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Comment by freyfogle | Hacker News Reader

I now have a German GmbH and had a UK Ltd in the past for 10 years. Definitely there is more seriousness/trustworthiness to a GmbH.

I am not sure there are "countless" scams in the UK, but yes, in 10 years of commercial operation did come across a few oddities. Example - a customer (UK Ltd) who declared bankruptcy owing us a money and then then next day founded a new Ltd company and tried to act like he didn't owe us the money because it was a new entity.

See https://en.wikipedia.org/wiki/Pre-packaged_insolvency

I have not come across this kind of thing in Germany.

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> a customer (UK Ltd) who declared bankruptcy owing us a money and then then next day founded a new Ltd company and tried to act like he didn't owe us the money because it was a new entity.

That is... how bankruptcy works? He literally didn't owe you money anymore. Obviously you shouldn't extend his new company credit, but extinguishing old debts is the exact purpose of bankruptcy.

I think the idea here is that you can't just "declare bankruptcy" in Germany, it's a Process with checks and balances.

It’s a process in the UK too, abuse of which could lead to the courts imposing sanctions ranging from barring the directors from company directorship all the way to piercing the corporate veil and holding directors liable for the company’s debts.

Corporate insolvency requires an “insolvency practitioner” to be appointed by the directors; this is a regulated profession, and this ensures that the company is wound up according to the regulations and statutes.

You cannot just “declare bankruptcy” in the UK either.

Your comment is a bit tongue in cheek: it’s a process with checks and balances everywhere in the developed world, and scams aren’t common at all.

You’re insinuating that due to the bureaucracy Germany is somehow better at this; it is not, it’s just more inefficient.

The US concept of bankruptcy is basically unimaginable in most (all?) of Europe.

There's an old movie, The Edukators, where one of the protagonist is effectively broke and working a low wage job but has spent years already and has many years more left to pay off a debt she incurred by accidentally crashing into an expensive car without insurance.

This situation is basically impossible in the US where the term "uncollectible" is used to describe such debts.

I don't know about other countries, but in Germany there is Privatinsolvenz which is a personal bankruptcy that would resolve this exact scenario.

Of course it would first be covered by mandatory insurance you have to have when driving a car (if you're not legally allowed to drive a car, well, you're on your own)

FWIW Privatinsolvenz is not instant although the duration was shortened from the very excessive 7 years down to a more reasonable 3 years. During insolvency you're also prohibited from founding/owning companies or freelancing, though.

But on the flip side, Breaking Bad would've never happened anywhere in Europe - because "crippling medical debt" just is not a thing =)

Bankruptcy in Germany requires you to attempt to pay off your debts within six years. Any remaining debt gets canceled after those six years pass. This is... not how bankruptcy works in Germany.

For a GmbH and other limited liability companiee there are minimum equity requirements instead.

The duration for private bankruptcy was recently cut to 3 years so it's a bit faster now at least.

For corporations there's an entire process but in simple terms the company is handed over to an externally appointed handler who tries to generate liquidity by selling off all assets and contacting all debtors and creditors. The company might recover through the process (e.g. by finding an investor) but legally the corporation is frozen and substituted by a separate corporation that only exists to resolve its bankruptcy. If the corporation no longer has any assets, it can also be fast-tracked for being dissolved.

> Example - a customer (UK Ltd) who declared bankruptcy owing us a money and then then next day founded a new Ltd company and tried to act like he didn't owe us the money because it was a new entity.

Depends. This can be illegal and he is personally liable for the amount. That being said, he might have done things by the book and his previous venture is bankrupted.

How does the involvement of a notary at the time of formation reduce the risk of the company going bankrupt?

Is the notary able to model creditworthiness (i.e. they’re acting as a rating agency), or do they just sniff out “undesirables” by some ad hoc, unregulated process involving their personal judgement, or is it something else entirely?

> I have not come across this kind of thing in Germany.

Oh, it does exist :)

Obviously there is fraud everywhere. Still, I have a higher level of basic trust when dealing with a GmbH than someone who created their Ltd Co 3 hours ago. It's just a sign they are a more serious/stable business counter party to deal with.

Yeah! Especially rampant is reusing names of closed GmbHs, reopening them, sending out invoices and stuff like that. Or spamming newly created GmbHs with phantasy invoices. Or the scam that's called Abmahnung by lawyers. There's plenty in Germany, so don't be fooled.

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