[direwolf20]

> For example to make sure that a company can be held responsible when it breaks the law.

This is the reason Germany hates small companies. Germany wants you to be a sole trader with no liability shield.

Some people hack the system by registering a company in another EU state such as Lithuania.

[erispoe]

That's not a hack, if you operate the entity from Germany, it must be registered in Germany. It's often touted as a tax loophole, but it's not. Tax authorities do not care about you unless you actually make money, then they will come after you.

[jkaplowitz]

Would the liability shield not generally apply to a foreign entity registered in Germany? Sure there may be special rules for non-compliance with specific tax obligations, but I'm talking about for general liability for other purposes, like a contract signed by the entity where no personal guarantee was given, or a harm caused by the corporation where the owner was not personally involved or negligent in causing the harm.

[direwolf20]

Which law says it must be registered in Germany?

[johannes1234321]

It must be seated where the business happens for compliance with tax laws. But you may have a French S.a.r.l. in Germany and thus fall under their company law (with impact on publication responsibilities, company governance etc.)

While for some cases there is room for abuse (like Amazon Kindle eBooks are sold to Germany by a company situated in Luxembourg, while only selling via amazon.de to audience with German residency) However my employer is a Dutch B.V. with headquarters in Germany, thus they avoid having to form a board with works council representatives as a German GmbH (or AG) of comparable size would require.

[jkaplowitz]

Specifically, it must be seated where the principal management of the business occurs.

So if the executives and board meetings and books and records are strategically located in one country and most of the business operations are in a second, it's valid and probably even required for the business to have its tax residence in the first country rather than the second.

It may very well have a permanent establishment and therefore some tax obligations in the second country, but that's different from the second country being the primary tax residence.

[throwaway2037]

     > However my employer is a Dutch B.V. with headquarters in Germany, thus they avoid having to form a board with works council representatives as a German GmbH (or AG) of comparable size would require.

Damn, that's a pretty sleazy business practice. How do you feel about it? That would be a nice loophole to close.

[johannes1234321]

It's not that easy if you want European integration and support the idea of "freedom of settlement" also for companies, which to me makes sense and it is known that some countries try to pull companies to register in their legislation with sometimes improper means. I would prefer to focus on Irish taxation, which extracts value produced elsewhere to Irish benefit.

Workers rights are being unified, but that's a long complex process, as work cultures vary a lot and most companies fear German-style code termination, while it's an uphill battle to weaken it in Germany, thus it remains in national law's responsibility.

And to be clear:

a) works council exists with all normal rights, only they don't have board seats, which can be quite powerful, especially in public companies where one might form alliances with independent share holders. In the case here it's a 100% subsidiary of an American corporation, so they get their will one way or the other, board members may only delay

b) I am somewhat priviligedge as I am no simply replicable conveyor belt worker, but somewhat specialized engineer

c) I'm currently on garden leave period after 18 years in the company (incl acquisitions) due to a reduction, where works council produced a quite nice exit for me, so the only time I needed it, it worked well. But then I am somewhat privileged over others, making it hard to generalize.

[joe_mamba]

>c) I'm currently on garden leave period after 18 years in the company (incl acquisitions) due to a reduction, where works council produced a quite nice exit for me

Isn't this type of generosity the exact reason why German companies are making restructuring and moving jobs abroad where they don't have workers councils and such generous exit packages?

Like I'm sure it worked well for you now, but I'm wondering how sustainable this is for German companies going forward, in a more competitive business-cutthroat globalized world, that has less and less barriers for capital and trade.

[ratherbefuddled]

It's not that it must be registered (incorporated) in Germany. It's that for tax purposes if the company is run from Germany it will be considered "permanently established" and treated as resident there. Permanent establishment laws are often quite surprising to people doing business across different territories.

[jmaker]

Piercing the corporate veil is a very common practice across countries, both in civil and statutory cases as well as administrative cases. It’s a very fragile shell.