The Act Implementing the Digitalization Directive (DiRUG) transposed European Directive 2019/1151 of July 2019 into German law. The directive aims to introduce digital tools and procedures into corporate law.

The implementation in the DiRUG was initially based on the minimum requirements set forth in the directive. The legislative changes make it possible to form a GmbH (limited liability company) and an Unternehmergesellschaft (UG) online. The formation of a GmbH has been limited to cash contributions. The notarial certification required for formation may be conducted via video communication. Digital registration with the commercial register is possible for certain legal entities.

Criticism of the DiRUG

The DiRUG was widely criticized for not going far enough in terms of the digital procedures it enabled. In response, a draft amendment to the Act Implementing the Digitalization Directive (DiREG) was drafted shortly thereafter. Part of this amendment, as previously suggested by the BDI regarding the DiRUG, is the expansion of the online procedures available for GmbHs.

Amendment via the DiREG

While the DiRUG only permitted the online formation of a GmbH for cash contributions, the DiREG opens up the option of conducting formations via in-kind contributions digitally. The in-kind assets contributed must not be subject to a notarization requirement (e.g., real estate).

The BDI also proposed allowing amendments to the articles of association to be made via the online procedure. This proposal was taken into account in the DiREG. Since then, resolutions amending the articles of association—including capital measures—can also be processed digitally.

With the DiREG, the option to register online with the Commercial Register has been extended to all legal entities. Registration with other registers (such as the Association Register, Partnership Register, and Cooperative Register) can also be completed digitally.

The BDI achieved another success regarding the geographical restrictions on notarial activities when using video communication.

The provisions of the DiRUG regarding the Federal Notary Code previously required consulting a notary who had a geographical connection either to the parties to the deed or to the subject matter of the deed. This would have created an obligation to engage a notary whose jurisdiction covers the planned location of the company’s headquarters or branch office. With this restriction, the online procedure would have been subject to stricter requirements than an in-person visit to a notary. As a consequence of such a restriction, the severing of long-standing business relationships with notaries—who are familiar with internal company processes and thereby enable efficient collaboration—would have been unavoidable.

For foreign corporations wishing to open a location in Germany, the language barrier would also have become a significant problem. With the free choice of a notary, the company can select a notary who speaks the same language or at least has a good command of English.

Due to these concerns, the BDI successfully advocated for the removal of the geographical restriction on the execution of notarial acts via video communication, so that, with the entry into force of the DiREG, the planned corporate headquarters no longer determines the choice of notary.

The EU Directive on Expanding the Use of Digital Tools and Procedures in Company Law

It is not only the German legislature that, by amending the Implementation Act for the Digitalization Directive (DiREG), has expanded the digitalization of corporate law implemented by the European legislature through EU Directive 2019/1151 of July 2019 and the DiRUG.

Now, the European legislature has also responded and revised European Directive 2019/1151. The European Commission’s draft “EU Directive on Expanding the Use of Digital Tools and Procedures in Company Law” (2023/0089(COD)) was adopted by the European Parliament on April 24, 2024.

The aim of the amending directive is to make corporate data more readily available, to increase trust and transparency in companies across all member states, and to create more interconnected public administrations.

Among other things, the draft directive introduces the following changes to company law:

1. Art. 13g of the draft directive: European registers will exchange company data once it has been recorded via the Business Registers Interconnection System (BRIS).
2. Art. 16c (Draft Directive): A digital EU power of attorney is introduced. This allows companies to use a template for the digital EU power of attorney to authorize a person to represent the company when conducting proceedings in another Member State within the scope of the Directive. This reduces the need for an apostille on corporate documents or a translation in cross-border proceedings.
3. Art. 16b of the Draft Directive: An EU Company Certificate is introduced, containing information such as the name, legal form, registered office, and purpose of the registered company.

The BDI welcomes the draft directive and the EU legislature’s ongoing efforts to digitize corporate law. This will facilitate cross-border legal transactions for companies and strengthen confidence in the European single market. Furthermore, the harmonization of standards and the interconnection of registry offices will create greater transparency.

The European Council must still approve the draft EU directive before it can be published in the Official Journal and implemented by the member states.

Outlook

The BDI welcomes the expansion of online procedures and the resulting increased flexibility in corporate law. For future legislative changes, the digitization of additional procedures would be helpful in making corporate law more flexible, efficient, and better suited for the future.