Admissibility of the company name of a German entrepreneurial company (UG haftungsbeschränkt) with the component "Holding" despite the lack of a holding structure

The initial entry of a German entrepreneurial company (UG haftungsbeschränkt) in the commercial register with the component "Holding" in the company name is permitted even if the company does not yet have an actual holding structure at the time of entry.

Background

The UG haftungsbeschränkt is a German company form based on the Limited Liability Company (GmbH), but with the difference that it does not have a statutory minimum share capital. Such a company applied for initial entry in the commercial register with the component "Holding" as part of its name. This was rejected by the registration court. In particular, the addition "Holding" - without the necessary holding structure - was regarded as misleading. According to this provision, a company name may not contain any information which is likely to mislead about business relationships which are essential for the targeted public.

The Frankfurt Higher Regional Court (OLG) with decision dated April 16, 2019 (file no. 20 W 53/18) overturned the decision for the following reasons.

No "special need for protection" of the component "Holding" was given - neither was a special legal requirement or other legal protection regulation evident, nor was it a statutory addition to the legal form.

Furthermore, the company name does not contain any information which would be obviously misleading the relevant public with regard to the business circumstances of the company. The use of the component "Holding" does neither pretend a certain type nor an expected size that is not given due to the absence of a holding structure. This would make the first registration de facto dependent on whether the company would become commercially active even before the application was filed, e.g. by acquiring at least a majority shareholding or founding a subsidiary. In particular, such legal obligations of a predecessor company do not exist in principle. Furthermore, the fact that a holding company already exists when there is only one other company dependent on the company speaks against a suitability for deception. It is therefore a structural and not a size indication of the company.

Note

The component "Holding" in the company name is permissible and registrable in Germany in the context of the initial registration of a company despite the absence of holding structures. There is no further presumption that a company fulfills the actual requirements of the name derived from the company's purpose immediately upon initial entry in the commercial register. The decision of the OLG Frankfurt provides clarity and legal certainty in this respect.

However, special attention must be paid to the fact that, in the case of the use of the component "Holding", the holding structure implied thereby must actually be created after entry in the commercial register. This is not a relevant criterion for the initial entry. However, after registration, the company must be measured against this information. The registration court is in principle free to review the facts with regard to the prohibition of misleading information at a later date. If a violation of the prohibition of misleading information is affirmed, the company could be threatened with an administrative fine or even with an office deletion procedure. Companies with the component "Holding" in their name can therefore only be strongly advised to establish the holding structure promptly after entry in the commercial register.