Procedures on De-registration and Liquidation in Germany

Q. What is the logic behind the deregistration and liquidation process of a foreign-owned company in Germany?

A: The dissolution and liquidation in each country may seem very complicated and quite difficult to understand at first glance. In fact, if you want to understand the procedures for dissolution and liquidation of a foreign-owned company, you should first understand the procedures for the establishment of a foreign-owned company, and you will feel clear.
In Germany, when a foreign-owned company is established, it needs to check company name at Chamber of Industry & Commerce and file notarized Articles of Association with the court. In contrast, when deciding to close a foreign-owned company, it is also necessary to report to the court and submit to the federal electronic bulletin (https://www.bundesanzeiger.de/pub/en/start?0). In Germany, after the establishment of a foreign-owned company is approved by the court and the industrial and commercial registration number (HRB) is obtained, it is registered in local Commercial Register. Then, it is necessary to apply for the tax number. Also, when necessary, the company applies the value-added tax(VAT) number and EORI (the EU tax number). Based on the nature of the business, it is necessary to obtain a business license for a specific industry. If the import and export trade is involved, it is necessary to apply for the import and export customs number. The company also needs to register with the affiliated chamber of commerce and obtain the health and social insurance certificate number to insure applying social insurance for employees. In addition, it is necessary to open a business bank account.
When dissolving a company, it is also necessary to apply to the court and cancel the above-mentioned certificate number. The dissolution of a German company shall be decided by shareholders with more than 3/4 voting rights, and liquidators shall be appointed to apply to the court to record the shareholders’ resolution. The dissolution resolution should be submitted to the Commercial Register and published in the federal electronic bulletin. After that, the company must use the suffix I.L. or i.Abw on all business documents. In the process of liquidation, the creditors should be notified and the bookings and tax returns should be kept normally. After the remaining assets are distributed, the company should file with the tax authorities to make sure that there is no tax unpaid. Then the liquidator entrusts the notary office to apply to the court for dissolution of the company.

Q: What are the necessary procedures for the dissolution of a foreign-owned company in Germany?

A: The dissolution of a German company can be divided into three stages.

˙Dissolution
˙Liquidation/Winding up
˙Deletion/Removal
Stage 1: Dissolution
According to the translation of German “Act on Limited Liability Companies” （GmbHG, Sec. 60), grounds for winding up company can be follows.
https://www.gesetze-im-internet.de/englisch_gmbhg/englisch_gmbhg.html#p0420

1. Upon expiry of the period specified in the articles of association;
2. By resolution of the shareholders; unless otherwise provided in the articles of association, such a resolution requires a majority of three quarters of the votes cast;
3. By court judgement or by a decision of the administrative court
4. Upon the opening of insolvency proceedings
5. Upon the decision to refuse to open insolvency proceedings for insufficiency of assets becoming final
6. Upon an order issued by the court of registration establishing that the articles of association are defective
   and so on……
   When the dissolution is decided by the shareholders of the company, the resolution of dissolution can be reached if the shareholders with more than three-quarters of the voting rights vote. In the resolution, it is also necessary to appoint liquidators to take charge of liquidation matters and continue accounting bookkeeping until the liquidation and deregistration are completed. Usually, the liquidators are the executive directors of the company. This resolution also needs to be submitted to the court where the company is registered through the notary office as well as to the local Commercial Register. The dissolution is also announced in the federal electronic bulletin. When the liquidators are appointed, they are required to declare the intention of liquidation and sign on the declaration for the company. Unless otherwise specified, all liquidators must sign it (GmbHG, Sec.68). From the effective date of dissolution, I.L. or i.Abw should be affixed after the company name on all company transaction documents (such as mail, invoices, etc.) (GmbHG, Sec.71(5)).

Stage 2: Liquidation/Winding up
The liquidation period (at least one year (GmbHG, Sec.73)) begins when the dissolution of the company is published in the federal electronic bulletin. During this period, the company continues to exist, but does not engage in profit-making activities. Its main task is to repay its debts, including salaries, taxes, loans, debts, etc. The liquidators shall notify the creditors and repay the debts. In addition to the above tasks, the liquidators need to prepare the balance sheet, collect the account receivables, and prevent the assets from being distributed to shareholders during this period. After the one-year waiting period has passed, the remaining assets are turned into cash by the liquidators, then distributed to shareholders (GmbHG, Sec.70). Unless otherwise stipulated in the articles of association, the assets of the company are distributed to shareholders in proportion to the shares held by shareholders (GmbHG, Sec.72). In the process of liquidation, the liquidators shall prepare the liquidation balance sheet with the opening balance at the start of liquidation, and issue the annual financial reports and management report at the end of each year (GmbHG, Sec.71(1)).
Stage 3: Deletion/Removal
After the liquidation is completed, the liquidators shall be responsible for filing with the tax authorities to ensure that there are no unpaid taxes, and then provide a liquidation report and balance sheet, and appoint a notary office to apply to the court for deregistration of the company. After the court approves, it shall report to the local Commerce Register and announce it in the federal electronic bulletin. Then the dissolution and liquidation of the company is officially completed. （GmbHG, Sec.74(1)) After that, the company’s account books and important financial documents must be kept by one of the shareholders or a third party for ten years (GmbHG, Sec.74(2)).
In August 2021, the German Transparency Register requires all types of legal entities to list their economically entitled persons. When a natural person meets any of the following conditions, it is regarded as an economic beneficiary.

1. Person who directly or indirectly holds more than 25% of company’s shares.
2. Person who directly or indirectly controls more than 25% of the voting rights.
3. Person who exercises control over the enterprise in a similar way.
   (refer to https://www.clevana.com.cn/transparency-register-obligation/).

Therefore, foreign-owned company registered in Germany should register at the following website when they are registered and deregistered.
https://www.transparenzregister.de/treg/en/start?0
Regarding dissolution and liquidation act, please refer to the translation version of German “Act on Limited Liability Companies” from Division 5, Section 60-77 as below link
https://www.gesetze-im-internet.de/englisch_gmbhg/englisch_gmbhg.html#p0420
German Commercial Register website as below:
https://www.unternehmensregister.de/ureg/index.html?dest=ureg&language=en

Q: What documents need to be submitted in the process of dissolving a German company?

A:

• Resolution of dissolution: At the shareholders’ meeting, the resolution of dissolution can be reached by shareholders with more than three-quarters of the voting rights. The resolution of dissolution will be submitted to the court where the company is registered through the notary office, and then submitted to the Commercial Register where the company is located after approval by the court, and announced in the federal electronic bulletin. Common register portal of the German federal states:
  https://www.handelsregister.de/rp_web/welcome.xhtml
  Federal electronic bulletin
  https://www.bundesanzeiger.de/pub/en/start?0
• Liquidators’ appointment document: The liquidators are appointed in the document. Usually the liquidators are the executive directors of the company, otherwise are appointed.
• Announcement documents: published three times in a designated publications. It records the company’s resolution of dissolution and the names of the liquidator. The announcement also includes a request to ask company’s creditors contact the company.
• Liquidation balance sheet/liquidation financial reports: the balance sheet with the opening balance at the start of liquidation shall be submitted to the court where the company is registered through the notary office after liquidation. Those financial reports are also submitted to the Commercial Register where the company is located after approval by the court, and published in the federal electronic bulletin.
• Liquidation tax returns: the liquidators shall be responsible for submitting the liquidation tax returns to the designated tax authorities for the record to ensure that there is no unpaid tax.

German federal tax bureau
http://www.bzst.de/EN
E-filing Portal —
https://www.elster.de/eportal/start

These documents are to ensure that the company is liquidated in accordance with the law, and all debts are paid off, and the remaining property of the company is reasonably distributed. In the process of liquidation, all relevant documents should be properly kept for possible future inquiries or legal proceedings.

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