Size Classes in the German Commercial Code: Key for Financial Statements
The HGB defines different size categories for corporations. The larger a corporation is, the higher the legal requirements for the disclosure of company data. In this article, our team shows you what you should know about this as a founder.
What is a corporation?
Corporations are a generic term for various legal forms. You should already be familiar with some of these legal forms: The Gesellschaft mit beschränkter Haftung (GmbH), the Unternehmergesellschaft haftungsbeschränkt (UG haftungsbeschränkt) and the Aktiengesellschaft (AG). They all have one thing in common: limited liability.
The size classes and their influence on corporations: an overview
The size classes that the German Commercial Code (HGB) defines for corporations shape the accounting requirements for the company, which in turn has an influence on the preparation of the annual financial statements. The following overview will show you what you need to know about this:
- Definition of size classes according to HGB
- Design of the size classes
- Exceptions to the regulation
- Obligations of corporations by size class
Definition: The size classes of corporations according to HGB
The term ‘size classes’ is defined by the HGB for accounting law. They apply to all corporations: GmbH, UG haftungsbeschränkt and the AG. The size classes determine the accounting requirements and play an important role in the scope of the disclosure obligation. The larger the company, the more extensive the legal requirements. The following areas are affected:
- Accounting
- Auditing obligations
- Disclosure obligations for business data
The organisation of the size classes
The HGB defines the following four size classes:
- Micro-company
- small company
- Medium-sized company
- large company
Classification into a particular size category is determined by various threshold values in the areas of total assets, average number of employees and sales revenue.
Exceptions to the regulation on the size classes of the corporation
The regulations on size classes are not applied to some corporations. An exception is made for capital market-orientated corporations, such as listed public limited companies, which are always treated as large companies. Similarly, credit institutions and insurance companies are not covered by legal exemptions.
Obligations of corporations by size class
The obligations of the four size classes relate to the following areas:
- Deadline and structure of the annual financial statements
- Scope of the mandatory disclosures
- Audit of the annual financial statements
- Disclosure of the annual financial statements
Micro-corporations in particular only have to fulfil a minimum of requirements, whereas large companies are required to disclose every profit and loss account.
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