Modernization of partnership law

The MoPeG will bring important changes for partnerships into force in 2024, particularly for civil law partnerships.

With the "Act on the Modernization of Partnership Law", or MoPeG for short, the Bundestag and Bundesrat passed a large number of changes for partnerships in 2021. The MoPeG focuses on a reform of the civil law partnership (GbR), whose legal capacity is now regulated by law. Although the law, which will come into force on January 1, 2024, does not contain any direct changes to tax law, it will at least have an indirect effect there as well.

The scope of the MoPeG is evident not only from the fact that the first draft bill was already more than 350 pages long, but also from the fact that the MoPeG makes changes to a total of 136 laws and ordinances. Here is an overview of the main changes introduced by the MoPeG that will apply from 2024:

• Legally capable GbR: To date, there has been no legal basis for the legal capacity of a civil law partnership (GbR). Although the Federal Court of Justice certified the legal capacity of a GbR participating in legal transactions more than twenty years ago, this was only recognized in case law. In future, the GbR can also be an independent legal entity under the law, which can acquire rights, own assets or enter into liabilities in its own name. The assets of a GbR with legal capacity are therefore no longer just the joint assets of the partners (so-called joint assets), but independent assets of the GbR. The prerequisite for the legal capacity of a GbR is that it should participate in legal transactions in accordance with the common will of the partners. The legal capacity of the GbR is therefore not mandatory; a GbR without legal capacity can still be formed, which is limited to the legal relationships between the partners. The legal capacity of the GbR has no effect on the unlimited, personal and joint and several liability of a GbR partner.

  

• Company register: Based on the commercial register, a company register is introduced in which a company with legal capacity can be entered. In addition to the name of the GbR, the partners and powers of representation are also entered in the company register. These entries enjoy the same protection of good faith as the entries for other company forms in the commercial register. Although there is no obligation for a GbR with legal capacity to be entered in the company register, registration is a prerequisite for various entries in other registers. In particular, if a GbR is to be entered in the land register or become a partner in another company, entry in the company register is a mandatory requirement. Registration has advantages for a GbR because contractual partners can rely on the data recorded in the company register. In addition, changes to the shareholder structure will be recorded centrally in future, which means that various land register entries no longer need to be changed if the GbR owns several properties. If a GbR is entered in the company register, it must bear the name affix "eingetragene Gesellschaft bürgerlichen Rechts" (eGbR).

• Conversion & change of status: In future, the eGbR will be a convertible legal entity within the meaning of the German Reorganization Act, meaning that it can be converted into a GmbH, for example. In future, a pure change of status to a general partnership (oHG) or a partnership company will also be possible for the eGbR. In this case, the eGbR will be transferred from the company register to the commercial or partnership register. This change of status is of course also possible in the opposite direction, i.e. from the oHG or PartG to the eGbR.

• Shareholding structure: If the articles of association do not contain any provisions to the contrary, each shareholder previously had an equal share in the company. This meant that each shareholder had one vote, regardless of the size of the share that the shareholder contributed to the company. In future, the shareholding ratios of the shareholders will instead be based on their contributions to the company, although the articles of association may continue to provide for a different arrangement. A shareholder's contribution may consist not only of assets, but also of the provision of services. In future, the voting power and the share of profit and loss will be based primarily on the agreed participation ratios or on the ratio of the agreed values of the contributions if no participation ratios have been agreed. If no contribution values have been agreed, each shareholder shall continue to have the same voting rights and an equal share of the profit and loss, regardless of the value of their contribution.

• Withdrawal & subsequent liability: Many reasons that previously led to the dissolution of the company (e.g. death or insolvency of a shareholder) will in future only lead to the withdrawal of the shareholder. The subsequent liability of a partner who has left the company will be limited to liabilities and claims for damages that were established before the partner left the company. If the heirs of a partner join the company after the partner's death instead of being compensated, each heir can demand to be given the status of a limited partner.

• Registered office: In future, a partnership may have a registered office other than its domestic registered office, as has long been possible for corporations. This can also be abroad, provided the company is recognized in that country. This change is particularly relevant for GmbH & Co. KG, which can thus also have a foreign registered office.

• Freelance company: In future, freelancers will also be able to use the legal forms of an oHG or KG, provided this is permitted by professional law. This means that freelancers can now also choose the GmbH & Co. KG as a form of partnership with limited liability as soon as professional law has been amended accordingly.

• Defects in resolutions: In contrast to corporations, there was previously no law on defective resolutions for partnerships. This is now changing with the introduction of a law on defective resolutions for commercial partnerships, which is based on the provisions of stock corporation law. A shareholder has a period of three months to file an action for rescission against a shareholder resolution, unless a shorter period has been agreed in the articles of association. Only in exceptional cases is a resolution void from the outset. The new law on defective resolutions only applies to a GbR if it has been expressly agreed in the articles of association.

  

• Shareholder action: To date, case law has already recognized the right of a shareholder to assert company claims in their own name. This is now also regulated by law. This means that in future, every shareholder will be authorized to assert a company claim based on the corporate relationship against another shareholder in their own name if the shareholder with management authority fails to do so in breach of duty.

• Unified society: The form of a unitary partnership, which has long been recognized by case law and in which the limited partnership is also the sole shareholder of its general partner, is now also recognized by law. The law stipulates that the shareholder rights to which the limited partnership is entitled are exercised by the limited partners at the general partners' meeting.