business establishment & outsourcing management consultants

Setting up a Limited liability company

Basic characteristics

A limited liability company is a company with share capital and legal personality and is liable for its debts with the company assets. It is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners, a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on the number of partners). This form of enterprise may be convenient for small and medium size operations and is similar to the French Sarl or German GmbH. Although a business entity, it is a type of unincorporated association and not a corporation. The primary characteristic a limited liability company shares with a corporation is limited liability and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation, and it is well-suited for companies with a single member limited liability signifies that the liability of partners is limited to the total amount of capital, i.e. in contrast to personal companies, the assets of a company are clearly distinguished from the assets of the partners and the company is liable for debts and obligations with its own assets and not with the partners’ personal assets. Limited liability does not imply that partners are always fully protected from personal liabilities since courts can and sometimes will pierce the corporate veil of corporations when some type of fraud or misrepresentation is involved. Pursuant to article 3 of Greek Law 3190/1955, a limited liability company is a trade company, even if its business scope is not related to trade. Nevertheless, some trade activities, such as banking, insurance, stock exchange, portfolio management, mutual funds management, leasing, promotion, implementation of high technology investments (only venture capital) and athletic activities are expressly excluded from the scope of limited liability companies.

Further basic characteristics include:

  • - The capital stock is divided into participation units, each of which comprises of company shares, of a minimal value of 30 Euros each.
  • - Specific publicity rules during the company establishment procedures, as well as during its entire duration.
  • - Specific duration (although failure to record the duration does not constitute reason for dissolution).
  • - Limited liability of the partners.
  • - Decision making procedures are based on majority (more than half of the total number of the partners who represent more than half of the company capital).
  • - The existence of two bodies: the General Assembly of Partners and the Manager or Managers.

Incorporation requirements

As a rule, in order to establish a limited liability company, at least two persons, either natural or legal, have to associate. Under certain restrictions, a limited liability company may be established by a single natural or legal person (single-member limited liability company as per article 43a26 Law 3190/1955). In fact, the founder (legal or natural person) of a single-member limited liability company a single-member limited liability company can neither be the sole shareholder of another single-member limited liability company nor establish a new single-member limited liability company. In order to participate in a limited liability company, the natural persons have to be over eighteen years of age (according to article 127 of Greek Civil Code, as amended by article 3 of Greek Law 1329/83); participation of a minor in the establishment of a limited liability company is allowed only after magisterial permission.

The minimum capital required is 4.500 Euros to be deposited upon establishment (article 4 Law 3190/1955). The share capital is divided into participation units, each of which comprises of company shares, of a minimal value of 30 Euros each. It is not compulsory for the capital to comprise only cash but also contribution in kind; i.e. contribution of assets (article 5 Law 3190/1955). In the event that a maximum of 50% of the initial capital comprises contribution in kind, pursuant to article 9 of Greek Law 2190/1920 an advance valuation should be carried out.

Establishment Procedure

In order to establish a company one should refer to the One Stop Shop, which in the case of E.P.E. companies is a Notary Public. The One Stop Shop shall register electronically the company data, and the company’s Articles of Association in the database of G.C.R. The G.C.R. shall then send a G.C.R. number and a Registration Code Number. In terms of limited liability companies, a notice drafted by the notary public shall communicate the above registration to the competent G.C.R. Service. Upon registration of the company at G.C.R., the One Stop Shop shall send electronically to the Ministry of Economy and Finance the information stated in paragraph 1 of article 8 of Greek Law 3853/2010 (90A’) in order for a Tax Identification Number to be issued. Specific publicity rules apply during the company establishment (the company only then acquires legal personality) as well as during its entire duration (article 8 Law 3190/1955).

Estimation of cost to establish a limited liability company

  • - The Company Establishment Note (70 Euros). If the founders are more than 3 persons, the cost is increased by 5 Euros for each additional founder. The Company Establishment Note shall not be refunded.
  • - G.C.R. registration fee (10 Euros).
  • - Chamber registration fee depending on the respective Chamber.
  • - Duty paid to the Lawyers Welfare Fund in Athens, which amounts to 5.80€.
  • - Registration fee to the Insurance Organisation for the Self-Employed (OAEE) that amounts to 50% of the insurance premium of the pension branch of the third insurance category of new insurers – category 003 (approximately 111 Euros).
  • - Capital Accumulation Tax (1% of the capital stated in the Articles of Association)
  • - Notary fee: minimum cost €44.02 to draw up the contract plus 6€ per page, plus 23% VAT. The copies cost 5 € per page, plus 23% VAT. The fee is paid directly to the Notary Public and is not included in the Company Establishment Note.
  • - Attorney fee, if required. According to the law, an attorney should be present if the company capital is more than €100.000. An attorney’s minimum fee is 1% of the company capital, if the amount is less than €44.02,5429, and 0,5% of the company capital, if the amount is more than €44.02,5429. This fee applies to each attorney present. For instance, if a company is to be established by two parties and each party has their own attorney, then both attorneys shall receive a fee. The fee is paid directly to the attorney and is not included in the Company Establishment Note.

The Company Establishment Note, the Capital Accumulation Tax, the registration fee to OAEE, and any other payments made to third parties or for acquiring copies and certifications concerning the company, are paid in cash; otherwise if the total amount exceeds 1,500€, payment may be made by bank cheque, or by bank deposit to the account of the Central Agency of G.C.R., in which case the bank deposit receipt must be produced. Otherwise, if applicable, payments may be made via web and/or phone banking, credit or debit card, or interbanking systems. When submitting the necessary documents to the One Stop Shop, the company’s founders or their representative should also provide a bank account in order for the deposited amounts to be refunded, in case the company is not ultimately established.

Company-related information to be included in the Articles of Association

The Articles of Association constitute a necessary document for the establishment of a company; the articles have to be drafted as a notary deed and determine a number of significant topics related to the partners’ relations, company management, duration and dissolution. Article 6 of Law 3190/1955, defines the minimum details to be included in the Articles of Association of a limited liability company, namely, the partners’ names, surnames, professions, residence and nationality; the corporate name, which shall also include a brief description of the main business scope; the registered seat (may also be municipality or a commune within Greece), the business scope and the duration of the company (although specific duration is one of the basic characteristics of a limited liability company, failure to state the duration in the articles of association does not constitute reason for dissolution). The articles shall also explicitly state the type of company as a limited liability company, the share capital, the participation share and the number of company shares held by each partner (in the event of contributions in kind, their valuation and the name of the partner contributing). Further provisions relating to dissolution of company for reasons other than those provided in the Greek law or on management control may also be included. The articles of association may also validate agreements between partners on non-competition agreements among partners, share transfer prohibition, prohibition of partners’ withdrawal etc.

Documentation needed for incorporation

A. Documents regarding founders who are natural persons

  • - National identity card for Greek citizens, identity card or passport for citizens of EU member states, passport for citizens of non-EU member states and residence permit, if residing within the country. The founders’ representative may also submit to the One Stop Shop certified copies of these documents.
  • - Residence permit for the exercise of independent financial activity for citizens of non-EU member states who shall participate as general partners in general partnership company and limited partnership company, or shall be appointed as managers in a limited liability company, or as legal representatives in a public limited company (SA).
  • - Completed Form M1 (“Application for a Tax Identification Number/Change of Personal details) and Form M7 (“Declaration of Taxpayer’s Relations”), if required in order for the founders to acquire a Tax Identification Number (TIN), if they do not have one.

B. Documents regarding founders who are resident legal persons:

  • - An exact copy of the company’s codified Articles of Association
  • - In terms of personal companies and limited liability companies, a special authorisation is required, if their representative for the establishment of the company is different from the legal representative and the company is to be established by a notarial deed. If the company is established by a private agreement, then an authorisation that bears the authenticated signature of the company’s legal representative is sufficient, if this is permissible according to the Articles of Association or by decision of the Assembly of partners.
  • - In terms of limited liability companies, it is required to submit a decision of the Assembly of partners regarding the participation of the limited liability company in the company under establishment.
  • - In terms of public limited companies, it is required to submit the Issues of the Government Gazette that relate to the legal representation of the company as well as to the Board of Directors’ decision regarding the participation of the public limited company in the company under establishment.

C. Documents regarding founders who are foreign legal persons:

  • - Articles of Association that bear an apostille, according to article 4 of the Hague Convention of October 5 1961, officially translated or certified by a consulate, if the country of origin has not signed the Convention.
  • - Certification by a competent authority of the legal person’s country of residence to verify the existence of the company.
  • - Certified copy of the authorisation document which appoints the legal representative in Greece.
  • - The debtor should complete Form M3 (“Statement of commencing/changing business of non natural person”) and Form M7 (“Declaration of Taxpayer’s Relations”), in order to acquire a TIN.

D. Further Documents:

  • - The company’s Articles of Association in print and electronic form, if this is a personal company established at a One Stop Shop. If the establishment is carried out before a notary public who acts as a One Stop Shop, it is not necessary to submit the company’s Articles of Association in print and electronic form.
  • - If the establishment procedure is carried out by a representative, he/she should produce an authorisation granted by the founders that bears the certified signatures of the founders, according to paragraph 1 of article 3 of the present guideline.
  • - The Bank deposit receipts, if the amounts required for the establishment and the registration of the company at G.C.R. have been paid, according to those stated in paragraph 1 of article 13.
  • - The lease of the premises of the company certified by the competent Public Fiscal Service, or an official copy of the title deed, or an official statement of article 8 of Greek Law 1599/86 granting permission to use the premises as seat of the company under establishment including the grantor’s certified signature.

E. The debtor should complete the following forms in order for the company to acquire a Tax Identification Number (TIN) following its establishment.

  • - Form M3 (“Statement of commencing/changing business of non natural person”)
  • - Form M6 (“Statement of Business Activities”), if required.
  • - Form M7 (“Declaration of Taxpayer’s Relations”)
  • - Form M8 (“Statement of Members/Partners of non natural person”), if required
  • - Statement of Capital Accumulation Tax
  • - The statement forms are available for print at the website of the General Secretariat for Information Systems of the Ministry of Economy and Finance. The founders may also access this website via the One Stop Shop.

The persons applying to establish and register a company at the G.C.R. or an authorised person for this purpose, should complete and submit to the One Stop Shop a written order and authorisation in order that the One Stop Shop may carry out the necessary actions regarding the establishment of the company, according to those stated in Greek Law 3853/2010. This order indicates that the founders of the company under establishment give consent to the One Stop Shop to search and acquire certifications and information necessary to the establishment of the company. The abovementioned order includes the following applications:

  • - Application to check availability of company name and distinctive title and to register these to the Chamber.
  • - Application to register at the relevant Chamber and
  • - Application to register at G.C.R.
  • - Application to provide a Tax Identification Number to those founders that do not have one, and the company following its establishment.
  • - Application to acquire a copy of the tax clearance certificate of the founders, if not submitted.
  • - Application to acquire a copy of the social security certificate of the partners from the Social Insurance Institute (IKA), TEAM and the Insurance Organisation for the Self-Employed (OAEE), if required but not submitted.
  • - Application to register the partners (of general partnership companies, limited partnership companies and limited liability companies) and the members of the Board of Directors of public limited companies (SA) who are shareholders holding more than 3% of the share capital, to the respective Social Security Organizations, according to the relevant legislation in force.

TAX CLEARANCE CERTIFICATE

The One Stop Shop shall insure that a tax clearance certificate be provided to each founder of the company under establishment. In case any of the founders have tax debts, the One Stop Shop shall set a deadline of maximum ten (10) working days in order for the debtor to settle the tax debts and acquire a tax clearance certificate.

TAX IDENTIFICATION NUMBER (TIN)

If the founder, resident or foreign natural person or foreign legal person, does not have a Tax Identification Number (TIN), the founder him/herself or his/her representative should complete and sign the following forms:

  • - If the founder is a natural person, he/she should complete and sign Form M1 (“Application for a Tax Identification Number/Change of Personal details) and Form M7 (“Declaration of Taxpayer’s Relations”), if required. The One Stop Shop shall then send these forms to the competent Public Fiscal Service via fax or email.
  • - If the founder is a foreign legal person, the data provided in Form M3 (“Statement of commencing/changing business of non natural person”) and Form M7 (“Declaration of Taxpayer’s Relations”), are registered and sent via email to the Ministry of Economy and Finance.

The applicants are liable for providing true data and accurately completing the forms. The original forms are filed in the company files and copies or the originals may be sent to the competent Public Fiscal Service upon request.

COMPANY REGISTRATION AT G.C.R.

The One Stop Shop shall register electronically the company data, and the company’s Articles of Association in the database of G.C.R. The G.C.R. shall then send a G.C.R. number and a Registration Code Number. In terms of public limited companies and limited liability companies, the above registration shall be made known electronically to the competent G.C.R. Service or to the G.C.R. Department via a notice drafted by the notary public.

COMPANY TAX IDENTIFICATION NUMBER

After registering the company at G.C.R., information as stated under paragraph 1 of article 8 of Greek Law 3853/2010 (90A’) shall be send electronically to the Ministry of Economy and Finance the namely:

  • - The G.C.R. number and the Registration Code Number;
  • - Payment receipt of the Capital Accumulation Tax;
  • - Information about the seat and the remaining facilities of the company (title deed or lease or sublease agreement legally certified by the Public Fiscal Service, or an official statement of granting permission to use the premises) and
  • - The relevant forms submitted to the One Stop Shop by the applicant for having a TIN issued), as well as the data provided in Form M3 (“Statement of commencing/changing business of non natural person”), Form M7 (“Declaration of Taxpayer’s Relations”), Form M8 (“Statement of Members/Partners of non natural person”), if required, and Form M6 (“Statement of Business Activities”), if required, in order for the established company to acquire a TIN. The TIN is provided directly by the Ministry of Economy and Finance and is sent electronically to the One Stop Shop.

The notary public who operates as a One Stop Shop shall draw up a notice regarding the establishment of a limited liability company, and shall send it via email or fax to the National Printing Office to be published in the Issue of Sociétés Anonymes - Limited Liability Companies and General Commercial Registry. The One Stop Shop shall register the TIN of the newly established company at G.C.R.

Note: The above-mentioned procedures do not pertain to companies that require an administrative approval or decision in order to commence their business activity

Basic organs of a Limited Liability Company and representation

The General Assembly of Partners and the Manager or Managers are the two main organs of a Limited Liability Company; a third organ, which is the auditors shall be added in the event of a large Limited Liability Company; in order for an Ltd company to be considered as large two of the following conditions must be fulfilled: a) total assets over €1.500.000; b) net turnover over €3.000.000; c) average personnel employed during the fiscal year, 50 persons. Decision making procedures are based on majority, i.e. over half of the total number of the partners representing more than 50% of the company capital (article 13 Law 3190/1955). The representation of the company is exercised by all partners acting collectively. The management of the company may be exercised by one, several partners or not and if not otherwise provided by the corporate articles acting collectively on anything related to the corporate scope. The managers may be appointed and invoked by resolution of the General Assembly. The General Assembly of Partners is the highest organ of the company, competent to make decisions on any corporate matter and these are binding on all partners (including dissenting partners). The phrase “unless otherwise provided for in the articles of association” is read throughout all applicable laws and is responsible for the flexibility the members of the limited liability company have in deciding how their company will be administered (always abiding by the provisions of the law). The law provides for automatic or “default” rules for how such a company will be governed unless the articles provide otherwise.

Audit Requirements

EPEs that do not exceed the limits which apply to be considered as large companies and therefore are subject to an audit by a certified auditor are exempt from a statutory audit altogether. Entities which satisfy two of the three criteria included here above in two previous consecutive accounting years must be audited by a recognised auditing firm of certified auditors (i.e. a member of the Institute of Certified Auditors "SOEL").

Accounting Period, Accounting Books and Records

For Greek tax purposes an accounting period is one of twelve months. However, on the initiation of activity the first accounting period may extend over a period up to 24 months. The fiscal year must either end on 30th June or on 31st December. Corporations are required by the Books and Records Code to keep double entry accounting books, inventory books, General Assembly minutes’ books and management books. The accounts structure shall be the one defined by the Greek General Chart of Accounts or, if the entity is a bank, the Banking Chart of Accounts. Both the Greek company law and the Chart of Accounts prescribe the form of presentation of financial statements, which is in line with the EU Fourth Company Law Directive.

Tax Audit Certificate and "Annual Certificate"

The Annual Certificate provided by para.5 article 82 of Law 2238/1994, applies also on limited liability companies whose annual financial accounts obligatorily audited by Certified auditors registered in the public Register as per Law 3693/2008. The audit consists on specific tax issues, defined in a specific audit programme published by the Ministry of Finance in cooperation with the Greek Accounting and Auditing Oversight Board (ELTE), is updated annually and is in accordance with everything defined by the International Standard on Assurance Engagement – ISAE 3000.

Detailed Accounting Obligation (para.2 article 7 Law 1882/90)

All companies which, for two consecutive fiscal years (at the end of the first fiscal year) have a total balance sheet of over 2.500.000 euro, resulting from adding up items A through E of the Asset Accounts in the balance sheet, a net turnover of five million euro and over 50 persons of average employed personnel during the last fiscal year fall under the provisions of detailed accounting and shall elect their auditors from the Institute of Certified Auditors.

Taxation

Prior to 1992, the profits limited liability companies were subject to income tax in the hands of the partners irrespectively of whether an actual distribution has taken place. Since 1992, the profits of a limited liability company are taxed in a manner similar to that of a company limited by shares (A.E.). A special feature of the taxation of the limited liability company is that a portion of its profits is taxed in the hands of administrator(s) who are also partner(s).

Distribution of Profits

A minimum amount equal to 5% of the annual profits must be transferred to a statutory reserve until it reaches one-third of the paid up capital. There are no statutory requirements for a compulsory profit distribution and the profits are equally shared amongst the partners unless otherwise provided by the Articles of Association.

Publicity formalities

Both upon establishment and during its entire duration (article 8 Law 3190/1955), a limited liability company is subject to publicity formalities. The Articles of Association as well as any amendments thereof must be filed with the One Stop Shop to be registered in the GCR and published in the Government Gazette. The financial statements of a limited liability company (with the exception of the notes to the financial statements) and the auditors’ report (where applicable) shall be published annually in the Government Gazette and in selected political and financial newspapers.