An unborn child cannot be registered as shareholder in the Commercial Register

The Higher Regional Court of Celle (judgement of December 19, 2017, II ZR 255/16) recently decided that an unborn child (a so-called "Nasciturus") cannot be registered as a shareholder in the Commercial Register before it is born.

In the case decided by the Higher Regional Court, the limited partner of a limited partnership had given her still unborn child a limited partner's share in the company. When applying for registration of the unborn child as shareholder in the Commercial Register, the competent court refused the registration before the birth. The court argued that the registration of a change of shareholders was only possible once the change had been completed. Therefore, it was required that the child had acquired legal capacity (the ability to be owner of rights and obligations). Under German law (§ 1 German Civil Code), however, legal capacity begins only upon completion of the birth.

Functions of the Commercial Register

In addition, the Higher Regional Court was of the opinion that a registration before birth was contrary to the functions of the Commercial Register; these are: (1) the function of publication (information to the public), (2) the function of evidence (in particular facilitation of judicial evidence), (3) the function of publicity (reliability and protection of confidence) and (4) the control function (verification of the facts to be entered by the registry judge). According to the court, the protection provided by the Commercial Register could no longer be ensured if it was possible to register also uncertain facts.

Requirements for transferring company shares to a newborn child or a minor

But also with regard to a transfer of a company’s share to a newborn child or a minor (i.e. until the age of 18) it must be noted that such transfer regularly requires the consent of the guardianship court (Vormundschaftsgericht, § 1822 German Civil Code). This consent serves for the protection of the child and is typically required for transactions that may have major disadvantages or obligations. Only if a legal transaction is "only legally advantageous", i.e. if it cannot entail any disadvantages for the child, consent is dispensable.

However, since a transfer of company shares often involves major obligations (e.g. the obligation to make additional contributions), the consent of the guardianship court is usually required. Therefore, whoever wishes to transfer a share of a company to a minor should check the legal requirement for this in detail in advance.