German Court Allows GmbH Formation with Foreign Notary

Germany's Kammergericht (Court of Appeal) has issued a significant ruling allowing for the notarization of German limited liability company (GmbH) formation documents by foreign notaries. This decision could pave the way for companies to reduce costs associated with establishing a German subsidiary.

Historically, German notary fees, which are legally fixed, can be substantial, particularly for companies with large share capital or in cases of share transfers. This has prompted many businesses to explore notarization services abroad, with Switzerland being a popular choice due to its negotiable and often lower notary fees.

The Kammergericht's decision specifically addressed a GmbH formation notarized by a notary in the Swiss canton of Bern. The lower court, Amtsgericht Charlottenburg, had previously rejected the registration, deeming the Swiss notarization process not equivalent to the German one, particularly as reading the document aloud was not mandatory under Swiss cantonal law. However, the Berlin court found the Swiss notary's qualifications and role to be comparable to that of a German notary, and deemed the voluntary reading of the document sufficient.

The ruling has sparked debate among legal professionals, with some criticizing the comparability of the notarization procedures, especially concerning the notary's advisory and disclosure obligations. Companies considering foreign notarization should carefully assess potential additional costs, such as travel expenses and apostille fees, and understand that foreign notaries often limit their liability. Furthermore, it is advisable to confirm the commercial register's acceptance of foreign notarizations in advance to avoid delays, as the appeals process in the case lasted approximately two years.