellschaft – OHG) and limited partnerships (Kommanditgesellschaft – KG), the GbR is not dissolved by law in the event of a partner's death, resignation, or insolvency. In such cases, the remaining partners are required to continue the company in accordance with section 723 (1) BGB. Nevertheless, this can be stipulated otherwise in the partnership agreement if necessary. 

Furthermore, succession considerations should be reviewed in the light of the MoPEG and, if relevant, incorporated into the partnership agreement. In principle, the heirs of a GbR-partner now have the option of converting their shareholding into a partly limited partnership share with the consent of the other partners in accordance with section 724 (1) BGB. In accordance with legislation, the death of a partner will result in the heir being excluded from the GbR. It is therefore necessary to include a succession clause. When assessing the viability of a conversion and its alignment with the company's objectives, it is important to note that the conversion requires entry in the commercial register. Given the potential for far-reaching tax and operational implications, it is 

Opening of the commercial partnership for freelancers

The distinction between trade and liberal professions has long been a controversial topic in legal policy. In this regard, the recent extension of access to the formation of a commercial partnership to freelancers in section 107 (1) sentence 2 HGB represents a significant development. Freelancers are now permitted to form commercial partnerships, provided that the respective professional law expressly permits such an arrangement. In terms of the functional self-administration of professional groups, the legislator has delegated the decision as to whether they wish to authorise the option of a commercial partnership for their members. 

In relation to the liberal professions of lawyers, tax advisors, and auditors – which are considered especially relevant in practice – the professional requirements have already been established via the “German Act to Reform the Professional Law of Legal and Tax Advisory Professional Practice Companies” as of 7 July 2021. It seems reasonable to suppose that in the future there will be a competition between commercial partnerships, in particular the GmbH & Co. KG and the PartG mbH, in the area of legal and tax advisory professions. However, the advantages and disadvantages of the legal forms should be carefully weighed up. For example, the GmbH & Co. KG offers enhanced legal protection with regard to liability, whereas the limitation of liability of the PartG only applies to professional errors. In contrast to the PartG, the GmbH & Co. KG is required to disclose its annual financial statements and to file for insolvency in the event of imminent insolvency.

It is recommended that members of other professional groups, such as doctors and healthcare professionals, continue to monitor developments in their respective professional legislation, which may vary from one federal state to another. Due to the prevailing legal uncertainty, doctors in particular are advised to consult with both the relevant registry courts and the medical association that decides on their admission if they wish to operate jointly in the form of a commercial partnership. In this context, the medical association's opinion on registration as an OHG or KG is an important factor to be taken into account.

New law on defective resolutions

If shareholders dispute the validity of the dismissal of a (shareholder) managing director or the validity of the exclusion of a shareholder from the company, the underlying shareholder resolutions often become the subject of court proceedings. Previously, a breach of formal or substantive law in the resolutions of a general partnership, limited partnership or GmbH & Co KG resulted in the resolutions being null and void. The new MoPeG has aligned the legal framework for commercial partnerships with that of share capital companies and has extended the distinction between void and contestable resolutions to cover commercial partnerships.

In accordance with section 110 (2) HGB, shareholder resolutions of commercial partnerships are considered null and void if they violate mandatory law or are annulled by a court ruling. In the event that a resolution is deemed invalid, the appropriate legal recourse is an action for annulment (section 114 HGB). In case of violation of disposable law, the claim must be brought within the period of three months by means of an action for annulment (section 112 (1) HGB). Under the new law, legal action must always be taken against the company itself (section 113 (2) sentence 1 HGB), as the resolution of the shareholders' meeting is attributed to the company as its own decision-making process (BT-Drs. 19/27635, p. 233). As a result, the shareholder bringing the action is (initially) obliged to bear litigation costs proportionate to his shareholding, as part of the operating expenses, even if the action is successful. The legislator has explicitly delegated the responsibility to the courts to determine whether and under what circumstances a material claim for reimbursement of costs against fellow shareholders can be considered. 

Interim relief measures must also be taken against the company itself. If co-partners do not comply with the injunction, the fine must be solely imposed on the company, and no longer on the co-partners. 

Codification of the shareholder action (actio pro socio)

Section 715b BGB now codifies for the first time the actio pro socio, a legal instrument which has long been recognised in case law and legal literature. If the requirements are met, the shareholder action permits an individual shareholder to bring a claim against a co-shareholder in the name of the company. The scope of application of the actio pro socio extends beyond the law of the GbR to the OHG and KG (section 105 (3) HGB and sections 161 (2), 105 (3) HGB). However, there is no corresponding reference provision for the silent partnership and the GmbH. With regard to the silent partnership, it can be concluded that the shareholder action will not be applicable according to the intention of the legislator. The explanatory memorandum to the government draft of the MoPeG does not expressly address the applicability of the shareholder action under GmbH law. Until a court provides clarification, there is a risk of legal uncertainty regarding the applicability of the shareholder action under GmbH law. Therefore, as a precautionary measure, it would be advisable for the articles of association of the GmbH to stipulate the conditions under which an individual shareholder is entitled to bring a shareholder action. It will typically be necessary to amend existing GmbH articles of association to ensure compliance with these new regulations.

The rationale behind this type of statutory representative action is to enhance the protection of minority shareholders. This enables a shareholder who is not authorised to represent the company to initiate legal proceedings on its behalf, even in the absence of consent from the managing shareholders. This is particularly relevant in practice for social claims, i.e. claims made by a company against its shareholders. Such claims are particularly common in the context of unpaid contributions and claims for damages or injunctive relief resulting from management actions in breach of contract.

Conclusion and outlook

The MoPeG delivers on its promise of reform, addressing long-standing issues in key areas in a comprehensive and effective manner. The legislation provides greater legal certainty and flexibility by adapting legal institutions that have already been established through case law and introducing completely new regulations. However, the onerous requirement to register in the company register or the necessity for a distinct action against the partners themselves illustrates that the benefits on the one hand are sometimes accompanied by calculated disadvantages on the other. The new legislation strengthens the position of partnerships and aligns them with the requirements of modern business.