How long does it take for each type of corporate vehicle used to invest in real estate to become operative?
Note that due to the new regulations which apply to Alternative Investment Funds the time frame for setting up the necessary acquisition vehicles also depends on the cooperation of the German supervisory authority (BaFin).
Establishing a GmbH involves signing the incorporation deed, contributing share capital, followed by registration with the relevant commercial register. For liability reasons, trading should not commence until registration is complete, since if a GmbH enters into contracts prior to registration this gives rise to personal liability on the part of the shareholder(s). Registration can take up to two weeks from the signing of the incorporation deed and the submission of the application.
If time is of the essence, investors may use an off-the-shelf company that is already registered, and which may therefore be used in dealings as soon as its shares have been acquired. This can often be achieved within a couple of days.
Establishing an AG involves signing the incorporation deed, auditing the incorporation deed, contributing at least one quarter of the capital contribution (contributions in kind must be contributed in full) and finally registering with the competent commercial register.
For liability reasons, trading should not commence until registration is complete, since individuals acting on behalf of the AG will be personally liable between the signing of the incorporation deed and the registration of the AG. Generally, the incorporation process takes from three weeks to two months. However, as there are circumstances outside the control of the shareholders, particularly registration, the quoted time frames are only an indication. Registration can take anything from one week to several weeks after the application has been filed, depending on the circumstances and the workload of the commercial registry. Prior to submitting the application other matters must be dealt with, eg setting up a bank account and obtaining confirmation from the bank that the share capital has been deposited in the company's account. If time is of the essence it is advisable to use an already registered off-the-shelf company, which can be used as soon as the shares in the company have been acquired.
Since a REIT is a listed stock corporation, incorporation takes time, is expensive and wide-ranging.
For liability reasons, trading should not commence until registration of the REIT in the commercial register is complete, since individuals acting on behalf of the AG will be personally liable between the signing of the incorporation deed and the registration of the REIT. Registration can take between one week and several weeks from the date the application is filed, depending on the circumstances and the workload of the commercial registry.
Additional time is required for the public listing of the REIT. Altogether, the entire process may take up to two months.
Since for many stock corporations it will not be possible to comply with all prerequisites of a REIT straightaway (in particular with regard to public listing), legislation has introduced the option of establishing a pre-REIT, a stock corporation registered with the Central German Federal Tax Office (Bundeszentralamt für Steuern). One year after this registration, and every year subsequently, the pre-REIT must demonstrate to the Central German Federal Tax Office that its objectives and the structure of its assets and earnings comply with the law.
The pre-REIT must apply for a listing on a stock exchange in a regulated market within three years of its registration as a pre-REIT. If no application is made, if the application is turned down or if the pre-REIT cannot provide the necessary proof of compliance, the corporation's pre-REIT status is lost.
Setting up a real estate fund may take roughly 7 to 11 months, mostly to obtain the necessary BaFin approval.
A partnership effectively comes into existence when the partners enter into the partnership agreement but, in relation to third parties, the partnership comes into existence only after it has commenced business activities or been registered in the commercial register. The partnership may commence operations before it has been registered but in this case the limited partners will not benefit from limited liability and will be personally liable, unless the limited liability is known to the contractual partner. Depending on the workload at the commercial registry, registration may take up to two weeks from the date the application for registration has been filed.
