Registered Association

Executive Summary

German Name: Verein

General Information: not intended to serve as corporate structure for for-profit associations

Incorporation: adopting of articles of association; registration in the Register of Associations

Minimum Capital: none

Board Structure: member's assembly appoints committee to represent the association in and out of court

General Information

In German law, the “Verein“ is the basic form of all corporations. It is not specifically designed to serve as a corporate structure for for-profit associations. There rather are other corporate structures which suffice to these purposes: the “GmbH”, the “AG” and the “Genossenschaft”.

A “Verein” is capable of holding rights only when registered in the “Vereinsregister”. It can then be subject of rights and duties, act in its own name, sue and be sued in its own name, and hold assets including real estate.

In contrast, a non-registered “Verein“ has no legal personality. According to sec. 54 of the German Civil Code (“Bürgerliches Gesetzbuch” [BGB]), the laws governing the civil law partnership (“Gesellschaft“) apply. In the Federal Republic of Germany, a countless number of non-registered “Vereine” exist. For historical reasons, German political parties are also organized as non-registered “Vereine”.

Beyond these non-profit associations, the law also recognizes a profit-orientated type of “Verein”. However, thelegal personality of this will depend on a governmental award which is accorded only by individual application. As a rule, the award it is not accorded to for-profit associations.

Sec. 23 of the German Civil Code deals with foreign associations. Their legal personality also depends on an award by the state.

Incorporation

The foundation of a „Verein“ requires at least seven founder members.It is carried out in three steps:

a) Adopting the Articles of Association („Satzung“)

First of all, the association’s articles have to be established. They have to include the association’s non‑profit purpose, name, registered office, and the declaration that the “Verein” shall be registered.

b) Appointment of the Committee by resolution of the members’ assembly.

c) Application for Registration of the “Verein“ in the Register of Associations (“Vereinsregister”), filed by the committee.

A “Verein“ without a legal personality (“nicht-rechtsfähiger Verein”) will attain legal capacity upon its registration in the register of associations. The competent “Vereinsregister” is that kept at the “Amtsgericht” in the court circuit of the registered office of the “Verein”.

The application for registration is carried out by the committee. Along with the application for registration, the articles of association (original text and supplementary copy) as well as copies of the documents recording the appointment of the committee must be submitted. The application must state the name and the registered office of the “Verein”, as well as the date of the adoption of the articles of association, the names of the members of the committee and their right to represent the association. The application for registration must be filed in the form of a public document (cf. sec. 77 of the German Civil Code). This will usually be produced by a Notary Public (cf. sec. 129 of the German Civil Code).

Upon registratiobn of a “Verein”, the abbreviation “e.V.” (i.e. “eingetragener Verein”, meaning registered association) is added to its name.

Capitalisation and Financing

A nominal or minimum capital is not required.

Board Structure

The “Verein“ is represented by its committee as legal representative in and out the court. The extent of this right of representation may be limited by the articles of association.

Furthermore, the committee as legal representative is also responsible for the management of the “Verein”'s business. The members of the committee are recorded in the register.

The committee is appointed by the members’ assembly; the appointment being revocable at any time. The rules governing mandates (sec. 664–670 of the German Civil Code) are applied, mutatis mutandis, to the committee.

The members’ assembly is the supreme body of the “Verein”. It is responsible for all matters that do not fall within the competence of other bodies of the “Verein”, as well as for amendments of the articles of association. The latter require a three-quarter majority, whilst other decisions are adopted by simple majority. It is possible to change these requirements by amendment of the articles of association.

The members’ assembly will convene at the times specified in the articles of association; furthermore, it comes together to special sessions should the interests of the “Verein” require so.

Moreover, special agents can be appointed to represent the “Verein” in the field of distinct particular tasks.

Decisions within the bodies of the “Verein” (excluding amendments to the articles of association) are adopted by simple majority.

Liability:The “Verein“ is liable for its bodies’ actions.

Annual Costs

Annual costs will arise in the form of legal, information, and control costs chiefly in the field of financial accounting, accounting control and publicity. Further costs may arise from legal and tax advice.

The amount of these costs varies in amount and depends on the size and the structure of the “Verein”.

Corporate Taxation and Financial Reporting

The taxation of the “Verein“ follows the rules governing the taxation of corporations (“Körperschaften”). Therefore, the registered “Verein” is in principle subject to corporate income tax and, within the scope of sec. 2 of the German Trade Income Tax Act (“Gewerbesteuergesetz” [GewStG]), to trade income tax.

Tax Exemption and Public Utility (“Gemeinnützigkeit”):

The “Verein” is by far the most common corporate structure for charitable activities and civic commitment. If the articles of association and the purpose of the “Verein” comply with the legal requirements, a tax exemption is possible on application, along with a number of other tax privileges.

The principles of public utility are laid down in secs. 51–68 of the German General Tax Code (“Abgabenordnung” [AO]).

To the extent as tax-privileged “Vereine“ operate a business enterprise, they are, in principle, subject to taxation. In case that the total revenue (including VAT) from a business enterprise which is no “Zweckbetrieb” (cf. secs. 65–68 of the German Tax Code) does not exceed EUR 35,000 p.a. (exemption limit, cf. sec. 64 para. 3 of the German General Tax Code), the tax basis assigned to this business establishment is liable neither to corporate income tax nor to trade income tax. Business enterprises that meet the requirements of a “Zweckbetrieb” are exempt from tax.

„Gemeinnützige Vereine“ can collect donations that are tax-deductible up to a certain limit with the donor

Employee Participation in Corporate Bodies

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