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Management and shareholders

The managing director of a UG can either be a shareholder who is also appointed as managing director, the so-called “managing partner”, or he can be a managing director in employment (external managing director).

Both shareholders have the same duties in their role as managing directors. In contrast to an employed managing director, the shareholder owns shares in the company and is entitled to vote at the shareholders’ meeting.

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Management: Tasks and important details about a responsible job

In the position of Managing Director, you also represent your company externally. This means that you are authorised to conclude transactions for the UG.

You take responsibility and lead the way for the entrepreneurial future of the UG. You should therefore be aware of what you should bear in mind and what rights and obligations you have.

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What requirements do you need to fulfill to become a managing director of a UG?

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What are your duties and tasks as Managing Director?

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How can you become a managing director in a UG?

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How does management liability work?

Who can become a managing director?

Anyone wishing to be part of the UG management must be of legal age and have legal capacity. In certain cases, persons are excluded from taking on a management position: Anyone who was part of insolvency proceedings may not be appointed as managing director for the time being. Anyone who is convicted of an offense under § 6 para. 2 of the German Limited Liability Companies Act cannot join the management board within the next five years.

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What duties does the UG managing director have

The managing director manages the company’s business and is bound by the shareholders’ instructions. In addition, he has a duty of loyalty to the company and is obliged to provide the shareholders with information about the company.

It is also the duty of the managing director(s) to convene the shareholders’ meeting. There are cases provided for by law in which the meeting must be convened. For example:

  • in the event of impending insolvency
  • Amendment to the Articles of Association
  • High-risk business
  • Annual financial statements

Decisions agreed within the shareholders’ meeting are called shareholder resolutions.

How is the managing director of a UG appointed?

The shareholders’ meeting is responsible for appointing the managing director. If a managing director is appointed or terminates his/her office, this must be entered in the commercial register by a notary.

The exact rights and duties of the management are regulated in a management contract. Agreements on remuneration, notice periods and non-competition clauses are made there. It is possible for a managing director to have a secondary occupation, which must be recorded accordingly in the managing director contract.

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How does management liability work?

As the management is bound by the shareholders’ instructions, it must implement all of the shareholders’ requirements. If she harms the company and disregards her duties, she can be held liable. If there are several managing directors, all of them are obliged to monitor compliance with the obligations. This is because all managing directors are generally jointly liable for errors made by the other managing directors.

The UG is a limited liability company, which is why the shareholders are generally not liable with their private assets. In contrast, the managing director may be liable with his or her private assets, whereby a distinction must be made between liability towards the company and towards third parties.

In particular, the managing director may be liable to third parties:

  • in the area of accounting, for example if he/she does not submit the annual financial statements.
  • he/she does not comply with his/her tax obligations
  • in the event of insolvency

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FAQ

Why found a UG (haftungsbeschränkt)?

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Founding a UG (haftungsbeschränkt) is particularly suitable for young companies. This is because 1 euro is theoretically enough for the share capital. If you don't want to be liable with your private assets but don't have the start-up capital for another limited company, a UG (haftungsbeschränkt) is a good choice. Unlike a sole proprietorship, liability is limited here and private assets are protected. In practice, however, there are also many arguments against setting up a UG (haftungsbeschränkt), as it often makes more sense to set up a GmbH. Individual advice should be sought here.

What does UG (haftungsbeschränkt) mean?

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The legal form UG (haftungsbeschränkt) means that the founders are not liable with their private assets if the company gets into financial difficulties. The legal form must be indicated on all business documents, for example in e-mails, letters and invoices as well as in the website imprint. This is required so that other companies and customers can see at a glance that the company's liability is limited. The UG (haftungsbeschränkt) is less highly regarded by banks and investors and in business transactions than other corporations.

What do you need to set up a UG (haftungsbeschränkt)?

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It doesn't take much to set up a UG (haftungsbeschränkt). In addition to a company name and a business address, a business account is required to pay in the share capital. First, a shareholders' agreement is drawn up and notarised by a notary. Then you have to open the business account and pay in the share capital. The notary registers the UG (haftungsbeschränkt) in the commercial register once the share capital (at least EUR 1) has been paid in. The UG (haftungsbeschränkt) is then registered with the trade office and tax office before it can start its business activities.

What is the difference between a GmbH and a UG (haftungsbeschränkt)?

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The biggest difference between a UG (haftungsbeschränkt) and a GmbH is the amount of share capital required to set up the company. A GmbH requires 25,000 euros in share capital, half of which must be paid in when the company is founded. In the case of the UG (haftungsbeschränkt), on the other hand, EUR 1 is sufficient as share capital, provided the capital requirement does not necessitate a higher sum. In the case of a UG (haftungsbeschränkt), reserves must be formed from profits which may not be distributed to the shareholders. In addition, the UG (haftungsbeschränkt) can also consider increasing its capital and changing its name to a GmbH. Otherwise, the UG (haftungsbeschränkt) has the same rights and obligations as a GmbH in terms of shareholder, accounting and liability requirements. The UG (haftungsbeschränkt) must also pay corporation tax and trade tax in the same way as the GmbH.