The German Act to Modernise the Law on Partnerships (Gesetz zur Modernisierung des Personengesellschaftsrechts - MoPeG) - amendments and the need for companies and partners to act

The German Act to Modernise the Law on Partnerships (MoPeG) - long overdue and in planning for over a year. It was established at the end of last week: the new regulations will enter into force on 1 January 2024. The new Act extensively adapts the legislative text to the state of the art in case law and contractual practice. A need for action nevertheless exists, especially for civil law partnerships (Gesellschaft bürgerlichen Rechts - GbR), but also for general partnerships (Offene Handelsgesellschaft - OHG) and limited partnerships (Kommanditgesellschaft - KG).

Some of the current regulations for partnerships date back to the 19th century. This is particularly the case for civil law partnerships (GbR), general partnerships (OHG) and limited partnerships (KG). Since such time, case law and legal practice have in some cases considerably distanced themselves from the established regulations. A fundamental reform was therefore overdue. With the so-called "Maurach Draft", a commission of experts presented in April 2020 a first comprehensive proposal for a reform of partnership law. On this basis, a government draft of an act to modernise partnership law (MoPeG) had been available since January 2021. After several discussions and adjustments, the MoPeG was passed by the Bundestag and Bundesrat at the end of last week.

With the new regulations, the legislator is making a variety of modifications to the previous legislative text. Many of the amendments do indeed correspond to the state of the art in case law or usual contractual practice, which deviates from the previous legal model. Nevertheless, companies need to take stock of their existing individual corporate law structures and the provisions in their partnership agreements in order to identify a possible need for action and to align their own corporate governance with the new legal requirements. This applies in particular with regard to the new possibility or obligation of GbRs to be registered and to their future obligations regarding the Transparency Register.

The envisaged new regulations first enter into force on 1 January 2024 after a transitional period. There is therefore still sufficient time to prepare for the changes.

Comprehensive reform of the civil law partnership (GbR)

The new (old) legal model

The main focus of the reform of the MoPeG concerns the civil law partnership regulated in the German Civil Code (Bürgerliches Gesetzbuch - BGB). The original concept of the GbR has existed almost unchanged since the introduction of the BGB almost 120 years ago. This no longer corresponded to the legal reality and the requirements of the economy. The original conception of the historical legislator has been obsolete at the latest since the Federal Court of Justice (Bundesgerichtshof - BGH) recognised the legal capacity of the (externally acting) GbR in 2001. Now, for the first time, the legal capacity of the external GbR is also anchored in the wording of the law.

In future, the law will provide for three different variants of GbR: (1) the unregistered GbR with legal capacity, (2) the registered GbR with legal capacity, and (3) the (internal) GbR without legal capacity. With this differentiation, the legislator wants to bring the GbR with legal capacity closer to the commercial partnerships OHG and KG and achieve comparable publicity.

The new Company Register

Up to now, a GbR, unlike an OHG or a KG, for example, was not subject to registration. Since recognition of the legal capacity of GbRs, the difficulty has therefore been how to identity a GbR and its partners with legal certainty, for example when a land-owning GbR is to be entered in the Land Register. In future, it will therefore be possible for GbRs to be entered in a new Company Register that is to be kept by the local courts. The name and registered office of the company as well as the identity and power of representation of the partners will be registered. Registration in the Company Register is not obligatory for all GbRs. However, the acquisition of real estate, shares, shares in limited liability companies (Gesellschaft mit beschränkter Haftung - GmbH), trademark rights or other rights to be entered in public registers will in future require registration of the GbR. With the GbR’s registration, it simultaneously falls under the scope of application of the German Money Laundering Act (Geldwäschegesetz - GwG), which means that it must notify its beneficial owners in particular to the Transparency Register.

Extensive structuring freedom

In contrast to the law governing corporations, where individual provisions in the articles of association are only possible to a limited extent due to the strictness of the articles of association, partnership law provides extensive structuring freedom, even after the reform.

Sections 705 et seqq. BGB, which apply directly to the GbR and indirectly to the OHG and KG, have been extensively revised and will in future form a coherent regulatory system.

The following regulatory complexes should be highlighted:

• A right to choose the registered office is being introduced, which will allow registered companies to contractually stipulate the registered office. To date, the decisive factor was the actual administrative seat. Thus, (registered) partnerships can now also be formed under German law with an administrative headquarters abroad. This has been possible for corporations for some time.
• The voting power in partners’ resolutions as well as the profit and loss participation will in future fundamentally be based on the partnership quotas in accordance with standard practice and - in deviation from the previous statutory rule - only alternatively on a "per capita" basis.
• Resolutions of the GbR partners continue to generally require unanimity and are null and void in the event of deficiencies in the resolution. However, deviating regulations, in particular a majority clause, can still be agreed in the partnership agreement.
• As a consequence of the legal recognition of GbRs with legal capacity, the liability standards for OHGs, which the courts previously applied by analogy to GbRs, are being transferred from the German Commercial Code (Handelsgesetzbuch - HGB) to the German Civil Code (BGB). In this respect, the personal liability of all partners remains mandatory for GbRs. A general limitation of liability ("GbR mbH") is not being made possible.
• The previous regulation, according to which the death or termination of a GbR partner generally leads to the dissolution of the GbR, is being replaced by the regulations that already apply to OHGs and KGs. In future, the death or termination of a partner will generally only lead to the partner's withdrawal whilst the company continues to exist. A special continuation clause in the partnership agreement is no longer required.
• GbRs will also be transformable for the first time. Unlike in the past, registered GbRs will in future be able to participate in a demerger, merger or change of legal form in accordance with the German Transformation Act (Umwandlungsgesetz - UmwG).

Changes in commercial partnerships (OHG/KG)

In the case of OHGs and KGs, the law on deficiencies in resolutions in particular is being fundamentally reformed. In future, a differentiation will be made between the contestability and nullity of a partners' resolution (based on stock corporation law and in contrast to the GbR). In this context, procedural adjustments are also being made: In future, a statutory contestation period will apply by force of law as a preclusive period for legal actions against partners' resolutions. Moreover, the opposing party in an action concerning a deficiency in a resolution is no longer all of the partners, but the company itself.

The standards for determining and distributing profits have also been revised and selective amendments made to the law on limited partnerships (KGs). According to the wording of the law, limited partners were previously only entitled to a very limited right to information, although this right had already been extended by case law. In the future, limited partners will also be able to request under the law the information they need to properly exercise their membership rights.

Finally, the liberal professions, i.e. doctors, lawyers or architects, who were previously referred to the GbR or PartG, are now free to choose not only the special legal form of the partnership company but also the legal forms of OHG or KG, insofar as this is permitted by the respective law covering their profession.

Oppenhoff has many years of experience in the holistic consulting of partnership-based companies. We would be pleased to advise you on the individual effects of the reform, whether you are a partner or a company, and to develop tailor-made solutions for you.

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