081. Investigation Of The Legal Existence Of A Foreign Corporation By The Commercial Register Court

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On a set of facts reminiscent of the case decided two years previous by the Hamm Regional Court of Appeal (reported on in article no. 40), the Berlin Chamber Court recently held that the Commercial Register is entitled and required to investigate the legal existence of a foreign corporation which, as shareholder of a German GmbH, requests entry of amendments relating to the GmbH in the Commercial Register (here appointment of new general managers and amendments to the articles of incorporation; DB 1997, 1124 - 11 Feb. 1997; cf. OLG Hamm DB 1995, 137 - 18 Aug. 1994).

As explained at length in the above cited article no. 40, German choice of law rules determine the law applicable to a company with respect to its "seat of management" (Verwaltungssitz). This term is synonymous with, or very close in meaning to, the company's principal place of management, in other words, the place from which the company is actually managed. If the actual place of management of a foreign corporation is in Germany, this would mean that recognition of its legal existence would depend on its compliance with German law regarding its formation, etc. Since this is seldom, if ever, the case, and is conceivable only for dual resident entities, the legal existence of such foreign corporations will not be recognised in Germany. For further details, see article no. 40.

The Berlin Chamber Court did say that the Commercial Register was generally to assume the correctness of the facts presented to it unless "justifiable doubt" existed as to the correctness of such facts. "Justifiable doubt" was created, however, in the opinion of the Berlin Chamber Court merely by the fact that the corporation in question was formed in a country listed in a bulletin issued by the Federal Finance Office and coordinated directives issued by the tax authorities of the German states (BB 1994, 927) identifying jurisdictions which are commonly used for formation of "mailbox" corporations. The list includes Andorra, England, Ireland, Liechtenstein, Luxembourg, the Netherlands, Switzerland, certain states in the U.S., and the Netherlands Antilles, among others.

It will be recalled that the Hamm Regional Court of Appeal took a precisely opposite view of the investigative prerogatives and duties of the Land Records Office (Grundbuchamt) with regard to registering foreign corporations as the owners of German real estate.

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