Project “Schneller Gründen” regarding faster company formations – What do companies need to consider?

Making it easier and faster to set up a company anywhere in Germany and, in the longer term, enabling the entire process to be completed digitally within 24 hours is the objective of the project “Schneller Gründen”, which forms part of the German Federal and States’ governments’ modernization agenda.

The Federal government, the German States and local authorities are working together to modernize the company formation process in Germany. The aim is to reduce bureaucratic barriers. The following measures are planned:

• One-stop shop. A nationwide one-stop shop - a central online platform - is intended to enable founders to complete all the bureaucratic steps required to set up a company in one place.
• Faster issuance of tax numbers. In standard cases, tax numbers are to be issued automatically within a matter of minutes.
• Digital business registration. Business registrations are to be made fully digital without any media discontinuity.
• Modernization of registers. A once-only system (NOOTS) is intended to enable authorities to exchange data automatically. This should also eliminate the need for founders to enter the same information multiple times.
• Modernization of the Commercial Register. An improved registration procedure is intended to accelerate entries in the Commercial Register and increase transparency.

Key elements of the process are currently being tested in a pilot phase at various locations under real-life conditions. In particular, the business registration and tax registration processes are being tested as a combined application within a single digital procedure.

What Do Companies Need to Consider?

The project’s aim of enabling companies to be formed quickly and digitally, without significant administrative effort, is particularly attractive to start-up founders and foreign investors. It remains to be seen, however, to what extent bureaucracy will actually be reduced. It is also doubtful whether setting up a company will ultimately be possible within 24 hours.

For example in the case of corporations, the biggest time-consuming factor is often that the company first needs a bank account in order to pay in its share capital before it can be registered with the commercial register. As part of the account-opening process, the relevant bank’s anti-money-laundering checks generally require the submission of extensive documentation. It seems to be that amendments in this connection will not be covered by the project “Schneller Gründen”.

However, speed is not everything in connection with company formations. Key legal and tax issues still remain important, including choosing the right legal form, structuring any shareholders’ agreements, the (correct) contribution of existing intellectual property and know how to the company, and complying with other tax and, where applicable, regulatory requirements. Obtaining legal advice at an early stage helps to ensure that the planned digital speed does not create legal risks.