German GmbH Audit Requirements & Thresholds

Which GmbHs need a statutory audit

The basic rule sits in §316(1) HGB: the annual financial statements and management report of a medium-sized or large corporation (Kapitalgesellschaft) must be audited by an independent Wirtschaftsprüfer. A GmbH is a Kapitalgesellschaft. So the audit requirement depends entirely on which size class the GmbH falls into under §267 HGB.

Micro and small GmbHs are exempt from the statutory audit requirement. Medium-sized and large GmbHs must be audited. The GmbH & Co. KG (a partnership without a natural person with unlimited liability) is treated identically to a corporation for financial reporting, audit, publication, and disclosure purposes under §264a HGB, so the same thresholds apply.

This is not a matter of professional judgment. The classification is mechanical: count the criteria, check whether two of the three thresholds are exceeded, confirm that the exceedance persists for two consecutive years, and the audit obligation follows. The only complexity lies in the transitional situations (a GmbH crossing a threshold boundary) and the exceptions (where a small GmbH still faces a mandatory audit for other reasons).

The updated §267 HGB size thresholds (April 2024)

On 17 April 2024, the Zweites Gesetz zur Änderung des DWD-Gesetzes und zur Änderung handelsrechtlicher Vorschriften came into force. This raised the balance sheet total and revenue thresholds by 25% (and the micro thresholds by approximately 28.5%). Employee thresholds remained unchanged.

A GmbH is classified as medium if it exceeds at least two of the small thresholds but does not exceed at least two of the medium thresholds. It is classified as large if it exceeds at least two of the medium thresholds.

The new thresholds are mandatory for financial years beginning after 31 December 2023. An early application option existed for financial years beginning after 31 December 2022. When first applying the new thresholds, they must be used to assess the size classification retroactively at all past reporting dates, which can produce an immediate reclassification.

How the two-consecutive-year rule works

§267(4) HGB contains the stability mechanism: a GmbH is only reclassified to a different size class if it exceeds (or falls below) two of the three thresholds on two consecutive balance sheet dates. This prevents a single year's fluctuation from triggering or removing audit requirements.

Here is how it operates in practice:

• A GmbH that has been classified as small will only become medium-sized if it exceeds at least two of the small thresholds at both the current year-end and the prior year-end.
• The reverse applies: a medium-sized GmbH drops to small only if it falls below at least two of the small thresholds at both the current and prior year-end.

The average number of employees is calculated as the sum of headcount at 31 March, 30 June, 30 September, and 31 December, divided by four. Trainees (Auszubildende) are excluded from this count.

What each size class means for reporting and audit obligations

The practical consequences of size classification extend well beyond whether an audit is needed. Each class carries a distinct set of reporting and filing requirements.

Micro GmbHs

Prepare a balance sheet and profit and loss account. They can use micro-entity presentation reliefs under §266(1) sentence 4 HGB (condensed balance sheet). No notes (Anhang), no management report (Lagebericht), no statutory audit. Abridged filing with the Bundesanzeiger is permitted. Micro GmbHs can also waive the Anhang entirely under §264(1) sentence 5 HGB, provided certain conditions are met.

Small GmbHs

Prepare a balance sheet and profit and loss account, supplemented by notes (Anhang). No management report is required. No statutory audit. Filing with the Bundesanzeiger can be abridged (for example, the P&L does not need to be included in the public filing). This is the category where the 2024 threshold increase has the largest practical impact, because GmbHs dropping from medium to small lose both the audit obligation and the management report requirement.

Medium GmbHs

Prepare a balance sheet, P&L, notes, and a management report. A statutory audit by an independent Wirtschaftsprüfer is required under §316 HGB. The managing directors (Geschäftsführer) must prepare the annual financial statements within three months after the financial year-end. Some abridgements are allowed in the Bundesanzeiger publication.

Large GmbHs

Face the full reporting package: balance sheet, P&L, notes, and management report, all subject to statutory audit. Full publication obligations apply with the Bundesanzeiger. Capital-market-oriented companies (kapitalmarktorientierte Kapitalgesellschaften under §264d HGB) are always treated as large, regardless of actual size. The same applies to credit institutions and insurance undertakings (§340a(1) and §341a(1) HGB).

Exceptions: when small GmbHs still need an audit

Falling below the medium thresholds does not guarantee audit exemption in every case. Four situations can override the size-based classification:

1. Parent company with consolidation requirement. If the GmbH is required to prepare consolidated financial statements (Konzernabschluss) under §290 HGB, a statutory audit of the consolidated financial statements is mandatory under §316(2) HGB, regardless of the parent's individual size classification. The group-level size thresholds under §293 HGB (which were also raised in April 2024) determine whether the consolidation exemption applies.
2. Capital-market-oriented entity. A GmbH whose securities are admitted to trading on an organised market (kapitalmarktorientiert under §264d HGB) is always treated as a large corporation. This is rare for a GmbH but not impossible (for example, a GmbH with listed bonds).
3. Credit institutions and insurers. Credit institutions, financial services institutions, and insurance undertakings structured as GmbHs receive no size-based audit relief under §340a and §341a HGB. They are audited regardless of size.
4. Voluntary audit clause. The articles of association (Gesellschaftsvertrag) can voluntarily require an audit even when no legal obligation exists. Some GmbHs maintain a voluntary audit to satisfy bank covenants, shareholder agreements, or internal governance requirements. In these cases, the audit is a contractual rather than statutory obligation, but the Wirtschaftsprüfer still conducts it under ISA-DE.

Worked example: does Kessler Verpackung GmbH still need an audit?

Client scenario: Kessler Verpackung GmbH is a packaging manufacturer based in Düsseldorf. The company has been audited annually for the past six years as a medium-sized GmbH. The managing director wants to know whether the April 2024 threshold changes affect the audit obligation.

Step 1: Apply the old thresholds (for reference)

Under the old §267(1) HGB thresholds (balance sheet ≤€6M, revenue ≤€12M, employees ≤50), Kessler exceeded two of the three small thresholds at both 31 December 2022 and 31 December 2023:

• Balance sheet €6.8M exceeded €6M. Revenue €13.9M exceeded €12M. Employees 47 below 50. Two of three exceeded.
• Balance sheet €7.1M exceeded €6M. Revenue €14.6M exceeded €12M. Employees 46 below 50. Two of three exceeded.

Classification under the old regime: medium.

Step 2: Apply the new thresholds retroactively to 2022 and 2023

The new §267(1) HGB small thresholds are: balance sheet ≤€7,500,000, revenue ≤€15,000,000, employees ≤50.

• 31 December 2022: balance sheet €6.8M below €7.5M. Revenue €13.9M below €15M. Employees 47 below 50. Zero thresholds exceeded. Classification: small.
• 31 December 2023: balance sheet €7.1M below €7.5M. Revenue €14.6M below €15M. Employees 46 below 50. Zero thresholds exceeded. Classification: small.

The two-consecutive-year test is satisfied under the new thresholds at both the 2022 and 2023 year-ends. Kessler Verpackung GmbH reclassifies from medium to small effective for the 2024 financial year.

Step 3: Determine the consequences for the 2024 audit engagement

Kessler no longer has a statutory audit obligation for the financial year ending 31 December 2024. The managing director has several options depending on timing:

• Engagement letter not signed: the company can simply choose not to appoint an auditor for the 2024 financial year.
• Engagement letter signed, work not started: the contractual basis has ceased to exist under §313(3) BGB (frustration of purpose), and the company can withdraw from the contract.
• Work already underway: the company can still withdraw under §313(3) BGB, but the auditor retains a fee claim for services already rendered.
• Audit completed: the audit opinion and report remain as issued. A retroactive conversion to a voluntary audit is not possible.

Practical checklist for determining audit requirements

1. Obtain the GmbH's balance sheet total, revenue, and average employee count at the two most recent balance sheet dates. Calculate the employee average using the quarterly formula (31 March + 30 June + 30 September + 31 December, divided by four), excluding trainees.
2. Apply the current §267 HGB thresholds (as updated April 2024) to both year-ends: small is ≤€7.5M balance sheet, ≤€15M revenue, ≤50 employees. If the GmbH does not exceed at least two of these thresholds at either year-end, it is classified as small and has no statutory audit obligation.
3. If the GmbH does exceed at least two of the small thresholds at both year-ends, check whether it also exceeds two of the medium thresholds (≤€25M balance sheet, ≤€50M revenue, ≤250 employees). If yes at both year-ends, it is large. If no, it is medium.
4. Check for override situations: is the GmbH a parent required to consolidate under §290 HGB? Does it have securities on an organised market (§264d HGB)? Is it a credit institution or insurer? Does the Gesellschaftsvertrag require an audit? Any "yes" triggers a mandatory audit regardless of size.
5. If the GmbH has reclassified from medium to small under the 2024 thresholds, document the reclassification with calculations at both prior year-ends and address any existing audit engagement contractually (engagement letter status, §313(3) BGB withdrawal, fee settlement).
6. File the annual financial statements with the Bundesanzeiger within 12 months of year-end, applying the publication reliefs appropriate to the new size class. A newly small GmbH can now file without the P&L and omit the management report.

Common mistakes

Firms sometimes apply the two-consecutive-year rule incorrectly by checking only the most recent year-end against the new thresholds. §267(4) HGB requires the thresholds to be exceeded (or not exceeded) at both the current and prior year-end. On first application of the 2024 thresholds, the retroactive assessment means checking the new thresholds against 2022 and 2023 year-ends, not just 2023.

Small GmbHs with a voluntary audit clause in their Gesellschaftsvertrag sometimes assume the statutory audit obligation has been removed when they reclassify. The statutory obligation may have disappeared, but the contractual obligation remains until the shareholders amend the articles. The Wirtschaftsprüfer should clarify whether the engagement is now voluntary (under contract) rather than statutory (under §316 HGB), as this affects reporting requirements under IDW PS 400.

The CSRD reporting obligation depends on the same §267 HGB size classes. A GmbH that drops from large to medium under the 2024 thresholds may no longer fall within the scope of mandatory sustainability reporting. Firms should check the CSRD applicability alongside the audit obligation when advising on reclassification.

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Frequently asked questions

Further reading and source references

• Handelsgesetzbuch (HGB): §267, §267a, §316, §264a, §290, §293 – the statutory provisions governing size classification, audit requirements, and consolidation thresholds.
• Zweites Gesetz zur Änderung des DWD-Gesetzes (17 April 2024): the legislation implementing the 25% threshold increase for balance sheet and revenue limits.
• EU Delegated Directive 2023/2775: the EU directive that mandated the threshold increase, transposed into German law.
• §319 HGB: independence requirements for statutory auditors, including the 15% fee dependency threshold.
• IDW PS 400: the IDW practice statement on voluntary audits, relevant when a GmbH reclassifies but retains a contractual audit obligation.