Term and General Definition of Participation
The concept of participation plays a complex role in German law and fundamentally refers to the involvement or participation of a natural or legal person in a legal process, an organization, an asset, or an action. The legal significance of participation varies depending on the area of law, with the term being of central importance in corporate law, criminal law, tax law, administrative law, labor law, as well as in insolvency law and procurement law. The legal structure and consequences of participation depend on the respective context.
Participation in Corporate Law
Definition of Corporate Participation
In corporate law, participation describes the position of a stakeholder (for example, partner, shareholder, or limited partner) in a company. Participation particularly entails rights and obligations in relation to the company and other participants.
Forms of Companies and Participations
- Partnerships: Here, participation generally occurs through entry into the partnership agreement, for example as a partner in an open commercial partnership (OHG) or limited partnership (KG). Essential aspects are the amount of the contribution, participation in profits and losses, as well as co-management rights.
- Corporations: Participation occurs through the acquisition of shares, for example by acquiring equity interests in a limited liability company (GmbH) or shares in a stock corporation (AG). This creates membership rights such as voting rights at the shareholders’ meeting as well as property rights (e.g., dividend).
Rights and Obligations from Participation
Participants generally receive membership and property rights:
- Voting rights and right to participate in meetings
- Right to profits and liquidation proceeds
- Information and inspection rights
- Cooperation obligations, contribution duties, or additional payment obligations
Of particular relevance is the distinction between direct and indirect participation, for example via intermediate companies.
Participation in Criminal Law
Forms of Participation according to the German Criminal Code (StGB)
In criminal law, participation in a criminal offense describes the involvement of multiple persons in committing the act. The Criminal Code differentiates here between perpetration and participation.
Perpetration
- Sole perpetrator (Section 25 (1) StGB): Commits the act independently and on own responsibility.
- Joint perpetration (Section 25 (2) StGB): Several persons act jointly to commit the offense.
- Parallel perpetration: Several persons act independently of each other in a single course of events.
Participation
- Incitement (Section 26 StGB): Inducing another to commit an intentional unlawful act.
- Assistance (Section 27 StGB): Supporting the act by providing assistance.
Legal Consequences of Participation
The particular form of participation influences the degree of criminal liability and sentencing. Each participant is held accountable according to his or her contribution to the offense. Participation in a criminal offense generally requires intent.
Participation in Tax Law
In tax law, participation primarily describes the involvement in businesses (partner position), which may have special tax implications, for example in the calculation of income of co-entrepreneurs (Section 15 EStG) or the definition of shareholder for withholding tax purposes.
Participation Relationships and Tax Consequences
The amount and type of participation often determine the taxation of dividends, profit distributions, or disposals of shares. For certain tax benefits, offsetting of losses, or exemptions, the participation quota may be decisive (e.g., in Section 17 EStG).
Participation in Administrative Law
Participation of Third Parties in Administrative Procedures
In administrative law, participation characterizes the involvement of persons in administrative procedures. This right to participate arises from the provisions of the administrative procedure acts (e.g., Sections 13 ff. VwVfG) and grants those affected the opportunity to influence the decision of an authority.
Forms of Participation
- Participation as Obligation to Grant a Hearing: Before issuing a burdensome administrative act, authorities must grant participants the right to be heard.
- Participation in Plan Approval Procedures: Affected persons may raise objections against projects, such as infrastructure measures.
Participation in Labor Law
In labor law, participation means the involvement and codetermination of employees in companies and enterprises.
Codetermination and Participation Rights
The most well-known forms are:
- Works council: Rights and obligations from the Works Constitution Act (BetrVG)
- Staff council: Participation in the public sector
- Supervisory board: Employee codetermination under the Codetermination Act
Participation rights extend, for example, to hearings, rights of approval or veto, and initiative rights.
Participation in Insolvency Law
In insolvency proceedings, participation identifies the involvement of creditors or other parties to the proceedings.
Participation of Creditors
Creditors exercise their rights at the creditors’ meeting, decide on the progression of the proceedings and the distribution of the insolvency estate.
Participation in Procurement Law
Procurement and competition law refers to participation when companies submit tenders in public procurement processes. Participation is subject to specific legal requirements, particularly regarding transparency and equal treatment.
Conclusion: Significance and Complexity of Participation in Law
The term participation in German law is highly complex and ranges from corporate co-ownership to forms of criminal involvement to applications in tax, administrative, labor, and insolvency law. The respective forms and consequences of participation depend largely on the area of law; precise knowledge of the relevant laws and regulations is essential for assessing participation in individual cases.
Frequently Asked Questions
What legal forms of participation exist under German law?
German law recognizes various legal forms of participation that must be distinguished according to the area of law and purpose. In corporate law, essential forms of participation are as a partner in a partnership (e.g., GbR, OHG, KG) or as a shareholder or equity holder in a corporation (e.g., GmbH, AG). Each form involves different rights and obligations, especially concerning liability, voting rights, participation rights, and profit expectations. Participation also plays a role in public law, e.g., in citizen participation in land use planning under the Building Code (Section 3 BauGB), in environmental impact assessments (Section 18 UVPG), or in administrative procedures (under Sections 28, 29 VwVfG). There are also participation rights for employees in companies (e.g., codetermination in the supervisory board according to the Codetermination Act). The specific legal form essentially determines how participatory rights, obligations, and liability limitations are designed.
How is the transfer of participations regulated by law?
The transfer of a participation largely depends on its legal structure. Transfers of GmbH shares require notarization according to Section 15 GmbHG, with any approval requirements from the articles of association to be observed. Shares are in principle freely transferable; bearer shares are transferred by agreement and delivery, while registered shares require their registration to be altered in the share register (Sections 67, 68 AktG). In partnerships, the transfer of a partnership interest generally requires the consent of the other partners; the partnership agreement may contain specific provisions regarding this. In public law, a participation such as voting rights in referendums cannot be transferred. The exact modalities and legal consequences therefore depend on the type of participation and are strictly subject to statutory requirements as well as contractual specifics.
What liability rules apply to participations?
Liability rules vary depending on the form of participation. In partnerships (e.g., OHG), partners generally have unlimited and joint and several liability with their private assets (Sections 128 ff. HGB). Limited partners in an KG, however, are liable only up to the amount of their contribution (Section 171 HGB). Shareholders of a GmbH or shareholders of an AG are liable only with their contributions; there is generally no further personal liability (Section 13 (2) GmbHG, Section 1 AktG). In cooperative law, liability varies according to the articles of association, and an additional payment obligation can be agreed (Section 22 GenG). In public law, participation in proceedings generally does not entail tortious liability; rather, procedural regulations determine the extent to which claims, rights of objection, or legal actions exist.
What information and inspection rights do participants have?
Statutory information rights are among the most important participatory rights of participants. GmbH shareholders have comprehensive rights to information and inspection of company records under Section 51a GmbHG. Shareholders of an AG may request information at the general meeting (Section 131 AktG). Partners in partnerships may request inspection of business books and papers under Section 716 BGB and Sections 118 ff. HGB. Supervisory board members also have access to relevant documents. In public law, information rights also exist, such as file inspection under Section 29 VwVfG in administrative proceedings. However, the right to information may be restricted in exceptional cases to protect trade secrets, data protection, or rights of third parties.
What participation and co-determination rights exist?
Participation rights depend on the respective form of participation and the relevant corporate or administrative regulations. GmbH shareholders participate in general meetings and decide by majority vote (according to share capital), unless otherwise provided for in the articles of association. Shareholders exercise their voting rights in the general meeting, generally with one vote per share. In partnerships, fundamental decisions are made jointly by the partners, although deviations may be regulated in the partnership agreement. In public law, participation rights are governed, for example, by the right to comment in planning procedures, rights of objection, or association actions. Employees exercise codetermination rights to a certain extent (e.g., works council under BetrVG, supervisory board seats).
What tax consequences can arise from legal participations?
The tax consequences of participation vary depending on the legal form and type and are complex. In principle, profits from participations in corporations are subject to income tax (Section 20 EStG) and, in cases of business participations, possibly to trade tax as well. In partnerships, profits are taxed directly at the level of the individual partners based on the principle of transparency (Sections 15, 18 EStG), whereas corporations maintain a distinction between company and shareholder taxation. Furthermore, gift or inheritance tax may apply in the event of a transfer of participation. Specific tax benefits are also regulated (e.g., partial income method for share sales), tax losses, or the tax exemption of certain capital gains (Section 3 no. 40 EStG).
What special features apply to minority participants from a legal perspective?
Minority participants generally enjoy special protective rights to prevent possible disadvantage by majority shareholders. For example, in the GmbH Act, minority rights are established for participants holding at least 10% of the share capital, such as the right to request a shareholders’ meeting (Section 50 GmbHG). In stock corporation law, minority shareholders may file actions for annulment (Section 246 AktG), request special audits (Section 142 AktG), or demand the convening of a general meeting (Section 122 AktG), provided a minimum threshold is met. In public law, minorities may submit their own statements or initiate association actions in participatory procedures. Such protective mechanisms are essential to legally secure a fair balance between majority and minority interests.
