What does the entry in the commercial register do?
In earlier times, the regulations for keeping a commercial register for German companies were based solely on the Commercial Register Ordinance of German legislation (HGB), but today the international laws and regulations also apply. An EU regulation has been particularly relevant since 2007, which states that the commercial register must be kept in electronic form, which is why this has been the case in Germany since 2007. The processes related to the commercial register are also carried out exclusively in electronic form, such as registrations or requests for information about the commercial register. For this purpose, certain electronic communication and information systems are used, which are referred to as “e-justice”.
What is the significance of the commercial register?
According to gradphysics.com, the entries in the commercial register can be viewed by anyone at the competent registry court. If you wish, you can also receive copies of extracts from the commercial register and the documents on which they are based. A fee has to be paid for this “information”. The entries and changes as well as deletions in the commercial register are published by the Federal Gazette and by at least one newspaper. The companies must submit the entries in a publicly certified form.
Since the commercial register enjoys public faith, it means that every person who inspects the register can put absolute faith in the respective entries. This also applies in the event that the data and information are incorrect – because something was not deleted in time, for example.
Legal transactions in good faith on the accuracy of the entry
If legal transactions are concluded that are based on the good faith of the correctness of the entry in the commercial register, then these are also valid if the entry was no longer correct or incorrect. If, for example, an authorized signatory is dismissed by a company but fails or forgets to delete his authorized signatory in the commercial register, then a legal transaction that this former authorized signatory concludes with a third person after his dismissal on behalf of the company remains valid. However, the prerequisite is that the third person did not know anything about the dismissal and has convinced himself of the power of attorney by inspecting the register. For this reason, it is important that a merchant or a company always makes all changes that are subject to registration, always in good time,
What are the advantages of the commercial register?
As already mentioned, the commercial register is a public directory that gives everyone information about the companies registered. Such an entry in the commercial register can be useful, because the company not only appears more professional, but also more serious. It is often the entry that earns the business partner’s trust and, moreover, a person can only be granted power of attorney if an entry is made in the commercial register.
In addition, the entry in the commercial register leaves an impression of seriousness with the authorities and banks. Cooperation is often preceded by a review and it also makes it clear that the company works in accordance with commercial regulations, rights and obligations – in particular, it is based on the HGB (commercial code). In some cases, an entry in the commercial register is also necessary for membership in professional associations.
It may also be an advantage that the entrepreneur can give his company a fantasy name, so naming the owner by first and last name is no longer mandatory.
Are there any disadvantages?
The entrepreneur becomes a merchant through the entry in the commercial register and very special rules apply to him: those of the Commercial Code, or HGB for short. On the part of the legislature it is assumed that merchants must have more knowledge of legal transactions than non-merchants. Therefore, a merchant is already bound to a guarantee by an oral promise, in contrast to a non-merchant who can only conclude a guarantee contract in writing. In addition, the entry also creates other obligations. On the one hand, there is the accounting requirement, the creation of a balance sheet and an inventory. However, sole traders are exempt from this according to Section 242 of the German Commercial Code (HGB). In addition, anyone who does not generate more than € 600,000 in sales and € 60,000 profit in a financial year is also not for bookkeeping.
It is also important to know that an entry in the commercial register is subject to fees. Small businesses that are not entered in the register do not usually have to pay a basic IHK contribution, which is based on economic efficiency. As a rule, no contribution is due below an amount of € 5,000. Otherwise, the exact contribution limit is based on the respective statutes of the responsible Chamber of Commerce and Industry.