Case Study: Overseas Investors & Foreign Locals Set Up German Ltd (GmbH) I

Investor A:

• a medium-sized overseas Ltd. company
• business areas:
  • planning and building illumination systems for factories, public places and streets
  • Engineering for power stations, machine building, steel constructions and associated IT

Investor B:

• a medium-sized overseas Ltd. company
• business areas:
  • Trade with products of metal & plastics for the building industry; chemicals

The managing directors (and majority shareholders at the same time) of investors A and B each sent a family member to Germany who had graduated from university in their country of origin with majors in engineering. Both had residence permits for a language course and attended a language school. Having met in Germany for the first time, they decided to set up a business in Germany together.

Sonnenberg Law Firm advised them on issues concerning business strategy, corporate law, immigration and tax and drafted the articles of association as follows (excerpt):

• Shareholders: investors A and B each with 20% of shares; their family members each with 30% of shares
• Registered capital: some tens of thousands Euros
• Business area:
  • Export of machines involved in production of energy and conservation of resources
  • International trade in environmentally friendly materials, esp. chemicals and construction materials
  • Trade and consulting agency concerning overseas business relations

Both family members shall be appointed as directors for which a residence permit for self employed persons is necessary. Therefore Sonnenberg Law Firm prepared the applications by collecting and translating relevant documents, conducting a market analysis and drafting a business plan. The business plan has to show an overriding business or particular regional interest in their being in Germany. The preparation and consultation took about one month.

They moved to the city of the company’s business location in order to give the local immigration office jurisdiction.

In the same month Sonnenberg Law Firm applied for residence permits providing all the involved authorities with documents.

One month later the articles of association were notarized and the family members were appointed as directors. For notarization purposes they acted on behalf of the investors A and B, holding a proxy certified by the German embassy located in the investors’ country of origin. After notarization the directors opened the company’s bank account, and the shareholders transferred 50% of the registered capital to the account. The bank statement had to be attached to the application for company registration.

Sonnenberg Law Firm attended the immigration proceedings keeping in regular contact with the involved authorities in order to speed up the procedure and to prevent problems. Two months after the application the residence permits were granted for a one year period.

At the same time Sonnenberg Law Firm applied for development grants for foreign investors. The support program covers part of a founder’s expenses for consulting services. After company registration, the application was granted and the company received the grant.

Then the company received a tax number and started business.

In the following year the managing directors will have to apply for a residence permit extension. The authorities will check whether their activities conform to the business plan. After three years residence as self-employed people in Germany, the directors may each apply for a settlement permit.