New register for the civil law partnership (GbR)

The biggest reform of partnership law in over 100 years is on the horizon: Existing companies have until the end of 2023 to adapt to the new legal situation (if necessary, by amending their partnership agreements). The law is scheduled to come into force on January 1, 2024.

The core of the Law on the Modernization of Partnership Law (MoPeG) is the adaptation of the regulations governing the GbR (civil-law partnership), the OHG (general commercial partnership), and the KG (limited partnership) to modern needs. The new version changes the legal model of the GbR from a temporary partnership to a permanent, legally recognized partnership with its own rights and obligations.

Essentially, the legislator is codifying the decisions developed in case law and legal literature over the past decades. A new aspect is that partnerships under civil law will also have the option of registering in a register. These comprehensive legal changes affect not only newly formed partnerships but are also particularly relevant for existing partnerships. This necessitates action in the following situations:

Legal form	Action required	deadline
GbR, oHG, KG	Revision of the articles of association – are contractual deviations from the future legal situation desired?	until 31.12.2023
GbR with  Property ownership or other registered rights	Correction of all registers, if necessary prioritizing foreseeable changes in the shareholder structure	until 31.12.2023
	Obligation of the GbR (general partnership) to register in the new company register upon the first legal change that requires a change to entries in a register (e.g. land register)	from 01.01.2024

Existing GbRs will also have to consider whether they should register in the newly introduced company register:

• No deadline is stipulated for the registration of real estate partnerships (GbRs) in the commercial register. However, registration in the commercial register may be necessary in practice, as not only will the acquisition of real estate by a GbR require registration in the future (§ 47 para. 2 GBO n. F.), but future amendments to the land register affecting the rights of an existing real estate GbR will also require registration in the commercial register and registration of the real estate GbR in the land register (Art. 229 § 21 para. 1 EGBGB n. F.).
• The GbR (general partnership) becomes eligible for conversion. If the GbR is to participate in a conversion measure as part of a restructuring, prior registration of the GbR in the commercial register is required.
• In the future, a registered GbR (general partnership) will be required to obtain information about its beneficial owners and submit it to the transparency register. This increased publicity requirement should be considered when deciding whether to register a GbR.

Key changes for the GbR

• Legal capacity of the GbR (§§ 705 para. 2, 740 BGB n. F.) The legal capacity of a GbR (general partnership) is recognized in case law. It is now also enshrined in law: Depending on whether the GbR acts externally (i.e., participates in legal transactions), it is either a GbR without legal capacity or one with legal capacity. According to Section 705 Paragraph 3 of the German Civil Code (BGB), even a GbR that operates a business is now presumed to have legal capacity. In short: Legal capacity is the norm.
• Assets of the GbR (§§ 713, 722 BGB n. F.): It is also legally clarified that the legally capable GbR (general partnership) is the holder of its assets. Therefore, enforcement proceedings based on a judgment against the company can only be carried out against the company's assets and not against the assets of the partners.
• Separate company register for the GbR (§§ 707 ff. BGB n. F.): The Modernization of the Law on Partnerships (MoPeG) provides for the introduction of a company register for general partnerships (GbR), to be maintained by the local courts. There is a "freedom of choice" regarding registration. However, registration in the company register is a prerequisite for registration and thus, potentially, for acquiring certain rights that must be entered in public registers. This applies, for example, to rights to real estate (Section 47 Paragraph 2 of the German Land Register Code (GBO) as amended) and as a shareholder of a limited liability company (GmbH) (Section 40 Paragraph 1 Sentence 3 of the German Limited Liability Companies Act (GmbHG) as amended). As a consequence of registration in the company register, the GbR is subject to... Transparency register publication. In the future, the GbR will therefore have to obtain information about its beneficial owners and submit it to the transparency register.
• Conversion capability of the GbRThe GbR (general partnership) becomes eligible for conversion under the Transformation Act. Therefore, after prior registration as a so-called eGbR (registered GbR), the GbR can participate in a division, a merger, or a change of legal form, which increases its scope for structuring.

Key changes for the GbR (general partnership), which also apply to commercial partnerships

• Free choice of seat (§ 706 BGB n. F.): The MoPeG now clarifies that all companies registered in Germany (corporations and partnerships) have the right to freely choose their registered office, regardless of the place of registration. This right of free choice of registered office allows a German partnership to conduct all its business activities outside of German territory and still remain a German partnership.
• Company name of the GbR (§§ 707a, 707b BGB-E)If the GbR (general partnership) is registered in the commercial register, commercial company law largely applies. The GbR is required to use the legal form suffix "eingetragene Gesellschaft bürgerlichen Rechts" or "eGbR" in legal transactions, but is otherwise as free in its company name as commercial partnerships.
• Voting power and profit sharing according to shareholding ratios (§ 709 para. 3 BGB n. F., § 120 para. 1 sentence 2 HGB n. F.)The MoPeG (Act on the Modernization of the Law of Partnerships) abolishes the previous system of weighted voting and profit and loss distribution per capita and introduces the rule, already common practice, that voting power and profit distribution are primarily determined according to shareholdings. If the shareholders wish to deviate from this statutory rule, it must be ensured that the articles of association provide for different distribution rules in the future.
• Decision-making (§ 714 BGB-E)The revised version includes, for the first time, regulations governing decision-making procedures in general partnerships (GbR) and thus confirms the common practice of applying the rules for commercial partnerships to general partnerships. However, it remains the case that, unless otherwise stipulated in the partnership agreement, partner resolutions must be passed unanimously by all voting partners.
• Information rights and obligations (§ 717 BGB n. F.)The written rights of shareholders to information were previously underdeveloped. The Modernization of the Law of Partnerships (MoPeG) now includes a clear regulation regarding shareholders' rights to information from the company, which replaces the regulation of Section 118 of the German Commercial Code (HGB) (old version) for general partnerships (oHG) and professional partnerships (PartG). The information rights of limited partners continue to be regulated separately in Section 166 of the German Commercial Code (HGB) (new version). In practice, it should be noted, in accordance with the regulations for limited liability companies (GmbH), that this right cannot be easily restricted in partnership agreements.
• Shareholder's entitlement to compensation (§ 728 BGB n. F.)Unless otherwise agreed, the company must pay the departing shareholder compensation commensurate with the value of their share. The value of the share is to be assessed directly and not, as previously, derived proportionally from the company's value. However, the limits on deviations developed in the case law of the Federal Court of Justice shall continue to apply.
• Change of status (§ 707c BGB new version)The transformation of a partnership into a commercial partnership while maintaining its legal identity is not covered by the Transformation Act and is now regulated by a separate procedure in the German Civil Code (BGB). Such a change of status will be visible in the register in the future.
• Limitation of post-contractual liability (§ 728b para. 1 sentence 2 BGB n. F., § 137 para. 1 sentence 2 HGB n. F.)The final version of the MoPeG contains a significant change compared to the draft bill regarding the limitation of post-termination liability. A departing partner is now only liable for damages if the breach of duty occurred before their departure. Liability claims arising from breaches of duty by other members after a partner's departure no longer affect that partner.

Key changes for partnerships

• Resolution procedure (§ 109 HGB n. F.) and law on defects in resolutions (§ 110 ff. HGB n. F.)The MoPeG (Act on the Modernization of Partnership Law) introduces, for the first time, regulations governing decision-making procedures in partnerships. Furthermore, the legislator has decided to regulate the law on defective resolutions for partnerships according to the model for challenging resolutions under stock corporation law. In doing so, the legislator follows the practice of drafting partnership agreements that is already common, at least in larger partnerships, and increases legal certainty.
  To ensure greater legal certainty in a general partnership (oHG) or limited partnership (KG), the decision-making procedure should be regulated in detail in the partnership agreements. In particular, the person responsible for chairing the meeting should be specified to clarify the authority for adopting the resolution and to guarantee the existence of a legally contestable resolution. Of course, waiving the formal requirements and deadlines remains possible if the partners agree.

For general partnerships (GbR) (as well as limited liability companies (GmbH)), the legislature has deliberately chosen not to codify formal rules for challenging resolutions. All parties involved are still encouraged to agree on the rules contractually to avoid legal uncertainty. However, GbR partners can also voluntarily incorporate the new procedure for challenging resolutions into their partnership agreements. This is particularly important for GbRs with many partners and thus more contentious decision-making processes. 

• Profit determination and profit distribution (§§ 120 ff. HGB n. F.)The regulations governing profit determination and distribution are being revised. The managing partners are obligated to prepare the annual financial statements. The partners decide on the adoption of the financial statements by resolution, whereby – as with a general partnership (GbR) – the shareholding is decisive for the distribution of profits and losses. The legislator assumes the principle of full distribution of profits.
• Information rights of limited partners (§ 166 HGB n. F.)The legislator has expanded the information rights of limited partners. These information rights cannot be excluded in the partnership agreement. This must be taken into account when drafting partnership agreements in the future.

If you have any questions about the individual changes and their specific effects, please contact our lawyer(s) and notary(ies). Simone Krziwanek, Oliver Merleker, Dr. Christian Volkmann and Dr. Robert Scherzer gladly available.