According to a ruling of the Oberlandesgericht (OLG) Celle, the Higher Regional Court of Celle, the provisions in a GmbH’s articles of association concerning who bears the costs associated with forming the company must not be removed before a period of ten years has passed since the company was initially registered.

In addition to the company’s share capital, there are other costs which need to be taken into account when forming a GmbH. These include, for instance, costs arising from notarization and registration in the commercial register. Naturally, it is often in the shareholders’ interest for these costs to be borne by the company, especially since this gives rise to tax benefits. We at the commercial law firm GRP Rainer Rechtsanwälte note that if the intention is for the GmbH to bear the costs associated with forming the company, it then becomes strictly necessary to include a provision to this effect in the articles of association.

If the company has been in existence for several years, it is common for the shareholders to conclude that the provisions dealing with the formation costs are superfluous. However, these cannot be readily removed. In a ruling from 2 February 2018, the OLG Celle held that the provisions in a GmbH’s articles of association regarding who is to bear the costs associated with forming the company must not be removed before a period of ten years has passed since the company was first registered (Az.: 9 W 15/18).

The OLG Celle justified its decision with reference to the need to ensure that information interests in legal relations are upheld for a minimum period. The prevailing statutory limitation periods under GmbH law serve as a guide here. The Court went on to state that the waiting period for retaining the provisions in the articles of association dealing with the costs associated with forming the company must therefore amount to a minimum of ten years starting from when the company was first registered.

It is nonetheless generally beneficial for shareholders to transfer the costs associated with forming the company, as these are tax deductible as business expenses. However, there needs to be a provision to this effect in the articles of association. This is because these costs do not constitute business expenses but rather a hidden distribution of profits to the shareholders if they are borne by the GmbH despite the latter not being obligated to assume this responsibility.

A lot of factors need to be considered when forming a company, including aspects of tax law. Lawyers who are experienced in the field of company law can offer advice.

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