I. The Maurach draft

Following a recommendation of the 71st German Lawyers’ Congress in 2016, the Grand Coalition agreed in the coalition agreement of 7 February 2018 to adapt the law on partnerships, some of which dates back to the 19th century, to the needs of a modern and diverse business life. On this basis, the Federal Ministry of Justice and Consumer Protection [BMJV] has appointed a commission made up of company law experts from science and practice to prepare a draft law. This draft is intended to be the basis for a corresponding legislative procedure. On 20 April 2020, the expert commission presented the results of its discussions – the so-called Maurach draft for the modernization of the law on partnerships. The aim of the proposed new regulations and amendments to a total of 39 laws is to make the change of system legally comprehensible and to eliminate the discrepancies between the written law and the practical application and arrangements in the interest of legal certainty. In the context of this newsletter article we would like to present the main contents of the Maurach draft and give you a brief outlook with regard to the planned legislative procedure.

II. Main provisions of the Maurach draft

1. Company register and eGbR

The previous legal model is based on the partnership under civil law [GbR] as an internal company without legal capacity. The fact that a GbR which participates in legal transactions (so-called external GbR) can itself be the bearer of rights and obligations has been recognized by case law for several years. A legal regulation of the capacity of the external GbR has been missing so far. In practice, an external GbR occurs very frequently. The Maurach draft addresses this discrepancy between written law on the one hand and the application and shaping of law by practice and case law on the other. Still, the draft distinguishes between (non-legally capable) internal and (legally capable) external GbR, but reverses the legal model and expressly recognizes the legal capacity of the external GbR by law (section 705 para. 2 German Civil Code draft [BGB-E]).
The draft continues to differentiate between non-commercial partnerships and commercial partnerships with the consequence that the GbR cannot be entered in the commercial register [Handelsregister]. However, the draft provides that an external GbR can be entered in an independent public register of companies having publicity effect, oriented on the commercial register (sections 707 et seq. BGB-E). Upon registration, the company is entitled to operate as a “registered partnership under civil law” or “eGbR” (section 707a para. 3 BGB-E). The registration should not be necessary for the legal capacity of the external GbR and there is basically also no obligation to register. However, the Maurach draft provides incentives for registration. Thus, only an eGbR can register rights in other registers, such as the land register or the trademark register.
According to the Maurach draft, the information in the company register is based on public faith. Business partners of an eGbR should in principle be able to refer to the information in the company register. This should apply even if the information is in fact no longer correct, but is not deleted from the company register. However, the public faith of the company register does not cover the lack of the GbR’s commercial status (section 707a para. 2 BGB-E). As soon as the purpose of a GbR is directed towards the operation of a commercial business, the GbR transforms into a general partnership [OHG]. As was previously the case, the company must then be registered in the commercial register. In this case, the Maurach draft provides for the institute of the so-called “change of status”, which allows the transfer from one register to another.
Once a GbR has been entered in the company register, the entry cannot be reversed at will. Relevant changes must be notified to the register in order to ensure the continuity of the transparency created by the registration.

2. Disputes regarding deficiencies in decisions

Another core area of the Maurach draft is the introduction of a right to deficiency in resolutions for partnerships (sections 714a-714e BGB-E). Under current law, incorrect shareholder resolutions in partnerships are generally null and void. Actions for a declaratory judgment can be brought to enforce deficiencies in the resolution long after the resolution has been adopted. Therefore, clauses on the timely assertion of deficiencies in resolutions are often found in articles of association. The draft now codifies a uniform right to deficient resolutions, which is based on the law of stock corporations and distinguishes between contestable and void shareholder resolutions for all partnerships. Only infringements of indispensable legal provisions which can be invoked by means of an action for annulment brought against the company or in any other way shall lead to nullity. The current draft does not provide for a concrete catalog of grounds for invalidity, such as those contained in the German Stock Corporation Act, instead it is limited to a very general wording. Other violations of the law or of the articles of association will result in (only) a contestability of the defective resolution instead of invalidity. An action for rescission must be filed against the company against resolutions that are subject to appeal. A period of three months is provided for this. If an action for rescission is not filed within the stipulated period, the appealable resolution becomes final. In this way, the Maurach draft wants to contribute to legal certainty for decisions made some time ago.
Within the framework of the freedom of contract, the shareholders are free to make other arrangements (section 708 BGB-E).

3. Opening up commercial partnerships for the joint practice of members of liberal professions

According to the applicable legal system, the legal forms of commercial partnerships are generally reserved for business people [Kaufleute]. As a result, members of liberal professions [Freiberufler] have so far been generally denied these legal forms. Case law has produced numerous inconsistencies and has treated different professional disciplines inconsistently, at least in the outcome. The commission’s draft therefore proposes to allow members of liberal professions to organize themselves in the legal form of a general partnership [OHG] or limited partnership [KG] – provided that the respective professional law allows the choice of such a legal form (sections 107 para. 1 sentence 2, 162 para. 2 BGB-E). The reservation of admissibility under professional law is intended to ensure that the respective professional groups can take appropriate protective measures, for example in the form of insurance obligations or requirements for the acquisition of shares by persons outside the profession.
The Maurach draft thus opens up further options for members of liberal professions to exercise their profession. Members of liberal professions could in particular also organize themselves in a GmbH & Co. KG [limited partnership with a limited liability company as general partner], where there is the possibility of a general limitation of liability to the assets of the company. According to the draft, the German Partnership Act [PartGG] should not be repealed, so that the Partnerschaftsgesellschaft mbB [partnership company with limited liability] would remain a possible corporate form.

III. Outlook and consequences

The Maurach draft attempts to eliminate a discrepancy of the current law by legally regulating principles developed by case law. With the legal recognition of the legal capacity of an external GbR, the Maurach draft implements judicial law, which has long been recognized, into statutory law and, with the introduction of a company register, offers transparency in external relations and increases legal certainty. The aim of the Maurach draft, to create a “fundamental reform” of the partnership law in order to meet the requirements of a modern, diverse economic life, could be achieved not least through the newly gained transparency, legal certainty and the newly opened possibility of organizing as a commercial partnership formembers of liberal professions.
It is currently difficult to foresee a precise timetable for the legislative procedure. The expert commission explicitly left open the question of the entry into force of the proposed new legal regulations, particularly because it was not yet foreseeable how long the establishment of the company register would take. According to the coalition agreement, the planned legislative procedure would have to be implemented during this legislative period. The BMJV expects the comments by the end of July.
The draft confirms and extends existing ones and opens up new opportunities, but also requires (new) considerations and decisions. Partners in partnerships should therefore keep an eye on developments in order to be able to react in good time to expected changes and, in particular, to be able to adapt partnership agreements to a change in the law.