Key Points at a Glance
- The “conversion” of a UG into a GmbH is carried out by means of a capital increase.
- In practice, this may involve either a capital increase from company funds or a cash capital increase.
- The costs for a capital increase are typically in the range of several hundred euros.
How is a UG converted into a GmbH?
A UG can be “converted” into a GmbH through a capital increase. This is not a conversion in the legal sense of the German Transformation Act. The reason is that the UG is merely a variant of the GmbH, meaning that the “conversion” essentially represents a transition from a “small” GmbH to a “large” GmbH. The transition from a UG to a GmbH takes place by increasing the share capital to at least EUR 25,000.
How can the share capital of a UG be increased?
The share capital of a UG can be increased either through a cash capital increase or a capital increase from company funds.
In the case of a capital increase from company funds, capital or profit reserves are used to raise the company’s share capital. The following aspects must be considered in this context:
- High costs: Such a capital increase requires an audited balance sheet (§ 57e GmbHG). The costs for such an audit often amount to several thousand euros, which is why this option is rarely used in practice.
- Proportionality: If new shares are created through the capital increase, they must be distributed equally among the shareholders. Any other agreement is invalid (§ 57j GmbHG).
The following requirements must be met for a capital increase from company funds:
- Resolution: A shareholders’ resolution approving the capital increase is required, with at least 75% of the votes in favor (§ 53 GmbHG).
- Registration: All managing directors must register the capital increase from company funds with the commercial register. The registration must include a declaration that, to the best of the directors’ knowledge, no reduction in assets has occurred between the balance sheet date and the date of registration.
- Attachments: The registration must include the balance sheet underlying the capital increase, the shareholders’ resolution, the updated shareholder list, and the amended articles of association.
The second – and more common – option is the cash capital increase. In this case, the capital is raised through the contribution of money or other assets. The following requirements apply:
- Resolution: The shareholders’ resolution for the capital increase requires 75% approval and must be notarized.
- Subscription declaration: The persons acquiring the new shares must submit a subscription declaration, which must be at least notarized.
- Contribution: A cash contribution must be made. As with a GmbH, it is sufficient if at least EUR 12,500 of the share capital is paid in.
- Registration: The managing directors must register the capital increase (§§ 57, 78 Alt. 2 GmbHG) and confirm that the contributions have been made and are freely available to the company.
How much does it cost to convert a UG into a GmbH?
The capital increase required for converting a UG into a GmbH generally incurs costs amounting to several thousand euros. The exact amount depends in particular on the size of the capital increase and the level of legal advice required:
- Notary: Notary fees are legally regulated. Fees apply for the shareholders’ resolution, the subscription declaration, and the updated shareholder list. These fees depend on the amount of the capital change and generally start at around EUR 500.
- Lawyer: If legal advice is required, additional fees will apply. The costs depend on the scope of the consultation but typically amount to at least several hundred euros.
- Court: Registration with the commercial register also incurs court fees, although these are comparatively low.
The costs associated with the capital increase — such as notary, legal, and court fees — can generally be deducted as business expenses at the GmbH level.
What are the advantages of converting a UG into a GmbH?
The conversion of a UG into a GmbH offers the following main advantages:
- Reputation: A UG is sometimes perceived as less reputable than a GmbH. Consequently, a GmbH generally enjoys greater credibility and trust in business dealings.
- Retained earnings requirement: A UG is legally required to allocate 25% of its annual profits to statutory reserves. This obligation continues until the share capital reaches EUR 25,000 — that is, until the UG has been converted into a GmbH (§ 5a (5) GmbHG). Once the conversion is completed, this obligation no longer applies.
