Concept and Legal Framework of Economic Associations
Definition and Distinction
Economic associations are legally organized groupings of natural and/or legal persons, whose purpose is aimed at promoting common economic interests. They are established in accordance with private or public law regulations. The term is not conclusively defined by law, but is used in various pieces of legislation and in case law to form a generic term for economically oriented organizations that are not sole proprietorships.
Distinctions exist particularly with respect to other forms of economic combinations, such as cooperatives, associations, or companies. Economic associations can, depending on the respective law, take the form of corporations (e.g., GmbH, AG), partnerships, registered associations, or other legal entities.
Legal Foundations
National Legal Sources
In Germany and other German-speaking countries, economic associations appear in various laws without a uniform term being defined:
- § 6 para. 1 no. 3 GwG (Money Laundering Act): Economic associations under this law include legal entities, registered partnerships and other groupings based in Germany or abroad that pursue economic objectives.
- § 1 para. 2 VereinsG: The provisions on associations apply—unless otherwise specified—also to economic associations, but only if they are not commercial companies.
- Tax Laws: In the tax law context, economic associations are listed, for example in the Corporation Tax Act and in the Fiscal Code, where corporations, partnerships, and pools of assets are distinguished.
International Legal Sources and Supranational Regulations
The term also appears in European law, mostly in the context of competition and antitrust law (e.g., Art. 101 TFEU regarding restraints of competition by economic associations), but also in the context of money laundering prevention and cross-border economic activities.
Types and Forms of Economic Associations
Corporate Law Aspects
Economic associations can appear in various legal forms, which differ in their organization, membership, and liability issues. These include:
- Corporations (e.g., GmbH, AG)
- Partnerships (e.g., OHG, KG)
- Registered cooperatives
- Economically active associations (unless charitable)
- Other groupings, such as holdings, economic interest groups, or business promotion companies
Hybrid Forms and Special Types
There are also hybrid forms and special cases, such as the European Economic Interest Grouping (EEIG) under EU law, or public law economic associations, for example, in the field of agriculture or indirect public administration.
Legal Framework
Legal Capacity and Representation
Economic associations, depending on their legal form, enjoy either partial or full legal capacity. For example, corporations and registered cooperatives have full legal capacity and can acquire rights and incur obligations in their own name. In the case of non-legal-capacity associations, representation is usually conducted by statutory bodies or representatives by law or by statute.
Liability and Responsibility
Liability depends on the respective legal form. While in corporations liability is generally limited to the company’s assets, partners in partnerships are often personally or subsidiarily liable.
Admission, Membership and Duties
Membership in an economic association establishes rights and obligations, such as participation in decision-making, contribution responsibilities, and duties to cooperate in management and supervision.
Tax Treatment
For tax purposes, economic associations are often treated as corporations or partnerships. There are obligations to register, keep accounts, disclose, and pay taxes such as corporation tax, trade tax, or value-added tax.
Transparency Register and Reporting Requirements
Pursuant to §§ 18 ff. GwG, many economic associations are required to register their beneficial owners in the Transparency Register in order to prevent money laundering and terrorist financing.
Participation in Economic Combinations and Antitrust Law
Economic associations frequently act as parties under antitrust law, such as trade associations, sectoral alliances, or purchasing cooperatives. The prohibition of anti-competitive agreements under Art. 101 TFEU and § 1 GWB explicitly also covers decisions by associations of undertakings.
Supervision, Control and Sanctions
Several laws provide for intervention, supervision, and sanctions toward economic associations, for example by the Federal Office of Justice, the Federal Cartel Office, or tax authorities. Violations can be punished by fines, dissolution orders, or additional tax assessments, among others.
Importance and Function in Economic Life
Economic associations play a central role in the management, consolidation, and representation of economic interests. They particularly enable small and medium-sized enterprises to strengthen their position vis-à-vis market participants and policymakers, to spread risks, and to achieve synergies.
Summary
The term Economic Associations refers to a broad group of economically motivated groupings with complex legal structures. They are the subject of numerous statutory provisions and play a significant role in German and European economic law. Key issues include their legal form, their obligations in dealing with authorities and tax requirements, and their position under competition and antitrust law. The precise legal classification depends on the area of application and the underlying legal provisions.
Frequently Asked Questions
Who is legally capable within an economic association?
Within an economic association, it is generally the association itself that holds rights and obligations and is thus legally capable, provided and to the extent that the law or the articles of association determine this. Legal capacity depends primarily on the chosen legal form, for example, a limited liability company (GmbH), a stock corporation (AG), or a registered cooperative. These legal entities can independently enter into contracts, sue and be sued, and acquire property. Individual members of the economic association do not generally possess legal capacity in connection with the association, unless it is a partnership in which the partners can hold rights and obligations directly. For legal entities under private law, the authority to represent is also exercised by authorized bodies, such as the managing director or board, who act with binding legal effect for the association.
Which legal provisions need to be considered when founding economic associations?
Different legal provisions apply to the establishment of an economic association, depending on the legal form. For corporations, the Commercial Code (HGB) and the GmbH Act or the Stock Corporation Act are especially relevant. A deed of formation, articles of association or statute is regularly required, which must be notarized (as in the GmbH or AG). Entry into the commercial register at the competent local court is mandatory. In addition, depending on the business activity, there may be professional or industry-specific licensing requirements, such as for financial service providers. Furthermore, corporate rules on capital contributions, management and representation, voting rights, profit distribution, and liability arrangements must be observed. Tax matters and notification obligations to authorities complete the requirements.
Who is liable for the obligations of an economic association?
Liability for the obligations of an economic association depends on its legal form. In corporations such as the GmbH and AG, in principle, only the company’s assets are liable, while the shareholders are generally exempt from personal liability. Piercing the corporate veil to shareholders is only possible in exceptional cases, such as willful harmful acts or a so-called existence-destroying interference. In partnerships, such as the oHG or GbR, the partners are regularly personally, unlimitedly, and jointly and severally liable, whereas in the limited partnership (KG) a distinction is made between the general partner (unlimited liability) and the limited partner (limited liability). In addition, managing directors can incur liability toward the company itself or toward third parties in the event of breaches of duty.
Which bodies are legally relevant for the decision-making and representation of an economic association?
The bodies provided for in the articles of association or by law are of central importance for the decision-making and legal representation of an economic association. In corporations, these are regularly the managing director (for the GmbH) or the board of management (for the AG), who represent the company externally. The supervisory body (e.g., the supervisory board of an AG) oversees management and has certain control rights. The shareholders’ or general meeting is the highest decision-making body with wide-ranging powers, especially for fundamental decisions such as amendments to the articles, capital measures, or dissolution. The detailed rules on representation and structure of bodies depend on the legal form and must be examined in each case.
What codetermination rights do members have in economic associations?
The codetermination rights of the members of an economic association derive primarily from the articles of association and the applicable company law. In corporations, shareholders or stockholders in particular have the right to participate in the shareholders’ or general meeting, exercise their voting rights there, and in certain cases request information from management. In partnerships, individual participation and control rights are often stipulated. Depending on size and sector, employee codetermination rights under the Works Constitution Act (BetrVG) or the Codetermination Act (MitbestG) may also apply, requiring the establishment of works councils or employee representatives on supervisory boards.
In which cases can an economic association be dissolved and what are the legal implications?
An economic association can be dissolved for various reasons: by shareholder resolution, expiry of a specified period, opening of insolvency proceedings, court order, or by law. The legal consequences are liquidation of the association, in which company assets are realized and liabilities settled. Any remaining assets are distributed to the members. During the liquidation phase, the association continues to exist, but only for the purpose of winding up. Upon completion of liquidation and deletion from the commercial register, the economic association is legally terminated.
What publicity obligations exist for economic associations?
Economic associations are subject to various publicity obligations. Corporations are legally required to disclose annual financial statements, management reports, and, if applicable, consolidated financial statements in the electronic Federal Gazette (§§ 325 ff. HGB). Amendments to the articles, appointment and dismissal of managing directors or board members, and other material corporate changes must also be published in the commercial register. For partnerships, such disclosure obligations are only partially required or not at all, unless they qualify as companies of a certain size (e.g., the large partnership limited by shares—Publizitäts-KG). Additional public law information obligations may arise, for example, from tax or competition law.
