Specification of a limited liability company’s object in its articles of association

The object of a limited liability company must be specified in such a way that its activities and field of business can be precisely and sufficiently identified. This was confirmed by the Berlin Court of Appeal’s (Kammergericht “KG”) decision of March 19, 2025 (Ref. 22 W 2/25).

Facts

The shareholders of a limited liability company (GmbH) decided to change the company's object as follows: “The object of the company is commercial brokerage and trade including on the Internet in various types of goods that do not require a license.”

Thereafter, the notary applied to the competent registry court to have the change of the company’s object entered in the register. The registry court, however, informed the notary that the company’s object was too vague and requested the company to provide more specific details. As the company did not respond to this request, the registry court rejected the application for registration. The company appealed against this decision to the Higher Regional Court.

Reasons for the decision

The Berlin Court of Appeal dismissed the appeal. The company object proposed in the application was too vague. The company object specified in the articles of association must be described in such a concrete and individual manner that the company's activities are sufficiently recognizable to the implicated parties. A general wording is not sufficient.

In this case, the proposed company object was too vague, as it did not specify the type of goods to be traded or brokered. Ultimately, this could refer to all goods (not subject to approval), rendering the company's business activities not even remotely recognizable to the relevant parties. The Court of Appeal also noted that the scope of the company's business could have been narrowed down quite easily by a more detailed description of the type of goods in question. A phrase such as “trade in various types of goods, in particular XY products” would have been sufficient.

Practical information

The decision is in line with case law on the question of the specificity of company objects. General wordings that do not allow the relevant public to identify the area in which the respective company operates do not meet the principle of specificity. Third parties must at all times be able to ascertain the area in which the company concerned conducts its business.

The decision itself points out ways to prevent refusal of registration. The principle of specificity is satisfied by specifying the type of goods or services. This can be done, for example, by adding the word “in particular.” On the one hand, such an addition enables the company to comply with the requirements of company law (in most cases) without any problems. On the other hand, the company still retains a certain degree of flexibility, as its activities are not conclusively defined. If the focus of the activity is specified in this way, other activities related to the stated object of the company can be covered by further additions such as “and related businesses.” This allows the company's actual field of activity to be expanded to a certain extent at a later date without the need for a new resolution to amend the articles of association, which must be certified by a notary.

If transactions fall outside the scope of the company's object, they remain valid in external relations. However, the company's object also has the internal function of limiting the permitted field of activity of the management.  Management may only undertake activities outside the scope of the company's object if the shareholders agree on a corresponding resolution by the required majority. If the management acts outside the scope of the company's object, it may be liable for damages. This is another reason why it is important to ensure that the company's object is precisely defined in the articles of association.