Founding Limited Companies (Ltds.) in Germany - Perspectives and Risks

5.8.1 Accounting Regulations pertaining to the accounting of the English limited businesses include commercial bookkeeping and retention duties, as well as the obligation to prepare the annual accounts (Ebert, Levedag 2003, 1339). The most important principle in balancing is the reproduction of a true and fair view of the affairs of the company at the end of each financial year (Just 2005, 61). Aside from the question whether or not the administrative seat is to be found in England or Germany, the company is required to prepare annual accounts at the end of each financial year. The annual accounts contain a balance sheet, a profit and loss account with notes, a directors’ report and the auditors’ report (Just 2005, 61). The company is free to decide which one of two balance sheet formats (single-column or double-column echelons) it prefers. The company must also choose any of the four possible formats for the profit and loss account (Triebel, Hodgson, Kellenter 1995, 278). Certain balance sheet items have to be separately explained in detail. This includes, among others, the list of market - and book values of fixed assets, as well as the total sum of income, pensions and compensations of all the directors (Triebel, Hodgson, Kellenter 1995, 280). As far as the profit and loss account is concerned, one has the option of choosing between the classification of expense by type and the classification of expense by function. There are certain facilitations for small and medium-sized limiteds. In preparing the balance sheet, it is not an absolute requirement that all formalities are included. A simplified version of the annual accounts may also be submitted (Just 2005, 62). In order to be regarded as a small or medium-sized limited company, two characteristics must to be met, according to law. A company is considered a small limited company, if • • • [...]

The “Articles of Association” constitute the second part of the articles of incorporation. According to these articles, the internal relations of the company and its shareholders and management may be regulated on a voluntary basis (Vogel 2005, 213). If the articles are not submitted to the register, the regulations, which are stated in the annex to the Companies Act 1985 as Table A, automatically replace them as the articles of the company (Werner 2005, 288). Table A models articles for public or private companies limited by shares (Ebert, Levedag 2003, 1337). The articles cover everything from the rights of the directors to the constitution and authority of the board of directors and the procedure of general meetings, to the rights and prohibitions of voting (Güthoff 1993, 20). “Form 10 – First directors and secretary and intended situation of registered office” (cp. annex 1) represents a standardized form containing information to be submitted to the register: name and address of the company, of its directors and secretary with their names, dates of birth, addresses, nationalities and professions (Just 2005, 8). “Form 12 – Declaration on application for registration“ (cp. annex 2) requires a statutory declaration stating that the company is to be established under the [...]

Finally, the ECJ ruled that it was irrelevant to the application of the freedom of establishment why someone would found a company in another Member State, or where it conducts its business (Korts 2004, 40). Moreover, the required additional registration and the adjunct on the business letters and documents of the company were more than what was necessary (Wachter 2004, 90 (a)). Additionally, the regulations of the WFBV are an impediment to the freedom of establishment, since they result in the imperative application of Dutch company law, concerning the minimum capital and liability of the managing directors, to foreign companies, such as Inspire Art Ltd (Korts 2004, 40). [...]