Capital reduction in the GmbH

The share capital of a GmbH is at least EUR 25,000.00 in accordance with Section 5 (1) GmbH, but can always be a higher amount. The reason for a higher share capital may include corporate transactions such as reorganisations or mergers. If the tied-up capital is no longer required, the share capital can be reduced under the conditions of § 58 GmbHG or under simplified conditions of § 58a GmbHG; in particular, the lower limit of § 5 Para. 1 GmbHG and the provisions on creditor protection must be taken into account. A capital reduction can regularly be triggered by restructuring measures in order to improve the company's financial position or reduce debt and increase equity by creating free funds through the creation of uncommitted capital and thus increasing the company's liquidity. In addition, a capital reduction may be triggered by the departure of shareholders and a related severance payment.

A capital reduction always constitutes an amendment to the articles of association and requires a shareholder resolution with the necessary majority. In addition, it must be filed with the commercial register and only becomes effective once it has been entered in the commercial register.

There are various options for carrying out a capital reduction: an ordinary capital reduction in accordance with Section 58 GmbHG enables a prompt distribution to the shareholders or a release from contribution obligations. The following measures are required for an ordinary capital reduction:

1. Resolution on the capital reduction,
2. Publication of the reduction resolution,
3. Satisfying or securing the creditors,
4. expiry of the blocking year,
5. Application for entry in the commercial register,
6. entry in the commercial register and
7. realisation of the capital reduction.

A simplified capital reduction in accordance with Section 58a GmbHG is regularly used as part of restructuring measures to raise liquidity from the company's existing capital. The requirements for a simplified capital reduction are set out in Section 58a GmbH:

1. Permissibility (permissible purpose is to cover losses or a prior release of reserves and profit carried forward),
2. Resolution on the capital reduction,
3. application for entry in the commercial register and
4. Entry in the commercial register

Please contact us if you have any questions on the subject of capital reduction, we will be happy to advise you.