Teilungsgesellschaften

Teilungsgesellschaften, also known as division companies, are a legal structure primarily used in Germany to facilitate the division of assets between co-owners, particularly in real estate transactions. They are established under German civil law (§ 1059–1062 of the Bürgerliches Gesetzbuch, or BGB) to manage the shared ownership of property when co-owners wish to sell their individual shares without liquidating the entire property.

The concept arises when multiple parties co-own a property, such as through inheritance or joint purchase. If one co-owner wants to sell their share, the remaining owners may not wish to purchase it directly. In such cases, a Teilungsgesellschaft is formed to hold the property until the selling shareholder’s portion is liquidated. The company acts as an intermediary, ensuring the sale proceeds are distributed fairly among the co-owners while the property remains undivided.

A Teilungsgesellschaft is typically a limited liability company (GmbH) or a partnership (OHG or KG), depending on the number of shareholders and their liability preferences. The company’s purpose is strictly limited to managing the division of the property, and its existence is temporary, lasting only until the sale is completed and the remaining co-owners receive their shares of the proceeds.

The process involves registering the Teilungsgesellschaft, transferring ownership of the property into its name, and then selling the property as a whole. The proceeds are distributed according to the co-owners’ shares, with the selling shareholder receiving their portion minus any outstanding debts or costs. This method avoids the complexities and potential disputes of physically dividing the property, such as in the case of residential buildings.

Teilungsgesellschaften are particularly useful in avoiding forced sales or unequal distributions, as they provide a structured legal framework for equitable resolution. However, they require careful drafting of the company’s articles of association and compliance with German tax and notarial regulations to ensure validity. The use of a Teilungsgesellschaft is often recommended in complex co-ownership scenarios to streamline the division process.