Municipal company

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Municipal companies are independent administrative units that have been spun off from the immediate local government to fulfill public purposes . They represent a sub-form of the public enterprise and are to be distinguished from the public institutions .


The local self-government of municipalities under Art. 28 para. 2 of the Basic Law allowed the establishment to the local companies, local authorities allocated public duties to fulfill. The municipal regulations therefore permit the establishment of municipal companies if certain requirements are met (e.g. those of Section 108 (1) GemO NRW). The municipal regulations of the federal states shape the legal framework of municipal companies differently. The sole or majority sponsor is in any case the founding municipality, which exercises the right of direction and is represented in the organs of the municipal enterprise. Outsourcing aims to leave public budget and collective bargaining law and achieve better profitability . The creation of greater transparency through the separation of different areas of activity and organizational privatization can also be a goal of the outsourcing.

Fields of activity

A large variety of tasks can be identified in the municipal economic activity of municipal companies, which in most federal states is limited to public services .

They often perform supply and disposal tasks ( municipal utilities , waste disposal companies ). But also infrastructural ( local transport ), structural (economic development agencies), social (disabled workers, hospitals , nursing homes , housing agencies), economic (participation in savings banks ), technical ( data processing centers ) and ecological (horticultural companies) tasks are carried out by municipal companies. Most of these communal companies came into being towards the end of the 19th century after advancing urbanization and mechanization in the movement of municipal socialism .

In the municipal codes of all German federal states, however, there are provisions which, following Section 68 of the German Municipal Code (DGO) of 1935, set limits to the economic activity of the municipalities (e.g. Section 108 Nds. GO; Section 107 GO NW; Section 87 Bay GO). The central requirement here is the commitment to a public purpose . Purely commercial activity, in which the profit generation is the only purpose, is therefore prohibited for municipal companies. A company whose exclusive or primary purpose is profits is not compatible with the “public purpose”. "Purely commercial-fiscal companies are prohibited to the municipalities" if there is no reference to their public tasks. Nevertheless, the municipal ordinances assume that the municipal companies to be economically managed generate a profit as far as possible (e.g. § 109 GemO NRW).

legal form

The legal and organizational forms of municipal companies are very diverse. They can be founded in the public-law organizational forms of a public-owned enterprise , self-owned company or an institution under public law (see also municipal companies ), but also in the private legal forms of a limited liability company (GmbH) or in the GmbH (gGmbH ) declared non-profit under the AO ) and as a stock corporation (AG). Only legal forms with limited liability may be selected (Section 108 Paragraph 1 No. 3 GemO NRW), so that the OHG and the complementary status of the KG are excluded for municipalities. In recent times, the status of private limited liability companies has risen sharply. The choice of the organizational and legal form is an originally communal political decision within the framework of communal self-administration , which can also be checked in different ways by the supervisory authority. In the case of the government, the organization of the economic activity remains with the municipality, so that it lacks organizational independence from its municipality. Therefore, strictly speaking, it does not belong to the municipal companies, because their (legal) independence is an essential criterion. Nevertheless, government companies with economic tasks can be counted among the municipal companies because they are considered public companies under Community law.

Influence protection

Since the economic activity of the municipalities must be dominated by a locally rooted common good , responsibility for tasks has to remain with the municipality. Regardless of which legal form has been chosen, the municipality must ensure that it has adequate influence on the activities of the municipal company (see, for example, Section 102 (2) GO-SH). For this purpose, the municipality must send representatives who are bound by instructions to the supervisory board of a municipal company (see, for example, Sections 104 (1) and 25 (1) GO-SH). The so-called limitation obligation behind this also results from the principle of democracy , because after all , municipal companies operate with public funds, the use of which taxpayers must be able to demand accountability and influence through their democratically legitimized decision-makers.

The legally prescribed influence of the municipality causes conflicts where the municipal company maintains business relationships with the municipality that require tendering. In the case of municipal utilities, for example, this applies to the award of concessions . In order to advertise non-discriminatory in such a constellation, community representatives in the communal company and the decision-makers in the awarding process must at least be different in person. As a consequence, most of the federal states have now adjusted their local law so that the mayor is no longer mandatorily delegated to the supervisory board of a local company. Otherwise, this would violate the principle of neutrality in procurement procedures.

Further problems can arise if a private limited company was chosen as the legal form and private shareholders are also involved. The company's purpose, which is geared to the public purpose, must in any case be stated in the articles of association. This is what municipal investment management is used for .

Business aspects

In the case of municipal companies, in contrast to purely private companies, making a profit must not be the sole purpose of the activity. But they are also fundamentally subject to the principle of economic efficiency . There is an interaction, but also a tension, between the corporate goal of fulfilling public tasks on the one hand and the principle of economic efficiency on the other. Municipal companies are therefore required to achieve a given goal with the least amount of resources possible.

Municipal companies ultimately operate with public money; Doing business in public space therefore carries a special responsibility, which is expressed in the fact that their financial management is subject to special accounting and control regulations, but also to a certain degree of transparency.

With regard to the taxation of municipal companies, a distinction must be made between companies in public and companies in private legal form. For the taxation of municipal companies under private law, the law applicable to private individuals applies accordingly. In the case of public companies, it is not the organizational form but the type of activity that is of decisive importance. They are then subject to corporation tax and sales tax if they qualify as a business of a commercial nature (BgA).

Liability and Bankruptcy

The cities and municipalities, including their own and government operations, are not eligible for insolvency in Germany ( Section 12 InsO ). The municipality is therefore in principle fully liable for all liabilities. Municipal companies in a private legal form, on the other hand, are subject to bankruptcy law and are capable of bankruptcy. The municipalities are not obliged to withdraw from bankruptcy by federal or state law with regard to their private legal form. From a 100 percent participation of a municipality in a company organized under private law, therefore, it cannot be concluded that the shareholder will save the company from bankruptcy under all circumstances.

Particular attention is to be paid to corporate liability law . In terms of corporate law, the municipality forms a group with its associated companies in which it has a majority stake. The case law of the BGH has developed liability principles for a qualified factual group, according to which the main shareholder is liable to the creditors of his group companies under certain conditions. However, due to the “Trihotel” and “Gamma” case law of the BGH, this external liability was abandoned in favor of internal liability under Section 826 of the German Civil Code. This group law is generally applicable to relations between the public sector and its associated companies operated under private law.

Municipal companies in a legal form under public law ( public law institution ), on the other hand, are usually not capable of insolvency because their municipal sponsors have to be liable for them on a subsidiary and unlimited basis (so-called guarantor liability ; e.g. § 114 a para. 1 GemO NRW).

Personnel issues

The answer to the questions of personnel, service and labor law of public companies also depends on the respective form of organization. In terms of labor law, municipal companies in Germany are usually subject to the TVöD , but this is not mandatory. Even with public companies is a Staff Committee in accordance with the Staff Committee laws prescribed.


The municipalities have to draw up an overall financial statement in which all independent areas of responsibility are to be consolidated in public or private law. The scope of consolidation in the narrower sense includes the subsidiaries held by the municipality, which are to be included in the overall municipal financial statements through full consolidation in accordance with Sections 300 to 309 HGB . A municipal company is a subsidiary under Section 290 (1) of the German Commercial Code (HGB) if the municipality can exercise a controlling influence over it. The scope of consolidation in the broader sense includes the municipal companies that are to be included using the equity method in accordance with Sections 310 and 311 of the HGB.


In recent years, for reasons of economic efficiency as well as austerity, an increasing privatization of public tasks has been observed. This trend is welcomed from a liberal or neoliberal point of view, but it also meets with criticism from a statist and welfare state perspective. Ultimately, however, it is often inevitable, also due to European law , to reduce the municipal company holdings, and due to the weak financial situation, the municipalities are forced to part with companies with structural losses.

In addition to the surge in privatization since the 1990s, it can also be observed that the municipalities and their companies are increasingly working with purely private companies, accepting them as shareholders and donors, leaving them with special infrastructure projects or cooperating in other forms of public-private partnership . A privatization can also be seen in this, for example, if a company previously under public law is designed as a GmbH and private donors are accepted as shareholders and thereby also gain a certain influence on the company.





The municipal companies in Austria perform important infrastructure tasks for cities and municipalities. They guarantee the supply of electricity, gas, heat, transport services and water as well as the disposal of wastewater in a safe, cost-effective and environmentally friendly way. The Association of Austrian Municipal Enterprises (VKÖ) is an association here. Members include Wiener Stadtwerke , Linz AG , Holding Graz and Innsbrucker Kommunalbetriebe .


In France there is traditionally a large public sector ( secteur publique ) with many public companies ( entreprise publique ). One can distinguish

  • établissements publics à caractère industriel et commercial (EPIC) (subject to public law)
  • sociétés nationales in private law form (for example stock corporation: “SA” = Société anonyme), whose capital belongs exclusively to the state. Well-known examples:
  • sociétés d'économie mixte : companies in which the state and / or local authorities invest, but in which they own less than half of the capital (Art. L. 1522-1 CGCT ).

United States

State-Owned Enterprise , also known as Government-Owned Corporation (GOC), is a legal entity that is usually set up with the aim of competing with private companies on market conditions and generating profits. Although such companies are commercial, they are subject to government objectives and can be used as a political tool. The characteristics and rules under which state-owned enterprises operate vary from state to state. State-owned enterprises should not be confused with companies in which the state has a stake and can also exert influence, but only has minority interests.

In the USA, the organizational form of “component units” is very widespread at the state and local authority level (“municipalities”). Certain sub-areas of communal tasks are organizationally outsourced to them. This includes, in particular, drinking water, sewage or electricity supply. The sponsoring body is legally liable for them ("financially accountable"); they are consolidated in the annual financial statements of their sponsoring body.

See also


Web links

Individual evidence

  1. René Geißler, Municipal budget consolidation , 2010, p. 113.
  2. BVerfGE 61, 82, 107 f. from 1982
  3. BVerwGE 39, 329, 333 f. from 1972
  4. BVerfGE 61, 82, 106 from 1982
  5. ↑ in many cases there is only an obligation to notify the company; Section 115 GemO NRW
  6. Thomas Mann / Günter Püttner: Handbook of Municipal Science and Practice , 2011, p. 150.
  7. ^ Astrid Wiecha: Mayor's duty of neutrality in concession procedures . In: WIRTSCHAFTSRAT law . March 14, 2017 ( [accessed June 14, 2018]).
  8. so also: German Bundestag, printed matter 15/5095, 15th electoral period, March 15, 2005, statement of the federal government in the context of a small question
  9. ^ BGH, judgment of October 13, 1977, BGHZ 69, 334 (338); “VEBA judgment”: according to this, group law regulations also apply to the public sector. For this reason, a municipality receives the status of an entrepreneur if it has at least two participations in companies organized under private law
  10. ↑ Technical term for a group in which the group companies have a majority interest among themselves (opposite: contract group)
  11. The starting point is the regulation in § 317 AktG, which only applies to AG and KGaA. If the parent company then uses its de facto group influence by causing its subsidiary to enter into disadvantageous (i.e. loss-making) (legal) transactions that are not compensated in the same financial year, the parent company is obliged to pay damages to the subsidiary. The GmbH law, however, contains neither group regulations nor liability consequences in a pure GmbH group. This legal loophole was closed by the case law of the BGH. Group liability was primarily developed by case law to protect creditors and minority shareholders of the controlled GmbH (BGH NJW 1998, 968)
  12. This guarantor liability has been abolished for public savings banks since 2001 as a result of the " Brussels Concordance " of July 17, 2001
  13. Bernd Heinrich Peper / Niels Weller: The municipal total accounts , 2010, p. 102 ff.
  14. Bernd Heinrich Peper / Niels Weller, The municipal total financial statement , 2010, p. 105.
  15. ^ Établissement public à caractère industriel et commercial in the French language Wikipedia
  16. ^ Sociétés d'économie mixed de Paris in the French language Wikipedia