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A major reform of German commercial law was enacted in June 1998. The Law Reforming the Law of Merchants and Company Names and Amending other Provisions of the Commercial Code and Company Law of 22 June 1998 took effect by and large on 1 July 1998. There are detailed transition provisions or different effective dates in many areas, however.

A German language summary of the changes made is found in the August/September 1998 issue of KPMG-Mitteilungen (pp. 2 ff.).

The following is a highly selective list of amendments which may be of interest to certain taxpayers.

  • Changes are made in the concept of "merchant" to simplify the distinction between "merchants" (Kaufleute) and non-merchants. All individuals engaged in an activity which objectively constitutes a commercial business will be classified as merchants in the future. Persons engaged in commercial activity which does not rise to the level of a commercial business may qualify as merchants by registering with the Commercial Register, which will enter all applicants irrespective of the scope of their actual activities.
  • Changes are made in the law of commercial partnerships to permit such to be entered in the Commercial Register even if they do not carry on a commercial business.
  • Certain events with respect to partners in a commercial partnership which led to dissolution under the prior law will in the future merely trigger the withdrawal of the partner in question. Such events include a partner's death or insolvency and notice of termination given by a partner or his private creditors.
  • The new law of company names is based on three principles: (i) The name must be distinctive and permit the company to be differentiated from other companies. (ii) The name must not be deceptive. (iii) The name must contain a terminal abbreviation identifying its type of business association. The abbreviation "GmbH & Co." is no longer permissible. Instead, a more explicit abbreviation such as "GmbH & Co. KG" or "GmbH & Co. OHG" must be used.
  • There are certain changes, mostly simplifications, in Commercial Register law.
  • Various new reorganisation possibilities are created in connection with the commercial law reform.

By and large, the new law simplifies the existing statutes and makes them more flexible.

Disclaimer and Copyright
This article treats the subjects covered in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Specialist advice must be sought with respect to your individual circumstances. We in particular insist that the tax law and other sources on which the article is based be consulted in the original, whether or not such sources are named in the article. Please note as well that later versions of this article or other articles on related topics may have since appeared on this database or elsewhere and should also be searched for and consulted. While our articles are carefully reviewed, we can accept no responsibility in the event of any inaccuracy or omission. Please note the date of each article and that subsequent related developments are not necessarily reported on in later articles. Any claims nevertheless raised on the basis of this article are subject to German substantive law and, to the extent permissible thereunder, to the exclusive jurisdiction of the courts in Frankfurt am Main, Germany. This article is the intellectual property of KPMG Deutsche Treuhand-Gesellschaft AG (KPMG Germany). Distribution to third persons is prohibited without our express written consent in advance.