Organs of a Limited Liability Company

A Limited Liability Company (GmbH) is a legal entity. As such, it has legal capacity, i.e. it is itself the bearer of rights and obligations. In order to be able to act, it requires natural persons to act on its behalf. Therefore, a Limited Liability Company needs organs that form the will of the company and act on its behalf. Without these organs, a Limited Liability Company would be incapable of acting.

The organs of a Limited Liability Company are:

In addition, an auditor must be appointed under certain conditions.

General Meeting

The General Meeting is the highest decision-making body of a Limited Liability Company and consists of all shareholders. It must take place at least once a year as an ordinary General Meeting. It is generally convened by the company management.

Certain decisions must be made exclusively by the General Meeting. These include, among others, auditing and approving the annual financial statements, distributing the balance sheet profit if such distribution is specified in the Articles of association to be subject to a special annual resolution, amending the Articles of association, changing the share capital, the appointing and dismissing of the managing director and discharging him/her.

In contrast to the General Meeting of a Stock Corporation, the General Meeting of a Limited Liabilities Company has a comprehensive right to issue instructions to the managing director.

Managing Director

The managing director represents the Limited Liability Company externally and conducts the company's business internally. Only physical persons who are fully capable of acting can be appointed as managing directors; they can, but do not have to be shareholders. The appointment is made by the General Meeting; if it is a shareholder, the appointment may also be made by the Articles of association.

The managing director's power of representation in external relations cannot be limited, neither by the articles of association nor by a shareholders' resolution.

A Limited Liability Company may have one or more managing directors. It is possible to have an individual power of representation or a joint power of representation by which at least two or all managing directors jointly represent the company externally. It can therefore be regulated that the Limited Liability Company shall only be effectively represented to the outside if at least two managing directors act jointly.

A distinction must be made between the position of the managing director under company law as an officer of the Limited Liability Company and the employment relationship of the managing director with the Limited Liability Company. This becomes particularly clear if, for example, the managing director is dismissed by a shareholders' resolution, but his/her employment relationship continues.

Unlike a member of the Executive Board of a Stock Corporation, the managing director of a Limited Liability Company may be given instructions by the General Meeting or by the Supervisory Board if such a Board exists and is authorised to do so.

Supervisory Board

The Supervisory Board exercises particular control functions over the company management. The managing director is obliged to provide the Supervisory Board with regular reports on the development of the business.

In principle, a Supervisory Board does not have to be established in a Limited Liability Company. However, the shareholders may voluntarily appoint a Supervisory Board. If certain conditions are met (e.g. share capital amounting to 70.000 euros or more and the number of shareholders exceeding 50, or there are more than 300 employees), a Supervisory Board is mandatory.

Unlike the General Meeting of a Limited Liabilities Company, which has comprehensive rights to issue instructions to the management at any time, the Supervisory Board of a Limited Liability Company is only entitled to issue instructions to the management if it is authorised to do so by the Articles of association or a shareholders' resolution.

Advisory board

An Advisory Board may be appointed by the shareholders as an additional advisory body. The Advisory Board may also be empowered by the General Meeting to exercise certain competencies of the General Meeting.

Statutory Auditor

The obligation to audit the financial statements of a Limited Liability Company is based on the size categories of Section 221 Companies Code. Accordingly, small Limited Liability Companies that are not required by law to have a Supervisory Board are not obliged to have their financial statements audited. The auditor is elected by the shareholders; if a Supervisory Board exists, it must submit a proposal for such selection.

Legal basis

Translated by the Federal Ministry of Justice
Last update: 1 January 2022

Responsible for the content: Federal Ministry of Justice