English 1 Past Paper 2024/2025 PDF

Prof. Dr. Prof. h.c. Schellberg English 1 (Schlüsselqualifikationen Sprache 1) English 1 Professor of Business Adminis...

Prof. Dr. Prof. h.c. Schellberg English 1 (Schlüsselqualifikationen Sprache 1) English 1 Professor of Business Administration, Corporate Restructuring University of Applied Sciences Schmalkalden/Germany, Faculty of Business Law  Chapter 1: Introduction Course Description – Winter 2024/2025 Title English – Doing Business in Germany Faculty Business Law Professor Prof. Dr. Prof. h.c. Bernhard Schellberg ECTS 2.5 Level Bachelor Requirements - Add. Start: October 15th, 2024 Information Tuesday, 14:15 – 15.45 Lecture Hall: D0301 https://studip.hs- schmalkalden.de/dispatch.php/course/overview?cid=615c0ce56536530c7e16c0b9d5 4dca7d English 1 2 Prof. Dr. Prof. h.c. Schellberg Course Assessment: Final Exam (60 min.) Requirements - Add. Start: October 15th, 2024 Information Tuesday, 14:15 – 15.45 Lecture Hall: D0301 Chapter 1: Introduction https://studip.hs- schmalkalden.de/dispatch.php/course/overview?cid=615c0ce56536530c7e16c0b9d5 4dca7d Course Assessment: Final Exam (60 min.) Workload: 75 hours Content Germany's commercial appeal is manifold: it is the world's fourth largest economy and Europe's central economic driver. With an industry focus on engineering especially in automobiles, machinery, metals, pharmaceuticals and chemical goods, Germany has an excellent logistical and technological infrastructure, a highly skilled workforce, and a stable economy. Doing Business in Germany is your lecture to the legal and taxation system in Germany. It covers the main aspects of establishing and operating a company in Germany (focusing particularly on limited liability companies), the labor and tax framework, and the main aspects of German commercial, antitrust and IP laws. This lecture also includes information on how to get access to capital markets and relevant Banking and Finance laws when doing business in Germany. English 1 3 Prof. Dr. Prof. h.c. Schellberg  Berechnung siebte Fachsemester. der (BWL, VWL, Ein Gesamtnote Buchführung) im der Bachelorprüfung. Ausland absolvierter Ausbildungsabschnitt kann im Einzelfall als1.praktisches BWL Studien- 2. VWL wird. semester anerkannt werden, sofern er nicht auf andere Module des Studienprogramms angerechnet §4 3. Buchführung (5) Bei Nachweis eines berechtigten Interesses Allgemeine Zulassungsvoraussetzungen des Studierenden kann auf Antrag eine anteilige Vergabe von ECTS- Besondere BWL I 5 4 Kreditpunkten für Teilmodule erfolgen, für die eine Teilmodulprüfung vorgesehen ist oder 4die mit vertretbarem Besondere BWL Auf-I (1) AnFinanzierung den Modulprüfungen kann nur teilnehmen, wer aufgrund eines Zeugnisses der allgemeinen Hochschulreife, der und Investition wand isoliert geprüft werden können. Insbesondere im Hinblick auf die beabsichtigte oder erfolgte Teilnahme an Chapter 1: Introduction fachgebundenen Hochschulreife oder aufgrund einer durch Rechtsvorschrift oder von der zuständigen Stelle als Studienangeboten anderer Hochschulen im In- und Ausland sowie an anderen Fakultäten der Hochschule soll gleichwertig anerkannten Zugangsberechtigung an der Hochschule Schmalkalden an der Fakultät Wirtschaftsrecht dadurch eine für angepasste denBesondere Studienplanung BWL II Bachelorstudiengang ermöglicht 5 werden. Wirtschaftsrecht eingeschrieben ist. Ordentliche4Studierende, 4 Besondere die BWLFakul- an anderen II Unternehmens- und Personalführung täten der Hochschule Teilmodulprüfungen: eingeschrieben sind, können an Modulprüfungen und den zugrundeliegenden Lehrveranstal- § 3 1. Unternehmensführung tungen teilnehmen, wenn dadurch die Ausbildung der Studierenden der Fakultät Wirtschaftsrecht nicht nennenswert § 3beeinträchtigt Study Regulations wird. Prüfungsaufbau 2. Personalführung (1) Die Bachelorprüfung besteht Schlüsselqualifikationen (2) Zur Teilnahme an einer 1.1 2,5 inFach aus studienbegleitenden Modulprüfung FormFach einerFach Fachwird 2 Modulprüfungen Klausur Fach und nur Fach der Fach 2wer sich vorher IT Bachelorarbeit. zugelassen, 1 das Zen- über Pflichtmodule anmeldet. Die ECTS (IT-Anwendungssysteme) trale Prüfungsamt sem. sem.beginnen Anmeldefristen sem. sem. sem.viersem. jeweils endenΣjeweils zwei und sem. Modulprüfungen Wochen vor dem (2) Durch einePrüfungszeitraum. Modulprüfung sollDie festgestellt werden, Anmeldefristen sind 1Ausschlussfristen. ob der2Studierende 3 4 Eine5 Abmeldung Inhalt und6 Methoden 7 ist bis des zumPrüfungsmoduls dritten Werktag vorin dem festgelegten den wesentlichen Prüfungstermin beherrscht Zusammenhängen möglich. und die erworbenen Fähigkeiten und Kenntnisse selbständig an- wenden kann. Schlüsselqualifikationen Externe Rechnungslegung 1.2 2,5 5 2 4 2 4 Sprache Steuern 11 (Sprache (3) Die Zulassung 1) zu einer Modulprüfung darf nur abgelehnt werden, wenn und Besteuerung a) die in Absatz (3) Die Note einer bestandenen 1 genannten Voraussetzungen Modulprüfung wird in das nicht erfülltaufgenommen Zeugnis sind oder und bildet die Grundlage für die b) der Kandidat die Bachelorprüfung Berechnung der Gesamtnote der Bachelorprüfung. in einem Studiengang Wirtschaftsrecht an einer Hochschule im Geltungsbe- Schlüsselqualifikationen reich des Grundgesetzes 2 endgültig 2,5 nicht bestanden 2 hat oder der Kandidat sich2in einem Bachelorstudiengang Sprache 2 Unternehmenssteuerrecht (Sprache 2) 5 Wirtschaftsrecht in einem noch nicht abgeschlossenen 4 4 Prüfungsverfahren befindet oder Steuern 2 § 4 Examination Regulations c) der Kandidat die Frist zur Anmeldung zu der entsprechenden Modulprüfung nicht eingehalten hat. Allgemeine Zulassungsvoraussetzungen (4) DieSchlüsselqualifikationen 3 5 Zulassung zu Schwerpunktmodulprüfungen Grundlagen 10 4 4 sowie zur Anfertigung der Bachelorarbeit 8 Sprache erfolgt erst 3dann, und 4wenn 8 Teilmodulprüfungen: Wirtschaftswissenschaften (1) An den Modulprüfungen (Sprachekann 3 undnur 4) teilnehmen, alle Pflichtmodulprüfungen aus dem 1.wer undaufgrund eines Zeugnisses 2. Fachsemester gemäß derder allgemeinen Tabelle in § 3 der Hochschulreife, Studienordnungderbestan- der fachgebundenen Wirtschaftswissenschaften Hochschulreife den wurden. oder aufgrund einer durch Rechtsvorschrift oder von der Teilmodulprüfungen: zuständigen 1. Sprache 3 Stelle als (BWL, VWL, Buchführung) gleichwertig anerkannten Zugangsberechtigung an der Hochschule Schmalkalden an der Fakultät 1. Sprache 2. BWLWirtschaftsrecht 4 für den Bachelorstudiengang (4) Admission to focus Wirtschaftsrecht module eingeschrieben examinations ist.and Ordentliche Studierende, to writing 2. VWL die the bachelor's an anderen thesisFakul- only täten der Hochschule eingeschrieben sind, können an Modulprüfungen und den zugrundeliegenden 3. Buchführung Lehrveranstal- takes place when Wahlpflichtmodule all compulsory 20 module 4 4 examinations 4 4 from 16 tungen teilnehmen, wenn dadurch die Ausbildung der Studierenden der Fakultät Wirtschaftsrecht nicht the 1stWahlmodule and 2nd nennenswert semesters beeinträchtigt wird. (gem. have§ 5) been passed in accordance with the table in § 3 of the study Besondere BWL I 5 4 4 Besondere BWL I Finanzierung und Investition regulations. (2) Zur Teilnahme an einer Modulprüfung in Form einer Klausur wird nur zugelassen, wer sich vorher über das Zen- Schwerpunktmodul I/1 10 8 8 Schwerpunkt I/1 trale Prüfungsamt anmeldet. Die Anmeldefristen beginnen jeweils vier und enden jeweils zwei Wochen vor dem English 1 4 Prof. Dr. Prof. h.c. Schellberg Prüfungszeitraum. Die Anmeldefristen sind Ausschlussfristen. Eine Abmeldung ist bis zum dritten Werktag vor dem Besondere BWLNR. VERKÜNDUNGSBLATT II 5/2020 festgelegten Prüfungstermin möglich. 5 4 4 Besondere BWL II 40 SEITE Unternehmens- und Personalführung 8 8 Schwerpunkt II/1 Teilmodulprüfungen:  Chapter 1: Introduction Ê Introduction to the English business and legal language as well as English-speaking business life and its customs: Students should be encouraged to develop and practice their English-language skills. Ê Throughout the course, emphasis will be placed on using legal terminology accurately, discussing case studies, analyzing legal texts, and improving language skills relevant to business law discussions and negotiations. By the end of the course, students should have a solid foundation in legal English, preparing them for further study (e.g., master’s degree) or professional practice in the field. English 1 5 Prof. Dr. Prof. h.c. Schellberg  Chapter 1: Introduction Ê Germany's commercial appeal is manifold: it is the world's fourth largest economy and Europe's central economic driver. With an industry focus on engineering especially in automobiles, machinery, metals, pharmaceuticals and chemical goods, Germany has an excellent logistical and technological infrastructure, a highly skilled workforce, and a stable economy. Ê Doing Business in Germany is your lecture to the legal and taxation system in Germany. It covers the main aspects of establishing and operating a company in Germany (focusing particularly on limited liability companies), the labor and tax framework, and the main aspects of German commercial, antitrust and intellectual property laws. This lecture also includes information on how to get access to capital markets and relevant banking and finance laws when doing business in Germany. English 1 6 Prof. Dr. Prof. h.c. Schellberg  Chapter 1: Introduction Ê Presentations and debates: Participating in discussions and debates on legal topics to improve spoken communication skills. Ê Group projects: Collaborating with peers to work on business law- related projects, fostering teamwork and problem-solving abilities. Ê In our lecture we want to use the advantages of a small group. Speaking will be the focus. You should speak very often. Ê If you want, you can use your smartphone or tablet etc. as an aid in the lecture. With the help of these technical tools, you can prepare your short presentation and discussion contributions. This will not be possible in the written exam. But I will explain why it can be helpful for you at this stage. English 1 7 Prof. Dr. Prof. h.c. Schellberg  Chapter 2: Germany – An Overview Ê The law firm Baker & McKenzie is a very interesting employer for our graduates. In the summer semester of 2023, a graduate of our faculty and a partner of this law firm were our guests. In their presentation, they presented career opportunities (https://www.bakermckenzie.com/en/). Ê In the first part of our lecture, we discuss "Doing Business in Germany" (bakermckenzie.doing-business-in-germany.pdf) based on a publication by this law firm. This publication was prepared for foreign clients who are considering establishing business relationships with German partners. Ê In the ppt presentation, detailed reference is made to the pages of the Baker & McKenzie publication. In addition, you will receive further references. English 1 8 Prof. Dr. Prof. h.c. Schellberg  Chapter 2: Germany – An Overview Ê On pages 1 and 2, Baker & McKenzie outlines the "Political System". Please form working groups of two students each. Ê Please prepare a short presentation in pairs. You can use PowerPoint or the blackboard. Baker & McKenzie's release is from 2015. Please update your presentation and use information available today! What has changed in Germany since then? Please prepare a short presentation with your partner in your group. Ê The Federal Republic of Germany has a federal system with individual federal states. Which parties are currently forming the government in your state? To prepare, please also use sources available on the Internet. (Our university is politically neutral. Please avoid political evaluations in your presentation.) English 1 9 Prof. Dr. Prof. h.c. Schellberg  Chapter 2: Germany – An Overview Ê In your lectures you will learn a lot about legal systems. Please provide an overview of the two systems "Civil Law" and "Common Law” (bakermckenzie.doing-business-in- germany.pdf, page 2). Please read the following sources: Ê https://en.wikipedia.org/wiki/Civil_law_(legal_system) Ê https://en.wikipedia.org/wiki/Common_law Ê What are the main differences? Ê What advantages and disadvantages do you see? Ê Which legal system do you prefer? Please give reasons for your reply. English 1 10 Prof. Dr. Prof. h.c. Schellberg  Chapter 2: Germany – An Overview Ê The importance of Germany is justified with the help of Gross Domestic Product (bakermckenzie.doing-business-in- germany.pdf, page 2). Please explain what you mean by this and use the following source: https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi nal) Ê Please explain what you mean by GDP. Ê Please explain why GDP can describe the prosperity of a country! English 1 11 Prof. Dr. Prof. h.c. Schellberg  Chapter 2: Germany – An Overview Ê In recent years, the so-called BRICS countries have become increasingly important. Which states are we talking about? Why are these states becoming more and more important? Ê How should our foreign policy behave towards the BRICS countries? English 1 12 Prof. Dr. Prof. h.c. Schellberg  Chapter 3: Legal Forms of Doing Business Ê Before getting down to specifics, I will provide a brief overview of types of long-term finance: It is customary to classify sources of finance as debt or equity. Ê When the firm borrows, it promises to repay the debt with interest. If it doesn’t keep its promise, the debtholders may force the firm into bankruptcy. Ê However, no such commitments are made to the equity holders. They are entitled to whatever is left over after the debtholders have been paid off. For this reason, equity is called a residual claim on the firm. (bakermckenzie.doing-business-in-germany.pdf, pages 5 – 13.) English 1 13 Prof. Dr. Prof. h.c. Schellberg  1. Starting Up as a Sole Proprietorship Ê unincorporated business owned by one individual Ê SOLE PROPRIETOR: Sole owner of a business which has no partners and no shareholders. They bear all the costs and keep all the profits after the Internal Revenue Service has taken its cut. The proprietor is personally liable for all the firm’s obligations. Ê Sole proprietorships are used primarily for small businesses. In U.S., proprietorships account for only about 13% of all sales, based on dollar values, even though about 80% of all companies are proprietorships. Ê UK: ‘sole trader’ English 1 14 Prof. Dr. Prof. h.c. Schellberg  1. Starting Up as a Sole Proprietorship Ê Advantages Ê You bear all the costs and keep all the profits, Ê it is easily and inexpensively formed, Ê it is subject to few government regulations, and Ê its income is not subject to corporate taxation but is taxed as part of the proprietor’s personal income (A proprietorship pays no separate income taxes. The owner merely adds any profits or subtracts any losses from the business when determining personal taxable income.) The advantages of a proprietorship are the ease with which it can be established and the lack of regulations governing it. This makes it well-suited for a small company with an informal business structure. English 1 15 Prof. Dr. Prof. h.c. Schellberg  1. Starting Up as a Sole Proprietorship Ê Disadvantages Ê Unlimited personal liability for the business’s debts, which can result in losses that exceed the money invested in the company (creditors may even be able to seize a proprietor’s house or other personal property!). As a sole proprietor, you are responsible for all the business’s debts and other liabilities. If the business borrows from the bank and subsequently cannot repay the loan, the bank has a claim against your personal belongings. It could force you into personal bankruptcy if the business debts are big enough. Thus, as sole proprietor you have unlimited liability. English 1 16 Prof. Dr. Prof. h.c. Schellberg  1. Starting Up as a Sole Proprietorship Ê … Ê it may be difficult for a proprietorship to obtain the capital needed for growth; Ê the life of a proprietorship is limited to the life of its founder (no portion of the enterprise can be transferred to members of the family during the proprietor’s lifetime). Ê For these three reasons, sole proprietorships are used primarily for small businesses. English 1 17 Prof. Dr. Prof. h.c. Schellberg  1. Starting Up as a Sole Proprietorship This is a closed book exam. Other documents etc. are not permitted. All questions are compulsory. Please answer the questions in English and full sentences. (10 minutes): You want to start a business. You are considering starting as a sole proprietor. Please describe the main characteristics. Name the advantages and disadvantages of this legal form! English 1 18 Prof. Dr. Prof. h.c. Schellberg  2. Partnership Ê Instead of starting on your own, you may wish to pool money and expertise with friends or business associates. If so, a sole proprietorship is obviously inappropriate. Instead, you can form a partnership. Ê A partnership exists whenever two or more persons or entities associate to conduct a non-corporate business for profit. (bakermckenzie.doing-business-in-germany.pdf, pages 10 – 13.) English 1 19 Prof. Dr. Prof. h.c. Schellberg  2. General Partnership (OHG) Ê Small and medium-sized German trading companies Ê not a legal entity Ê it may own partnership assets and may assume liabilities Ê exercise legal rights, sue and be sued in court Ê the partners of an OHG are jointly and severally liable for all liabilities incurred by the OHG (bakermckenzie.doing-business-in-germany.pdf, pages 10 – 11.) English 1 20 Prof. Dr. Prof. h.c. Schellberg  2. General Partnership (OHG) Section 105 HGB (Commercial Code) (1) A partnership formed for the purpose of carrying on a commercial business under a joint business name is a general partnership if no partner's liability is limited vis-à-vis the partnership's creditors. (2) A partnership, whose commercial enterprise is not deemed to be a commercial business pursuant to Section 1 subsection (2), or which manages only its own assets, is a general partnership if the business name of the enterprise is registered in the Commercial Register. Section 2, second and third sentences, shall apply mutatis mutandis. (3) Unless this Part provides otherwise, the provisions of the Civil Code concerning a partnership shall apply to the general partnership. English 1 21 Prof. Dr. Prof. h.c. Schellberg  2. General Partnership (OHG) Ê Partnership agreements will set out Ê how management decisions are to be made and Ê the proportion of the profits to which each partner is entitled. Ê The partners then pay personal income tax on their share of these profits. Ê A partnership’s advantages and disadvantages are generally similar to those of a proprietorship. English 1 22 Prof. Dr. Prof. h.c. Schellberg  2. General Partnership (OHG) EXAMPLE Steptoe and Smith trade in antiques. Steptoe and Smith each have a 50% stake in the general partnership. The partnership has purchased oriental antiques from an importer for €30,000. The invoice has not yet been paid. Due to the economic slowdown, Steptoe and Smith only manage to sell this stock for €18,000. The partnership has no other assets that can be converted into cash. Smith is bankrupt. What amount does Steptoe have to pay to the importer? What are the possibilities of Steptoe? English 1 23 Prof. Dr. Prof. h.c. Schellberg  2. General Partnership (OHG) EXAMPLE Two men, Smith and Jones, have joint their activities in a partnership Networks, which is active in the computer retail business. The profit share of partner Smith is 2/3 and that of partner Jones 1/3. All is not going well with the partnership. Only the following assets remain (the amount behind each asset is an estimate of what will be received in the event of foreclosure): Equipment 30,000 Delivery van 10,000 Inventory computers 30,000 The partnership has a debt to the bank of 80,000. This debt must be paid next week. Furthermore, an amount of 20,000 still has be paid to a computer supplier. This supplier has a ‘claim of ownership’, which is to say that the computers remain his property until they have been paid for by Networks. Smith has 5,000 on his personal savings account and Jones has a car, which is worth about 8,000. Calculate the loss for the bank. English 1 24 Prof. Dr. Prof. h.c. Schellberg  3. Limited Partnership (KG) Ê To avoid this, it is possible to limit the liabilities of some of the partners by establishing a limited partnership, wherein certain partners are designated general partners and others limited partners. (HYBRID FORMS) Ê In a limited partnership, limited partners contribute capital and have liability confined to that amount of capital; they cannot lose more than they put in. Ê There must, however, be at least one general partner in the partnership, whose liability is unlimited. (bakermckenzie.doing-business-in-germany.pdf, pages 11 – 13.) English 1 25 Prof. Dr. Prof. h.c. Schellberg  3. Limited Partnership (KG) Ê In a limited partnership, the limited partners can lose only the amount of their investment in the partnership, while the general partners have unlimited liability. However, the limited partners typically have no control — it rests solely with the general partner(s). Ê Limited partners do not participate in the operation of the business; this is left to the general partner(s). The limited partners are strictly investors, and they share in the profits or losses of the partnership according to the terms of the partnership agreement. English 1 26 Prof. Dr. Prof. h.c. Schellberg  3. Limited Partnership (KG) A Kommanditgesellschaft is the German name for a partly limited partnership business entity. Section 161 HGB (Commercial Code) (1) A partnership formed for the purpose of carrying on a commercial business under a joint business name is a partly limited partnership if the liability of one or more of the partners is limited vis-à-vis the partnership’s creditors to the amount of a specific contribution of assets (limited partners), while the other partners have unlimited liability (general partners). (2) Unless this Part provides otherwise, the provisions applicable to the general partnership shall apply to the partly limited partnership. English 1 27 Prof. Dr. Prof. h.c. Schellberg  3. Limited Partnership (KG) In the OHG, all partners are full liable for the partnership’s debts, whereas in the KG there are Ê general partners (Komplementär) with unlimited liability and Ê limited partners (Kommanditisten) whose liability is restricted to their fixed contributions to the partnership. The GmbH & Co. KG is a limited partnership with, typically, the sole general partner being a limited company. GmbH -> general partner English 1 28 Prof. Dr. Prof. h.c. Schellberg  3. Limited Partnership (KG) EXAMPLE (12 minutes): You and your fellow student set up a limited partnership. In Germany, this legal form is called a Kommanditgesellschaft. You are the general partner. Your fellow student is the limited partner (Kommanditist) and participates in 2023 with a contribution of 10,000 euros, which he immediately deposits. Business is not going well. In 2024, your limited partnership will be insolvent. Assets of 120,000 euros are offset by debts of 400,000 euros. To what extent can creditors hold you and your fellow students liable? This means: To what extent can you or your fellow student will be called upon to make payments? English 1 29 Prof. Dr. Prof. h.c. Schellberg  4. Limited Liability Incorporated Entities Ê limited liability company (Gesellschaft mit beschränkter Haftung, GmbH) Ê the stock corporation (Aktiengesellschaft, AG) Ê legal entities Ê provide limited liability for their shareholders (bakermckenzie.doing-business-in-germany.pdf, pages 5 – 8) English 1 30 Prof. Dr. Prof. h.c. Schellberg  4.1 Limited Liability Company Section 1 GmbHG (Act on Limited Liability Companies) – Purpose, number of founders A limited company may be formed by one person or several persons pursuant to the provisions of this act for any purpose permitted by law. Section 13 GmbHG – Legal person; commercial company (1) A limited company as such has independent rights and obligations; it may acquire ownership of and other rights in real property and may sue and be sued in court. (2) The company assets alone shall serve to discharge the company’s obligations vis-á-vis its creditors. (3) The company is deemed to be a commercial company within the meaning of the Commercial Code. English 1 31 Prof. Dr. Prof. h.c. Schellberg  4.1 Limited Liability Company Section 5 GmbHG (Act on Limited Liability Companies) – Share capital; share (1) The company’s share capital must amount to no less than twenty-five thousand euros. (2) The nominal value of each share must be a full euro amount. A shareholder may subscribe to several share upon formation of the company. (3) The amount of the nominal values of the individual shares may be variously determined. The sum of the nominal values of all the shares must be equal to the share capital. (4) … English 1 32 Prof. Dr. Prof. h.c. Schellberg  4.1 Limited Liability Company What are some of the disadvantages of (a) a sole proprietorship? (b) a partnership? (c) a limited liability company (LLC)? English 1 33 Prof. Dr. Prof. h.c. Schellberg  4.1 Limited Liability Company EXAMPLE (10 minutes): You and your fellow student set up a limited liability company. In Germany, this legal form is called a GmbH. Business is not going well. In 2024, your company will be insolvent. Assets of 120,000 euros are offset by debts of 400,000 euros. After the assets have been liquidated, there are still debts of 280,000 euros. To what extent are you and your fellow student liable for debts of the company? This means: To what extent can you or your fellow student will be called upon to make payments? What would be the consequences for you if your fellow student couldn't make any payments at all? English 1 34 Prof. Dr. Prof. h.c. Schellberg  4.1 Limited Liability Company Section 5a GmbHG (Act on Limited Liability Companies) Entrepreneurial company (1) The business name of a company formed with a share capital which falls short of the minimum share capital as referred to in section 5 (1) must, in derogation from section 4, bear the designation ʻUnternehmergesellschaft (haftungsbeschränkt)ʼ (Entrepreneurial Company (Limited Liability)), or ʻUG (haftungsbeschränkt)ʼ for short. (2) In derogation from section 7 (2), the application to register the company may not be filed until the full amount of the share capital has been deposited. Contributions in kind are not possible. (3) The balance sheet in the annual financial statements to be prepared in accordance with sections 242 and 264 of the Commercial Code must include statutory reserves comprising one quarter of the annual surplus minus any losses carried forward from the previous year. The reserves may be used only 1. for the purposes set out in section 57c; 2. to compensate for an annual deficit, insofar as it is not covered by profits carried forward from the previous year; 3. to compensate for losses carried forward from the previous year, insofar as they are not covered by an annual surplus. (4) In derogation from section 49 (3), a meeting of shareholders must be convened without delay where there is a threat of illiquidity. (5) If the company increases its share capital so that it then equals or exceeds the amount of the minimum share capital as referred to in section 5 (1), then subsections (1) to (4) no longer apply; the business name as referred to in subsection (1) may be retained. (bakermckenzie.doing-business-in-germany.pdf, page 6) English 1 35 Prof. Dr. Prof. h.c. Schellberg  4.1 Limited Liability Company (10 minutes): You want to start a business. You have 5000 €. Can you set up a Limited Liability Company? Which legal form do you have to choose if you can't raise any further equity? In the first year of your business, you make a profit of €10,000. How much can you distribute a profit to the shareholders? In which balance sheet item do you post the remaining amount?Under what conditions can you distribute the entire profit to the shareholders? English 1 36 Prof. Dr. Prof. h.c. Schellberg  Assets: €100,000 Equity: €40,000 Debt: €60,000 €100,000 €100,000 English 1 37 Prof. Dr. Prof. h.c. Schellberg  Section 266 HGB (Commercial Code) Layout of the balance sheet (1) The balance sheet is to be drawn up in the form of accounts. In the process, medium-sized and large share capital companies (section 267 (2) and (3)) are to separately show under assets the items designated in subsection (2) and are to separately show under liabilities the items designated in subsection (3); they are to do so in the sequence stipulated therein. Small share capital companies (section 267 (1)) are only required to draw up an abridged balance sheet in which the items listed in subsections (2) and (3) designated by letters of the alphabet and Roman numerals are included as separate items in the sequence stipulated therein. Micro share capital companies (section 267a) are only required to draw up an abridged balance sheet in which the items listed in subsections (2) and (3) designated by letters of the alphabet are reported as separate items in the sequence stipulated therein. English 1 38 Prof. Dr. Prof. h.c. Schellberg Assets A. Fixed assets: I. Intangible assets: 1. Industrial property rights, created by the undertaking itself, and similar rights and assets; 2. Concessions, industrial property rights and similar rights and assets purchased for valuable consideration, as well as licenses to such rights and assets; 3. Goodwill; 4. Payments on account; II. Tangible fixed assets: 1. Real property and equivalent rights as well as buildings, including buildings on third-party real estate; 2. Plant and machinery; 3. Other equipment, factory equipment and furnishings and fixtures; 4. Payments on account and tangible assets in the course of construction; III. Financial assets: 1. Shares in affiliated undertakings; 2. Loans to affiliated undertakings; 3. Participating interests; 4. Loans to undertakings with which the undertaking is linked by virtue of participating interests; 5. Investment securities held as fixed assets; 6. Other loans. English 1 39 Prof. Dr. Prof. h.c. Schellberg B. Current assets: I. Stocks: 1. Raw materials, auxiliary supplies and consumables; 2. Work in progress, uncompleted contracts; 3. Finished goods and goods for resale; 4. Payments on account; II. Receivables and other assets: 1. Trade receivables; 2. Amounts owed by affiliated undertakings; 3. Amounts owed by undertakings with which the undertaking is linked by virtue of participating interests; 4. Other assets; III. Investment securities: 1. Shares in affiliated undertakings; 2. Other investment securities; IV. Cash in hand, deposits with Deutsche Bundesbank, bank balances, and cheques. C. Prepayments and accrued income. D. Deferred tax assets. E. Net defined benefit asset. English 1 40 Prof. Dr. Prof. h.c. Schellberg  Equity and Liabilities A. Equity capital: I. Subscribed capital; II. Capital reserve; III. Retained earnings: 1. Legal reserve; 2. Reserve for shares in a controlling undertaking or in an undertaking holding a majority interest; 3. Reserves provided for by the statutes; 4. Other retained earnings; IV. Accumulated profit / loss carried forward from the previous year; V. Net income for the year / net loss for the year. B. Provisions: 1. Provisions for pensions and similar obligations; 2. Provisions for taxation; 3. Other provisions. English 1 41 Prof. Dr. Prof. h.c. Schellberg  C. Liabilities: 1. Debentures showing convertible debentures separately; 2. Payables owed to credit institutions; 3. Payments received on account of orders; 4. Trade payables; 5. Liabilities arising from the acceptance of drafts and the issuance of promissory notes; 6. Payables owed to affiliated undertakings; 7. Payables owed to undertakings with which the undertaking is linked by virtue of participating interests; 8. Other payables, with a separate indication of taxes, with a separate indication of any payables related to social security contributions. D. Prepaid income. E. Deferred tax liabilities. English 1 42 Prof. Dr. Prof. h.c. Schellberg  4.2 German Stock Corporation (AG) Ê access to capital markets Ê governed by the German Stock Corporation Act (AktG) Ê can be set up by one or more shareholders, which may be natural persons and/or legal entities Ê formation process involves, among others, the notarization of the initial articles of association, the appointment of the first supervisory board members which appoint the first members of the management board, the (partial) contribution of the share capital in cash or in kind, and the registration of the company in the commercial register. (bakermckenzie.doing-business-in-germany.pdf, page 6) English 1 43 Prof. Dr. Prof. h.c. Schellberg  4.2 German Stock Corporation (AG) Ê minimum share capital EUR 50,000 Ê duty to pay in the share capital subscribed Ê different classes of shares: Ê bearer shares (Inhaberaktien), i.e., there is no share register (Aktienregister) kept with the company. Ê Companies with registered shares (Namensaktien) must keep a share register. Each transfer of shares needs to be entered into the share register in order to become effective vis-à-vis the company. Ê Apart from the difference between bearer and registered shares, a German stock corporation can also have ordinary and preference shares. Preference shares may be issued without voting rights. (bakermckenzie.doing-business-in-germany.pdf, pages 6-7) English 1 44 Prof. Dr. Prof. h.c. Schellberg  4.2 German Stock Corporation (AG) Ê mandatory three-tier system: Ê management board (Vorstand) Ê supervisory board (Aufsichtsrat) Ê general meeting (Hauptversammlung). Ê management board responsible for Ê the management of the company and Ê its representation vis-à-vis third parties. (The signatory power of the management board is unlimited vis-à-vis third parties.) Ê It consists of one or more individuals. In most cases, the management board consists of several individuals, each responsible for certain company resorts and a chairman of the management board (Vorstandsvorsitzender). (bakermckenzie.doing-business-in-germany.pdf, page 7) English 1 45 Prof. Dr. Prof. h.c. Schellberg  4.2 German Stock Corporation (AG) Ê supervisory board Ê responsible for the appointment and removal of the members of the management board Ê approval of certain kinds of transactions Ê supervises the management board. Ê not involved in the day-to-day management of the company. Ê general meeting Ê appoints and removes the members of the supervisory board (unless they are to be elected by the employees) Ê competent for the decision-making of the company with regard to certain basic matters Ê acts that trigger structural changes in the company, require the consent of the general meeting with a majority of at least three quarters of the nominal capital represented. (bakermckenzie.doing-business-in-germany.pdf, pages 7-8) English 1 46 Prof. Dr. Prof. h.c. Schellberg  4.3 Societas Europaea (SE) Ê shareholders may also choose to establish a “European” entity Ê legal entity which Ê basically, is governed by European community law, Ê complementarily reference is made to national laws. Ê gives companies with businesses in at least two member states of the European Economic Area the option to merge and operate throughout the European Economic Area on the basis of a single set of rules and a unified management and reporting system Ê setting up an SE can be a convenient way for companies to expand and manage their cross-border operations, instead of setting up a network of subsidiaries (bakermckenzie.doing-business-in-germany.pdf, pages 8-10) English 1 47 Prof. Dr. Prof. h.c. Schellberg  5. Branch Ê foreign company can pursue business activities in Germany either Ê through a subsidiary or (directly) Ê through an establishment (Niederlassung) (bakermckenzie.doing-business-in-germany.pdf, page 13) English 1 48 Prof. Dr. Prof. h.c. Schellberg