The abbreviation GmbH stands for Gesellschaft mit beschränkter Haftung. Translated from German, this phrase means "limited liability company".
A limited liability company (GmbH) is a form of business activity, which provides that the participants of the enterprise are responsible for potential risks only by the amount of their share in the authorized capital.
GmbH are very common in Switzerland, Germany and Austria. The size of the minimum authorized capital for GmbH, depending on the country, ranges from 25 to 35 thousand euros. It doesn't have to be real money. It is allowed when part of the authorized capital is secured by bank guarantees and securities.
Depending on how many people are in the founders of GmbH, the requirements for the authorized capital are slightly different. If the GmbH has one founder, the entire amount of the share capital must be paid at the time of registration of the company. If a GmbH has two or more founders, upon registration, each of them must contribute at least 25% of their share. The remaining amount is paid during the first year of operation of the enterprise.
The GmbH is usually managed at two or three levels. The lower level is the meeting of the GmbH members, the upper level is the executive director. The director of a GmbH can be a citizen of any country; it is not necessary to have a German passport. Between the meeting of the company's members and the director, there may be an intermediate managing link - the supervisory board. As a rule, the supervisory board is formed either in special cases, or in the case when the number of employees of the GmbH exceeds five hundred people.
The functions of the general meeting include solving current issues of the company. Decisions are made on the basis of voting - every fifty euros of participation in the authorized capital gives one vote. The minimum share in a GmbH is one hundred euros, respectively, each of the co-founders has at least two votes at the general meeting.
Regulatory Act GmbH
In Germany, GmbHs are governed by a law adopted at the end of the 19th century. The text of the law has changed many times, the last major amendment took place in 2008. The main goal of the changes was to prevent a variety of abuses. Now more stringent requirements are imposed on GmbH at the time of registration. If earlier GmbH got into a crisis situation, then all responsibility for declaring bankruptcy fell on the manager. Now, even if the GmbH does not have a manager or does not cope with its duties, the responsibility for the untimely declaration of bankruptcy or insolvency of the company falls on all co-founders.