GER: Commercial Code Adjustments to Relieve Smaller Companies

Feb 16, 2024 Benn-Ibler Rechtsanwälte

The German government has decided to raise the financial thresholds for accounting and financial reporting by nearly 25%. The aim is to reduce administrative burdens on small and medium-sized companies.

For this purpose the German Federal Ministry of Justice has published drafting aids for amending the German Commercial Code (Handelsgesetzbuch, HGB) and the Introductory Act to the German Commercial Code (Einführungsgesetz zum Handelsgesetzbuch, EGHGB).

These thresholds determine, for example, whether a company is considered to be a ‘micro’ or 'small' company for accounting purposes. In Germany, accounting and reporting requirements vary according to the size of a business. This means that smaller companies are subject to fewer such obligations than larger companies.

Around 52,000 businesses will benefit from the threshold increase by being exempted from around EUR 650 million in administrative costs per year. This corresponds to an annual reduction of around 16% of the total administrative costs caused by disclosure requirements for companies subject to these requirements.

‘Raising the thresholds will lead to less red tape and more entrepreneurial freedom in order focus on working and creating value,’ said Federal Minister of Justice Marco Buschmann.

The threshold increase serves to implement Commission Delegated Directive 2023/2775 of 17 October 2023 amending Directive 2013/34/EU of the European Parliament and of the Council. The European regulations also allow the threshold increase to be applied retroactively for the 2023 financial year.

Proposed amendment to the German Federal Government’s draft bill

Document Release 20/8762 (22 December 2023)