Introduction
The limited liability company (LLC) is a well-liked and commonly used corporation in European and worldwide corporate law systems. Germany, known for its strong economy and legal system, and Albania, a Southeast European nation, will be compared on three key LLC features in this essay.
Formation and Capital Requirements
The procedure for establishing an LLC in Albania is simple. A single shareholder is necessary to form an LLC, and there is no statutory minimum capital requirement.[1]Ideally, this flexibility allows entrepreneurs to establish a firm with little money. The shareholder(s) can determine the capital contribution amount based on their business goals. Because of this, entrepreneurs can start their businesses faster. Albania LLC formation is also famous because it may be completed in a week.
In comparison, establishing an LLC in Germany is more complicated. German law sets a “minimum financial equivalent” criteria even when no legislative minimum capital requirement exists. Ideally, this guarantees adequate assets are available to maintain business operations for at least a year. The precise amount of capital required may change based on the type of business. Ideally, this need ensures that the business has enough financial resources to meet its responsibilities, acting as a safeguard for creditors and stakeholders.
The German strategy emphasizes capitalization to avoid undercapitalized businesses that can initially experience financial challenges. As a result, business owners seeking to form an LLC in Germany should consider investing enough money to satisfy the “minimum financial equivalent” requirement.[2]. The need might entail a more significant financial outlay than Albania’s flexible approach.
Additionally, unlike in Albania, forming an LLC in Germany typically requires more time. Due to multiple administrative processes such as drafting the company’s articles of association, notarization, registration with the commercial register, and tax authorities, it might take a few weeks to a few months in Germany. Ideally, this extended procedure enables a complete examination and confirmation of the company’s adherence to legal obligations.
Governance and Decision-Making
The governance structure of an LLC gives the shareholders a substantial amount of freedom and autonomy in Albania. The operational oversight of the company is entrusted to a group of individuals known as directors, who possess the authority to act as shareholders or external entities. Ideally, this facilitates the inclusion of a wide array of individuals in the organization’s governance. The shareholders possess the prerogative to exercise their agency in appointing and terminating directors per their discernment, thereby endowing them with a considerable level of dominion over the organizational framework of the company. Due to the flexibility of director selections, businesses can better respond quickly to shifting business requirements and shareholder preferences.
The general meeting of shareholders in Albanian LLCs has the authority to make decisions. The company’s operations, strategy, and significant transactions are all decided upon by the shareholders.[3]. While the company’s articles of association can describe specific decision-making processes, the general meeting has the final say. Additionally, minority shareholder protection is addressed by statutory provisions in Albanian law, guaranteeing that their rights and interests are considered during decision-making.
In contrast, the governance structure for LLCs in Germany is more conventional and hierarchical. Managing directors, chosen through a formal process by the shareholders’ meeting, are generally responsible for leading a German LLC. Unlike Albania’s flexibility, this procedure may require a vote or resolution to choose the managing directors, offering a more organized method of appointing directors. In order to promote stability and safeguard the interests of shareholders, German law puts stronger requirements on the selection and removal of directors.
German LLCs’ management board or managing directors have most of the decision-making authority. Regular decision-making processes are often outsourced to the management board or the managing directors, even though shareholders maintain ultimate authority over some key choices, such as amending the company’s articles of incorporation[4]. The management is in charge of the company’s strategic and operational decisions thanks to this structure, which also assures effective day-to-day operations.
Albanian LLCs have a more adaptable governance structure, allowing for better shareholder control and participation in the firm’s operation, according to a comparison between Albania and Germany. Directors are autonomously appointed and removed by the shareholders, allowing flexibility and adaptation. The general meeting of shareholders retains decision-making authority, assuring collaborative decision-making. In contrast, Germany strongly emphasizes enhanced governance practices in LLCs, which provides stockholders with more protection. The formal procedures used to appoint and remove directors foster stability and uniformity. The management board or managing directors are typically given the authority to make decisions, streamlining daily operations.
Liability of Shareholders
The basic principle of limited liability applies, i.e., shareholders are generally exempt from personal culpability for the debts and obligations of the company in both Germany and Albania. However, there are differences in the scope of liability and rare situations when more culpability might materialize.
The limited liability concept is strictly upheld in Albania. Only the amount of their capital contributions makes shareholders of an Albanian LLC accountable. Ideally, this implies that shareholders’ personal assets are safeguarded, thereby confining their liability solely to the extent of their investment in the company’s capital[5]. In the event of the company’s financial liabilities, commitments, or legal contentions, creditors and claimants are exclusively entitled to pursue reparation from the company’s assets, with no recourse to the personal assets of individual shareholders. Because it reduces personal risk, the limited liability principle offers shareholders a considerable advantage and promotes investment and entrepreneurial activity.
In Germany, LLCs are governed by the limited liability concept. It is important to note that stockholders may be liable in certain situations. An exemplification of such circumstances pertains to the state of insolvency. Suppose the capital contributions of the company are deemed inadequate to address the claims of creditors during insolvency proceedings sufficiently. In that case, it is within the realm of possibility for shareholders to be held individually accountable for rectifying the financial shortfall. Ideally, this is referred to as having “inadequate capitalization” or having “deficiency liability” (Unterbilanzhaftung). This clause protects creditors by ensuring that the corporation has enough resources to meet its obligations even during tough financial circumstances.
Extra liability may develop in Germany when a shareholder exerts significant control over the company’s management but does not make the necessary capital contributions. In such circumstances, the shareholder may be held accountable for harm to the business or third parties. Ideally, this liability results from a shareholder’s failure to contribute the agreed-upon capital and may be used to compensate for any damages or losses sustained.
In contrast to Albania, these rare situations in Germany show how limited responsibility can be applied more subtly. In Germany, extra liability restrictions are in place to protect against abuse or misuse of limited liability and ensure that shareholders uphold their duties to the business and its stakeholders[6]. In cases where the company’s capital is insufficient, or shareholders fail to honor their capital contribution agreements, these rules act as safeguards for creditors, preserving their interests.
It is significant to highlight that the rigorous limited liability rule followed in Albania does not apply in Germany, where exceptions to limited liability apply only in specified circumstances and typically call for a greater obligation threshold. Since their liability is limited to their capital contributions, shareholders in Albanian LLCs have a stronger defense against personal culpability. In contrast, Germany’s exceptions impose additional liability in certain situations to protect the interests of creditors and guarantee the fulfillment of capital requirements.
Conclusion
Three elements of the LLC form were compared between Germany and Albania to show the differences and similarities between the two countries. Germany focuses on adequate capitalization and imposes harsher rules, while Albania prioritizes formation and capital requirements that promote a more approachable and flexible strategy. Compared to Germany, where the emphasis is on standardized processes, Albania’s governance and decision-making structures show a stronger involvement of shareholders. Regarding liability, Albania limits capital contributions, whereas Germany incorporates measures that may subject an individual to personal liability in certain circumstances. Businesses that want to operate in both nations must be aware of the variations between these two jurisdictions.
Bibliography
Elenita, Roshi. “Conjoint analysis and online forums on cultural heritage in Albania-analysing TripAdvisor reviews.” European Journal of Economics and management sciences 1 (2018): 3–14.
Hornuf, Lars, and Armin Schwienbacher. “Internet-based entrepreneurial finance: Lessons from Germany.” California Management Review 60, no. 2 (2018): 150-175.
Prašnikar, Janez, Fatmir Memaj, Tjaša Redek, and Damjan Voje. “The role of corporations in economic development: Albania on its way to internationalisation.” Post-communist economies 25, no. 3 (2013): 392-406.
Nuredini, Bashkim, and Ruzhdi Matoshi. “Legal Regulation of the Limited Liability Company in North Macedonia, Albania, and Kosovo.” Balkan Social Science Review 18 (2021): 183-205.
Shoroye, Babajide S. “Lifting the Corporate Veil for Directors and Shareholders’ Liability: Matters Arising.” JL Pol’y & Globalization 120 (2022): 44.
Fernando, Ricco, and Benny Djaja. “Implementation of Limited Liability Company Dissolution Reviewed from Law Number 40 of 2007 (Case Study At PT Sumber Berkat Jaya Hidup Baru-Batam City)”.” Edunity: Social and Educational Studies 2, no. 6 (2023): 683-697.
[1] Elenita, Roshi. “Conjoint analysis and online forums on cultural heritage in Albania-analysing TripAdvisor reviews.” European Journal of Economics and management sciences 1 (2018): 3–14.
[2] Hornuf, Lars, and Armin Schwienbacher. “Internet-based entrepreneurial finance: Lessons from Germany.” California Management Review 60, no. 2 (2018): 150-175.
[3] Prašnikar, Janez, Fatmir Memaj, Tjaša Redek, and Damjan Voje. “The role of corporations in economic development: Albania on its way to internationalisation.” Post-communist economies 25, no. 3 (2013): 392-406.
[4] Nuredini, Bashkim, and Ruzhdi Matoshi. “Legal Regulation of the Limited Liability Company in North Macedonia, Albania, and Kosovo.” Balkan Social Science Review 18 (2021): 183-205.
[5] Shoroye, Babajide S. “Lifting the Corporate Veil for Directors and Shareholders’ Liability: Matters Arising.” JL Pol’y & Globalization 120 (2022): 44.
[6] Fernando, Ricco, and Benny Djaja. “Implementation of Limited Liability Company Dissolution Reviewed from Law Number 40 of 2007 (Case Study At PT Sumber Berkat Jaya Hidup Baru-Batam City)”.” Edunity: Social and Educational Studies 2, no. 6 (2023): 683-697.
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