I. Parameters of the EU legislator

The effective date of the Directive on 31 July 2019 has set a milestone for the digital formation of a corporation without the involvement of a notary. However, it only establishes the cornerstones for an online foundation. The implementation of the Directive in detail is the sole responsibility of the member states which have been set a deadline ending on 1 August 2021.
The EU legislator intends to make it possible to form a corporation in only five banking days after submitting the application for registration to the commercial register and paying in the share capital. An online foundation with contributions in kind, however, is not possible.
Furthermore, corporations governed by the law of one member state should be able to register branches in other member states. In future, it will also be possible to submit company-related documents such as shareholder resolutions, particularly amendments to the articles of association and the appointment and dismissal of managing directors, online.

II. Implementation in Germany

Member states are granted considerable flexibility when implementing the Directive into national law. There are therefore some deviations from the Directive in the intended structure in Germany.

1. Digital GmbH foundation

For example, the Directive generally allows he online formation of a joint-stock company. However, the German legislator has made use of its so-called opt-out option, so that initially only a limited liability company [Gesellschaft mit beschränkter Haftung – GmbH] can be founded online. Due to the complexity of a joint-stock company, we consider it doubtful that the Directive will be extended to it.

2. Online identity check instead of notary appointment

It is also open to member states whether start-ups should only be established via online procedures or whether the founder still have to seek the services of a notary. It is currently assumed that Germany will make use of mandatory remote involvement of a notary in order to avoid abuse of law and to ensure general legal certainty.
Specifically, this means that, in the context of a video conference, the notary carries out the identification of the parties involved by means of an online identification function or another means of identification of the highest security level in accordance with the eIDAS Regulation (Regulation on electronic identification and trust services for electronic transactions in the domestic market) and acts in an advisory capacity. Merely holding the identity card into the camera, as is known from online identification procedures, is considered too insecure. Using an NFC-enabled mobile phone, the notary can verify the authenticity of the identity card. If the notary has nevertheless doubts about the legal capacity or the identity of the parties involved, he is free to refuse the online authentication and/or to request a personal appearance. The founder’ s signature is then submitted by means of electronic signature and no longer by means of an ordinary signature.
The procedure for identifying legal entities has not been clarified yet. They can also be online founders, as the Directive does not contain any restriction on the nature of online founders. However, the identification of legal entities can turn out to be much more complicated than that of a natural person, especially since the European legislator has not opened up the possibility of reducing the member states’ existing requirements for authenticity verification. It is therefore up to the member states to provide electronic means of identification.
Information on the existence and representation regulations of German legal entities can already be accessed via the electronic commercial register. This is a challenge with regard to foreign legal entities, as there is no standardized, suitable electronic proof of their existence or representation. The foreign commercial registers do not necessarily correspond in scope and legal effect to the German commercial register. Nowadays, proof in such cases must often be provided in the original document in the form of a so-called apostille. There is no comparable electronic verification procedure yet.

III. Conclusion

With regard to the competitiveness of the EU, the possibility of founding corporations online is an indispensable step. Depending on the existing degree of digitization, however, the implementation of the Company Law Package will pose various difficulties on the member states and, above all, because of the foreseeable differences in the individual member states, there will be no proper standardization. It remains exciting to see how the German legislator will manage the implementation of this Directive in terms of its compatibility with data protection guidelines and the Money Laundering Act [Geldwäschegesetz]. It is expected that even in the digital era there will be no way to permanently avoid involving the services of a notary, even if electronic communication is made possible in future instead of personal visits to the notary’s office.