Association

Association / Verein

January 30, 2025

An association is a permanent organization of individuals for the realization of common purposes with a corporate constitution and a uniform name that is independent of a change of members. There are associations with legal personality and associations without legal personality, depending on whether the association as an organization of individuals can itself be the bearer of rights and obligations. Sections 21 to 79a of the German Civil Code (BGB) mainly contain regulations on associations with legal personality, which is also the basic form of a legal person.

General information about the association

The members conclude a founding agreement, which also contains the articles of association of the future association, i.e. the constitution with all the basic provisions on the structure, organization and operation of the association Sec. 57 BGB. Between the conclusion of the contract and the entry in the register (foundation phase), there is a preliminary association, which is treated legally as an association without legal personality.

The association has at least two organs, i.e. "tools", through which it acts - the General Meeting and the Board. The general meeting is the supreme organ; it decides by resolution on the association's internal matters, insofar as these are not assigned to the board, Sec. 32 BGB. The Board is also an organ of the association, but has the status of its legal representative. It may consist of one or more natural persons and is usually appointed by the general meeting (depending on the provisions of the articles of association). The appointment can be revoked at any time and the members of the Board can be dismissed.

The membership is terminated by dissolution of the association, leaving of the member (depending on the articles of association, at any time or with notice period) or exclusion of the member. In accordance with Sec. 31 of the BGB, the association is liable for damaging actions of the Board or other appointed representatives in the execution of the tasks assigned to them. These fundamental liability rules apply to all legal persons under private law, including the GmbH [LINK], the Aktiengesellschaft and, according to case law, also to the OHG [LINK] and the KG [LINK].

The association is dissolved by the opening of insolvency proceedings over its assets, by the deprivation of its legal personality by the administration, Secs. 43 et seq. BGB, by the expiry of time determined for the association’s duration in accordance with Sec. 74 BGB, self-dissolution by the general meeting, Sec. 41 BGB or if only one member remains. After dissolution, liquidation must be carried out in accordance with Secs. 47 et seq. BGB.

Ideal association and commercial association

The ideal association is the legal rule and describes an association that pursues an idealistic object, i.e. not aimed at commercial business operations, Sec. 21 BGB. It is established in the so-called normative system, i.e. by entry in the register of associations (see below, "registered association"). The legal form of the ideal association was opened up for commercial activities by the so-called "daycare center case law" of the Federal Court of Justice (BGH).

A commercial association is established in accordance with the provisions of Sec. 22 BGB. Pursuant to this, such an association is granted legal capacity by the state (concession system). If it is not granted, it retains its lack of legal personality, Sec. 54 para. 1 sentence 2 BGB. The prerequisite for the state grant is the establishment of an effective (pre-)association (the provisions of Sections 56-58 BGB apply accordingly). Furthermore, in contrast to an ideal association according to Sec. 21 BGB, the association must be economically viable.

Formally, the grant procedure is subject to the administrative procedural laws of the federal states. The procedure is initiated by an application and the decision is made by administrative act. Furthermore, the concession system is generally subsidiary to the normative system, meaning that granting is to be denied if the association can reasonably be expected to organize itself in the legal form of an ideal association or another legal form under commercial law (e.g. GmbH), i.e. to meet the conditions set out there. One of the other legal forms is not unreasonable simply because an organization as a commercial association is more expedient. Subsidiarity is intended to prevent the creditor and investor protection provisions of the other legal forms from being undermined by the choice of the association form.

With the opening up of the ideal association to economic activities, the economic association is increasingly losing its significance and necessity. The distinction between ideal and commercial associations is controversial and relatively blurred due to the liberalization in case law. The first question to be clarified is whether there is an economic business operation, i.e. a permanent, planned, remunerated offering of goods or services on a market. It is irrelevant whether the association acts with the intention of making a profit.

If there is an commercial business operation, the distinction between an ideal and commercial association depends on whether the association pursues a non-economic object and the business operation is subordinate to this object and serves as an aid to achieving it. The object is to be classified as non-economic if the distribution of profits to the members of the association is excluded, i.e. according to the formulation of the object, something other than a distribution of profits is being pursued. This is the case, for example, with a village shop association. However, the granting of economic benefits (e.g. use of premises) to members does not preclude non-profit status. Recognition as a non-profit association or a special focus on the common good is irrelevant for classification as a non-economic object.

If economic activities are outsourced to independent companies in which the association mainly holds a stake, this activity is generally not attributed to the association according to the case law of the BGH and the classification as an ideal association is not compromised, even if this economic activity (of the affiliated company) does not serve to realize the ideal object of the association. An exception applies if the association's participation is not backed by equity capital.

If an association devotes itself to economic purposes, so that it qualifies as an economic association in accordance with Sec. 22, the registry court must delete it from the register in accordance with Sec. 395 of the Act on Proceedings in Family Matters and in Matters of Non-Contentious Jurisdiction (FamFG).

Registered and unregistered associations

The registered association ("eingetragener Verein", abbreviated to e.V.) is one of the most common forms of organization in Germany. In contrast to the unregistered association, it is entered in the register of associations. Registration gives the association legal personality as a legal entity, § 21 BGB. However, registration is voluntary, which is why there are also unregistered associations. In terms of organization and external form, there are hardly any differences between the two. The biggest difference lies in the legal personality, which only the e.V. (and in exceptional cases the economic association through state grant, see above) has - which is why the unregistered association - with the exception of the granted economic association - is not a legal person. Pursuant to Sec. 54 para. 1 sentence 2 BGB, the provisions of a civil law partnership ("Gesellschaft bürgerlichen Rechts", GbR, [LINK]) are applicable to the unregistered or non-legally capable association that pursues economic objects and has not been given legal personality by state grant. Since the GbR also has legal personality according to established case law, this corresponding application ultimately also leads to legal personality. On the other hand, the association law provisions of Secs. 21 et seq. BGB apply accordingly if they are not tailored to an entry in the register of associations.

The requirement for registration is the existence of at least 7 members as well as the submission of written articles of association with the specified minimum content (entry and exit of members, amount of contributions, appointment of the board and appointment of the general meeting). Upon registration, the name of the association is given the suffix e.V., Sec. 65 BGB. The distinctive feature of the registered association is its ideal, i.e. non-economic object. Only the registered association can apply for non-profit status, however, as an ideal association it cannot be primarily economically active, whereas the non-legally capable association can also pursue primarily economic purposes. To this end, the non-registered association cannot create its own assets; instead, the members hold the assets as collective owners, i.e. jointly and not each in part.

With regard to liability, the members of an unregistered association are jointly and severally liable for obligations and claims for damages, although this can be limited in the articles of association to the association's assets, i.e. joint property, so that the members are not liable with their private assets. Irrespective of the right of representation, the person who has acted on behalf of an unregistered association that pursues commercial purposes is personally liable to the third party business partner in accordance with Sec. 54 para. 2 BGB.

Non-profit association

Recognition as a non-profit association leads to tax benefits. Recognition must be applied for and requires that the association pursues exclusively charitable, benevolent or ecclesiastical purposes and that this is also expressly stated in the articles of association. A charitable purpose is given if it is aimed at the selfless material, spiritual or moral promotion of the public. This is the case, for example, with the promotion of youth and elderly care, art and culture or sport. The purpose is charitable if the needy are supported selflessly, and ecclesiastical if religious communities are supported.

In addition to the non-profit association, there are also the company forms of the non-profit GmbH [LINK] and Unternehmergesellschaft (UG) [LINK].

Federations, support associations and foundations

A federation ("Verband") is an association whose members are exclusively or predominantly legal entities, i.e. mostly companies and associations. However, it retains the legal form of an association and is not a legal form in its own right. Roof federations are associations of organizations or several federations that pursue the same purposes and have a similar thematic focus.

Support associations are normal associations, i.e. they do not have a special legal form of their own, but they do not actively pursue their own purposes, but raise funds for other non-profit associations or public corporations, which may then only be used for tax-privileged purposes. In this function, support associations usually assist other associations, kindergartens, (music) schools, universities or cultural institutions.

An association in the form of a foundation has assets that are permanently dedicated to a specific (charitable) purpose and the members exercise their rights in the interests of the founder, while hardly any independent decision-making takes place.