Requirements, rules and agreements: How to draft your articles of association

The Articles of Association provide the legal framework for a company. They set out all the essential provisions for shareholders regarding their actions, rights and obligations, and the conditions for the company. 
The good news is: In individual articles of association you have many options for structuring. However, some minimum details and rules are prescribed by law.

Important: Do not confuse the articles of association with the managing director's service agreement! The managing director's service agreement covers the rights and obligations of the management and must be distinguished from the articles of association.

Everything you need to know about the articles of association of a GmbH is set out in the Private Limited Companies Act (GmbH-Gesetz). Among other things, it states that the articles of association must be in writing. The document must also be certified by a notary. 
It is also important that all shareholders sign at the end. 
This information must be documented in your articles of association
With regard to the question of what information must be included in the articles of association, it is also worth taking a look at the Private Limited Companies Act . The minimum requirements that must be included in any such document include:

• The name of the company and its registered office
• Information on the object of the company
• The amount of the share capital
• Information on how the individual shares are distributed among the shareholders
• (if applicable) other obligations of the shareholders.

If you take a closer look at these requirements, you will quickly realise that this is only the broad outline.If you want to be on the safe side, you should add further details to the regulations.

Many entrepreneurs add further details to the legal requirements of their articles of association. The more information is included here, the more likely you are to find a quick resolution in the event of a dispute. Typical issues to address in your articles of association include:

• The procedure of transferring of shares
• Any non-competition clauses
• Managing director's saliers
• Information on voting rights and use of profits
• Considerations regarding working hours
• The distribution of profits
• Arrangements in the event of illness or death
• Severance payments
• Confidentiality obligations  

When you consider that changes to the articles of association must always be notarized, you will see why it makes sense to think about everything from the beginning.

Keep in mind: When looking for the right co-founders, many founders wonder what to look for or what questions to ask to determine if a joint foundation makes sense. The possible provisions for individual articles of association mentioned above can be helpful here. Many things should be discussed beforehand: How much time do the founders want to devote to the business, or how does it fit in with their family plans? It is always advisable to discuss exactly what the co-founders' ideas are and what can be expressed in the articles of association. This way, all founders are aware of each other's ideas and conflicts can be avoided early in the process. 

For GmbHs and UGs (limited liability), there is the option of using a so-called model protocol (Musterprotokoll) as an alternative to individual articles of association. The model protocol is a legally standardized template for articles of association. It contains the minimum information required to form a company.

Anyone who prefers a quick and uncomplicated incorporation can use this model protocol. The advantages are obvious: using the model protocol saves work, incurs fewer costs and is clear. If you are setting up on your own, this can save you a lot of work.

But beware: the sample protocol is not customizable. In other words, you cannot make any additional agreements about how to act within the company. If it is important to you to address the specific needs of your co-founders and your company, it may make more sense to draft individual Articles of Incorporation. Of course, it is also possible to individualize the articles of association at a later date - however, you should be aware that this amendment must be notarized and therefore incurs additional costs. 

With a sample articles of association, you can get an initial overview of which details you can or must include. Every GmbH foundation is different. It is therefore all the more important to consider your company individually. 
A personal consultation will help you to adapt your articles of association even better to your wishes and your start-up. 

If you and your potential co-shareholders decide to draw up your articles of association yourself, there will be no initial cost. However, as the articles of association are the foundation of your company, it is always advisable to consult experts. The provisions made in the articles of association have far-reaching implications for the day-to-day running of your company. If you hire a lawyer to draft them, you will incur costs. You should also bear in mind that the notarization will also incur costs. 

In the course of day-to-day business, it may become necessary to adapt or amend the articles of association. Such an amendment must also be notarized. An amendment is necessary in the following cases, among others: 

• New shareholders are admitted: When new shareholders are admitted, the articles of association are often adapted to the needs and wishes of the new members.
• Capital is increased: If the company raises new capital, for example through contributions from investors or shareholders, the articles of association must be amended. 

The articles of association form the basis for your GmbH and your day-to-day business. Before founding the company, you should consider all the options you have so that there are no conflicts between the shareholders later on. 
Regardless of whether you want to form a traditional or non-profit GmbH: No GmbH without articles of association! In this document provides everything you need to know about your company: From the salary of the management to the distribution of voting rights. 
Our team will help you to take all the relevant information into account so that nothing stands in the way of a stress-free start to your GmbH business idea.