It began with the decision of the European Court of Justice, effectively allowing UK ltd corporations to keep their status as limited liability companies even if their effective seat was Germany. Suddenly, many compared the UK ltd to the German GmbH, and decided to opt for the UK model. Germany requires a minimum fixed capital of 25,000 EUR, the UK ltd can be started with 1 Pound. German law requires noatrization, while the UK ltd essentially can be created online. Many small businesses suddenly saw the opportunity to create a corporate vehice - allowing them to opt out of the otherwise mandatory unemployment insurance and pension scheme - at a fraction of the costs. The numbers of UK ltds in Germany can only be estimated, but some speak of more than 20,000 in 2006. Thus, the pressure was on, and Germany had to either losse out or reform. As of next year, the minimum share capital will be reduced to 10,000 EUR, the need for notarization will be curtailed and a new entity will be created to be called Unternehmergesellschaft (entrepreneur's corporation) that does not require any share capital - but requires the shareholders to keep 25% of their profits in the corporation until a 10,000 EUR reserve has been created.
One thought: when the first Limited Liability Corporation Code was enacted, the then minimum fixed share capital was the equivalent of more than a lavish house. Now, it will be a Korean or Romanian car. More creditors will ask for personal security and the courts in all likelihood will find even more ways to hold the shareholders personally liable. Thus, the house is gone - again.
It remains to be seen, how this reform will change the use of UK ltd's and the landscape of corporations.
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