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Press release Responsible ownership does not facilitate the search for successors

Planned legal form "GmbH-gebV" is of no interest to innovative start-ups

"Introducing the legal form "GmbH-gebV" in Germany, comparable with the English LLC but with ‘tied assets‘, does not lead to longer-lasting companies – as the legal form initiators claimed. On the contrary: The legal form would complicate finding a successor since prospective buyers would have to forego profit sharing and investment valorisation due to the long-term profit retaining in the company," reports Dr Rosemarie Kay, deputy director at IfM Bonn. Her team examined the legal form "GmbH-gebV" alongside the current assessment by the federal government from an economic point of view. According to this legal form, searching for a successor is more challenging because potentially interested parties must accept the restriction of their entrepreneurial freedom of action. Only those who share the values of this form, like the fact that assets cannot be passed, would be potential buyers. In the case of legal entities, this would primarily be companies that also operate in this legal form.

"The asset lock – i.e. the long-term fixing of profits and assets – can also lead to riskier or less necessary investments. This aspect increases the risk of bad investments," Dr Rosemarie Kay reports. From an economic perspective, she sees the prohibition of profit distribution or limited participation opportunities in other companies as problematic, as this contradicts the principle of optimal capital allocation.

The legal form would only be suitable for a few companies

This legal form is also unsuitable for founders: Due to the several formal requirements, founding a "GmbH" is generally more time-consuming and financially expensive than establishing a sole proprietorship, for example. Accordingly, the latter is the founders' most frequently chosen legal form. IfM researchers are also critical of the GmbH-gebV proponents' argument that the new legal structure benefits start-ups. The choice of the legal form GmbH-gebV could lead to an innovative start-up finding it more difficult to obtain venture capital due to the asset lock. In the worst case, it cannot establish itself on the market due to a lack of money.
According to the study authors, the question arises whether introducing the new legal form GmbH-gebV is worthwhile from the legislator's point of view. Ultimately, intelligent, entrepreneurial action is more decisive for companies' durability than the company's legal form.