I. Transformation of a GmbH into a GbR

The German Transformation Act [Umwandlungsgesetz – UmwG] expressly allows the transformation of a GmbH into a GbR (section 191 para. 2, section 226 UmwG). Strict provisions for raising and maintaining capital or liquidation standards of the law on GmbHs or publicity regulations for corporations may be a reason for this allowance. From the creditors’ point of view, this process is ambivalent. On the one hand, capital protection pursuant the Law of GmbHs is no longer required, on the other hand, shareholders of a GbR are personally liable for the GbR’s debts. Nevertheless, in order to make use of it, they need to know the identity of the new shareholders of the GbR. If the GbR is not entered into the commercial register, it is often not easy to identify its shareholders. The UmwG itself only provides for the registration of the fact of the transformation of the corporation (section 235 UmwG). Recently, however, the legal literature has increasingly demanded that in order to protect creditors in the special case of a transformation of a GmbH into a GbR, the GbR and its shareholders must be entered in the commercial register of the GmbH. Cases have also been reported from practice in which such entries have been made, particularly in the present case of the BGH (Default Judgment as of 18 October 2016, file no.: II ZR 314/15).

II. BGH ruling on the entry in the commercial register

The decision was based on the transformation of a GmbH into a GbR, which was entered in the commercial register stating the GbR and the former GmbH shareholders as (alleged) GbR shareholders. At the time of this entry, however, the GmbH shareholders had already sold their GmbH shares to third parties. The entry of the shareholders in the commercial register was, however, changed two years later. The former shareholders have now been utilized for outstanding rental liabilities of the GmbH in the amount of approximately EUR 177,000. The legal proceedings were unsuccessful before the Regional Court and the Higher Regional Court of Bremen.
The BGH also assumes as a starting point that the accused former shareholders are not liable because they would have become personally liable partners of the GbR. Shareholders of a company created by transformation of legal form become those who, at the time of entry (not at the time of the resolution on transformation!), are shareholders of the legal entity changing its legal form. This does not apply to the defendants. Moreover, it is in principle legally harmless to sell shares in the company even after a resolution on the transformation of legal form has been passed.
For the BGH it did not make any difference at first that the defendants had been entered in the commercial register of the converted GmbH as partners of the GbR, even if by mistake. Although the German Commercial Code [Handelsgesetzbuch – HGB] provides that good-faith third parties may invoke incorrect information (section 15 para. 3 HGB: so-called positive publicity). However, this applies expressly only to facts that have to be entered – and the BGH now refuses to consider the name of the new company and its shareholders as facts requiring entry in addition to the entry of the change of legal form as such. In particular, the BGH was unable to identify any protection loophole regarding creditors’ rights. It is not a particular feature of a change of legal form that a creditor has no knowledge of the identity of the partners of a GbR. On the contrary, when a limited liability company is transformed, there is even the advantage of being able to obtain this knowledge by looking at the most recent list of shareholders. After all, creditors’ confidence in an incorrect entry in the register is already protected by general principles of apparent legality.

III. The liability of (nevertheless) incorrectly entered shareholders

The last-mentioned argument sets the decisive course for the BGH to consider the liability of the accused former shareholders in deviation from the lower courts. It applies general principles of liability in the event that a legal situation arises – in particular: “Persons may be liable as ostensible shareholders if they have set the ostensible existence of the GbR and its affiliation to this company in an attributable manner or if they have not acted in accordance with their obligations against the ostensible existence set and the third party has relied on such ostensible shareholdership an existence of the GbR in their business conduct.”
The BGH considered these conditions to have been met. The defendants had made the apparent legality attributable to their entry. As a consequence, the claimant could have been induced to bring an action against the defendant. In fact, the shareholders of the new GbR are personally liable of the GmbH that has changed its legal form. As a conclusion, the BGH affirms the defendant’s obligation to reimburse the costs of legal proceedings until the claimant had knowledge of it or could not negligently refuse knowledge that the defendant had in fact not become a shareholder of the GbR.
It should be noted that the BGH did not decide on the liability of the former GmbH shareholders in respect of the rental liabilities. These were no longer the subject of the proceedings. However, it can be assumed how this would have been decided. If the BGH requires a disposition for liability according to the principles of the ostensible existence of a legal situation, which is made with knowledge and trust in the correctness of such ostensible existing legal situation which is based on the legal principle, then a liability of the sham shareholders for liabilities arising before registration must be excluded. The legal appearance of the entry cannot be the cause of such liabilities.
Therefore, at the same time the argumentation of the Higher Regional Court of Saarbrücken (dated 22 December 2005, file no.: 8 U 91/05) in another case may be outdated. The court had stated that the liability of a fictitious shareholder for liabilities established prior to his alleged occurrence must always be ruled out because he had no pecuniary advantages due to a lack of effective occurrence. It is indeed correct that the BGH justifies the liability of entering GbR shareholders for old liabilities with their advantages from the entry. Fictitious shareholders, however, have not become effective shareholders and therefore have no rights of participation, so that if one thinks through the remarks of the Higher Regional Court of Saarbrücken to the end, they would be liable neither for old nor for new obligations. This is not true, as the present decision shows: Fictitious shareholders are also liable for specific dispositions initiated by an apparent legality; in the case of old liabilities, however, there will be no reason for this.

IV. Consequences for pracitcal situations

From the point of view of a GmbH that plans to transform its legal form, it must now be noted that only the transformation itself must be entered in the commercial register of the GmbH. In order to minimize liability risks, the name of the GbR and its shareholders should not be entered.
From the perspective of a GmbH’s creditors it must be borne in mind that in order to determine the personally liable shareholders of the GbR created by the transformation of legal form, the latest list of shareholders of the GmbH that changes its legal form must be inspected. A creditor may, however, rely on a register entry of the shareholders of a GbR, contrary to the above, up to the limit of gross negligence.