Unternehmensgegenstand: Everything you need to know about company objectives in Germany

Contents

• What is a Unternehmensgegenstand?
• Unternehmensgegenstand  vs. Gesellschaftszweck
• Who needs a Unternehmensgegenstand?
• What non-profits need to know
• Why is it so important?
• How to formulate one correctly
• Tips for a perfect Unternehmensgegenstand
• Erweiternde Zusätze (extending additions)
• Examples
• Summary

What is a Unternehmensgegenstand (company objective)?

The Unternehmensgegenstand (company objective or object of the company) describes the area and type of activity of a company and can be both commercial and ideational.

The company objective is mandatory content in the articles of association of a GmbH, UG and AG and must be entered in the Handelsregister (commercial register).

Its legal basis for the GmbH and UG is outlined in the German Limited Liability Companies Act (§ 3 para. 1 No. 2 GmbHG), and in the German Stock Corporation Act (§ 23 para. 3 no. 2 AktG) for AGs.

Unternehmensgegenstand vs Gesellschaftszweck
Company objective vs business purpose

Another term that often appears in relation to the Unternehmensgegenstand is the Gesellschaftszweck.

In contrast to the Unternehmensgegenstand, the Gesellschaftszweck normally only concerns the non-profit legal forms (gGmbH, gUG). It describes the objective of the enterprise. This must always be charitable, altruistic, non-profit or ecclesiastical in non-profit organisations.

In the case of regular GmbHs or UGs, no distinction is made between the company objective and the company purpose. This is because the usual company objective (Unternehmensgegenstand) is to make a profit. The formulation of a company objective is therefore sufficient. If you still want to include a separate company purpose, all legally admissible formulations can be used.

Detailed examples of the company objective and company purpose can be found further down the page.

Is the Unternehmensgegenstand only for the GmbH, UG or AG?

The company objective is a legally binding part of the company purpose for all companies entered in the commercial register – this applies not only to corporations such as AGs, GmbHs and UGs, and their non-profit counterparts gGmbH and gUG.

Sole traders and partnerships with an entry in the commercial register (Handelsregister), such as KGs or oHGs, also need to formulate a company objective. Even for the GbR, which is not entered in the commercial register, it’s nevertheless advisable to include a company objective in the partnership contract.

What non-profit organisations need to know

For non-profit organisations, it’s important to distinguish between the Unternehmensgegenstand (company objective) and the Gesellschaftszweck (business purpose):

While the business purpose describes the meaning of the association and their activities, the defines the means used to achieve the objectives. In principle, the Unternehmensgegenstand, for example, could be “trading with paper clips” is how the shareholders pursue the company purpose e.g. “refurbishment of a children’s hospital”.

The following applies to gGmbHs and gUGs:

• “Gesellschaftszweck” (company purpose) = ideational orientation or basis for tax exemptions
• “Unternehmensgegenstand” (company objective) = economic activities to realise the company purpose

Subtleties of the company purpose

In the case of gGmbHs and gUGs, special attention should always be paid to the formulation of the company purpose because its status as a legitimate charitable enterprise depends on it.

Why is the way it’s formulated so important? According to the German Fiscal Code (AO), charitable purposes are binding tasks in order to obtain the status of charity and the resulting tax benefits. §§ 52ff AO stipulates that non-profit, charitable or ecclesiastical purposes are possible as social purposes. However, the concept of non-profit status has been established as a generic term for all tax-beneficial purposes. In order to obtain the benefit, you must submit an application to your tax authority, which will assess whether your company meets the requirements for non-profit status.

In other words, if the company purpose is not legally compliant, contradictory or vague, the tax office can and will reject the application for recognition of non-profit status.

Without a non-profit status, tax exemptions are not possible and your company will be taxed regularly. In this case, the articles of association of the company must be amended, certified by the notary and replaced in the commercial register entry. This results in additional costs and possible damage to your image, as your association can then no longer present itself as a non-profit organisation.

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Special cases: Associations and asset management

The company objective (Unternehmensgegenstand) doesn’t apply in the case of non-profit associations. Only the purpose of the association counts for this. The same information must be recognisable in the purpose of the association, as it would with a company purpose.

Asset management companies are also somewhat different. In order for a trade tax exemption to be claimed, the aspect of asset management must be recognisable in the company objective and, ideally, in the company name. Read more about this in our guide to asset-managing GmbHs.

Why is the Unternehmensgegenstand so important?

It’s not just so business partners, investors or public relations can clearly define which activities you pursue with your company. The Unternehmensgegenstand is of central importance for other purposes: A well-written company objective can define the powers of management, prevent influence and decision-making power from blocking minorities, and avoid violations of the non-competition clause.

Definition of the powers of management

The Unternehmensgegenstand contains the focus of the company’s business activities. According to the articles of association, the CEO is obliged to act only within the parameters of the company objective and in the interest of its execution. As soon as he or she exceeds these powers, the actions are effective, but the management may be liable and have to pay damages. As a CEO, you are liable with your private assets for loss transactions that were carried out outside the company objective (Unternehmensgegenstand).

An Unternehmensgegenstand can, therefore, bind a CEO to the will of the shareholders by defining the upper and lower limits of the CEO’s powers. Thus, a well-defined company objective protects against liability claims and creates a framework for controlling management.

Protecting against influence by blocking minorities

Furthermore, the Unternehmensgegenstand can prevent minority shareholders, so-called blocking minorities, from taking decisions contrary to a majority resolution: A well-developed company objective prevents blocking minority decisions by specifying where and to what extent the company may move outside its objective.

Avoid breaches of non-competition clauses

The statutory non-competition clause covers all business activities in the trading sector of the company. This means that the company purpose defines when the non-competition clause has been infringed. Any competing activities of the shareholders or the CEO within the defined company objective (Unternehmensgegenstand) are prohibited. Anything beyond that cannot be regarded as a competitive activity.

Similarly, an excessively broad company objective (Unternehmensgegenstand) may lead to shareholders and/or directors who perform actual business operations being erroneously confronted with a non-competition clause.

Getting the wording right

Many founders are faced with the same question: How do I formulate my Unternehmensgegenstand (company objective) correctly? This question is particularly crucial when the company is founded: Every correction, change or extension, therefore, costs time and money.

The Unternehmensgegenstand must be individual and precise so that the focus of the company’s business activities can be clearly identified. Interested business partners must be able to immediately recognise the line of business and type from the company objective (Unternehmensgegenstand).

As a rule of thumb: You should formulate the company objective to the necessary extent and as narrowly as possible. A narrow wording is particularly recommended if the shareholders wish to restrict the responsibilities of the CEO.

Frequent errors made in formulating the company objective

There are no precise legal requirements for the formulation of an Unternehmensgegenstand, but various court rulings provide a rough guideline. The following formulations should be avoided at all costs:

• General formulations
  • “Trade or import/export of wares/goods/products” without a definition of product areas
  • “Consulting” without a definition of the main consulting areas
  • “Services” without indication of service activities
  • Individual words which do not constitute an activity (e.g. electricity, IT, agency)
• Empty formulae
  • “Operation of a merchant’s shop.”
  • “Commercial transactions of all kinds”
• Unlimited extensions that put the specialised business area into perspective afterwards
  • “… and all other businesses”
  • “… and related businesses”
  • “… including the acquisition of shareholdings and the establishment of branches”

Exceptions for general formulations

As a rule, rough classifications are allowed.

• “Operation of gambling halls”
• “Trade in knitwear”
• “Implementation of sanitation activities and all related works”

Tips for the perfect Unternehmensgegenstand

Thanks to our many years of experience, we have additional important tips that can make the rejection of your company objective (Unternehmensgegenstand) by the Chamber of Industry and Commerce (IHK) or the district judge much less likely:

• Make a clear reference to the company name, even if it’s a fantasy/made-up name.
• Describe the activity of the company, not its company purpose.
• Avoid time specifications such as “later also the following activities”, because the company objective (Unternehmensgegenstand) should always be valid or it must be changed later.
• Do not mention the company name, but describe the company. If you intend to change your company name in the future, you do not need to change the company objective (Unternehmensgegenstand).
• Avoid personal pronouns.
• Do not use foreign terms or technical jargon, so that there can be no misunderstandings.

If you take these tips into account, you’ll be on the safe side.

When to use ‘extending additions’

“Extending additions” or “expanding additions” (Erweiternde Zusätze) are intended to help the mobility of a company so that an amendment to the articles of association won’t be necessary with every expansion of the activity. Otherwise, the articles of association will have to be amended if the activities are extended to adjacent areas or if an auxiliary business is started.

Erweiternde Zusätze are only permissible as long as a specialisation or a reference to the main object is recognisable in the extending addition. In the case of extensions like “… and all other businesses”, but, neither specialisation nor a reference to the main business is made – such phrases are inadmissible in the company objective.

If the actual activity differs too much from the activity stated in the company objective, we recommend that the articles of association be amended by a notary public.

If the notary is presented with an excessively broad version of the company objective or if your wording contains empty formulae, this can influence whether your business objective can be registered. In all probability, the proposed company objective will not be entered in the  Handelsregister (commercial register) or will not even be submitted by your notary for registration.

Examples

There is no model wording for each specific sector, but there is a basic framework for the wording in the articles of association of a capital company:

Company objective

(1) The company objective is […].
(2) The company shall be entitled to establish branches in Germany and abroad and to establish subsidiaries and acquire interests in similar enterprises.
(3) The company is entitled to all actions which appear appropriate to promote the company purpose directly or indirectly.

As the company objective must be submitted in German to the commercial register, we’ve included a translated version:

Gegenstand des Unternehmens

(1) Gegenstand des Unternehmens ist […].
(2) Die Gesellschaft ist berechtigt, im In- und Ausland Zweigniederlassungen zu errichten und Tochtergesellschaften zu gründen und sich an gleichartigen oder ähnlichen Unternehmen zu beteiligen.
(3) Die Gesellschaft ist zu allen Handlungen berechtigt, die geeignet erscheinen, den Gesellschaftszweck unmittelbar oder mittelbar zu fördern.

Sample sentences

In the following, you’ll find some examples of objects of the company. Please note that these phrases should not be used as are. Instead, you should carefully consider whether you need an extension or specialisation to best describe your business.

• „Herstellung von Geschirr“
  “Manufacture of tableware”
• „Vertrieb von Backwaren und Speisen“
  “Distribution of baked goods and food”
• „Altenpflege, häusliche Krankenpflege“
  “Geriatric care, home nursing care”
  
• „Einzelhandel mit Bekleidung“
  “Retail sale of clothing”
  
• „Handel mit Beleuchtungszubehör und Ersatzteilen“
  “Trade in lighting accessories and spare parts.”
  
• „Handel mit Kraftfahrzeugen sowie Schulung zum Verkauf solcher Artikel“
  “Trade in and training for the sale of motor vehicles.”
  
• „Erstellen und Betreiben von Internetpräsenzen, Affiliate Marketing und Servicedienstleistungen“
  “Creating and operating internet sites, affiliate marketing and services.”
• „Tätigkeiten im Bereich der Unterhaltungsgastronomie, insbesondere der Betrieb von Diskotheken“
  “Activities in the field of entertainment gastronomy, in particular, the operation of discotheques.”
  
• „Montage im Bereich der Sanitäranlagen, sowie damit verbundene Dienstleistungen“
  “Installation in the field of sanitary facilities and related services.”
  
• „Betrieb einer Werbeagentur sowie Erbringung von Beratungs- und Servicedienstleistungen, insbesondere SEO- und SEM-bezogenen Dienstleistungen einschließlich Gestaltung und Durchführung von Marketing-Maßnahmen aller Art“
  

Examples of company objectives for GmbHs

When designing the company objective of your GmbH, you can orient yourself on the examples above. These suggestions are universal, meaning not only suitable for certain legal forms, and can also be used for your GmbH. A formulated company objective, unless the structure clarified above is to be used, would look something like this:

Gegenstand der ABC Software Solutions GmbH ist die Entwicklung und der Vertrieb von Software in den Bereichen Finanzdienstleistung, Vermögensverwaltung sowie branchenverwandten Anwendungen. Die ABC Software Solutions GmbH ist berechtigt, gleichartige oder ähnliche Unternehmen zu errichten, zu erwerben oder sich an solchen Unternehmen zu beteiligen. Die ABC Software Solutions GmbH ist weiterhin berechtigt, Zweigniederlassungen zu gründen.

(The purpose of ABC Software Solutions GmbH is the development and sale of software in the areas of financial services, asset management and industry-related applications. ABC Software Solutions GmbH is entitled to establish, acquire or participate in similar companies. ABC Software Solutions GmbH is also entitled to establish branch offices.)

Examples of gGmbH or gUG company objectives

For the gGmbH, it’s important not only to formulate the company objective but also its company purpose. Since the company purpose is to achieve the tax advantage of the non-profit company, it must be specified in such detail that the scope of the future activity can easily be derived from it. There’s no fixed sample formulation for the statutes here, but you can still orientate yourself on the following:

(1) Die Gesellschaft verfolgt ausschließlich und unmittelbar gemeinnützige Zwecke im Sinne des Abschnitts „Steuerbegünstigte Zwecke“ der Abgabenordnung (§§ 51 ff. AO).
(1) The association exclusively pursues non-profit and charitable purposes in accordance with the section on “tax-privileged purposes” in the German Tax Code (§§ 51 ff. AO).
(2) Zweck der Gesellschaft ist die Förderung von […].
(2) The purpose of the association is to promote […].
(3) Die Gesellschaft muss nicht sämtliche Zwecke mit derselben Intensität oder zur selben Zeit verfolgen.(3) The association need not pursue all purposes with the same intensity or at the same time.

Final thoughts on the Unternehmensgegenstand

The Unternehmensgegenstand (company objective) is not only the activity of the company but also fulfils the following functions:

• The CEO(s) shall be bound by the will of the shareholders
• Information for all interested business partners about the field of activity of the company
• Protection against the decision-making power of minority shareholders/blocking minorities
• Determination of the scope of the shareholders’ fiduciary duty
• Determination of the scope of the non-competition clause for shareholders and CEO(s)

Note: Writing a viable company objective is just one step out of many in the company formation process in Germany.