Legal Person under Private Law in Public Procurement Law 2026

Legal person under private law as a contracting authority: limited liability companies, public limited companies, and associations may be subject to procurement law where they act in the general interest.

Definition: A legal person under private law is an organisation with legal capacity established under private law (e.g. limited liability company, public limited company, association, foundation) which qualifies as a contracting authority within the meaning of public procurement law where it performs tasks in the general interest of a non-commercial character and is controlled or predominantly financed by the public sector.

Last updated: January 2026 · Legal basis: Directive 2014/24/EU Art. 2(1)(4); BVergG 2018 § 3(1)(2); GWB § 99(2)

What is a Legal Person under Private Law in Procurement Law?

Legal persons under private law can be contracting authorities within the meaning of public procurement law even though they are not state authorities or public-law bodies. Procurement law links contracting authority status not to the legal form but to functional integration into the public sphere. This so-called functional concept of the contracting authority is intended to prevent public procurement tasks from being removed from procurement law by spinning them off into private-law companies.

Typical examples of legal persons under private law that may be contracting authorities:

Municipal limited liability companies (municipal utilities, housing companies, waste management companies)
Public limited companies owned by the public sector
Universities under private-law sponsorship
Charitable associations that perform public tasks
Hospitals in private-law form with public majority ownership

Conditions for Contracting Authority Status

Under Art. 2(1)(4) of Directive 2014/24/EU, three cumulative conditions must be met for a legal person under private law to qualify as a contracting authority.

1. Tasks of General Interest of a Non-commercial Character

The body must perform tasks that serve the general interest and are not predominantly of a commercial nature. This presupposes that the body does not act like an ordinary commercial undertaking on the market – i.e. that it bears no significant market risks and is not primarily geared to making a profit.

2. Legal Personality

The body must possess its own legal personality, which is always the case with legal persons under private law (limited liability companies, public limited companies, associations, etc.).

3. State Influence

It suffices that one of the following conditions is met:

The body is predominantly (more than 50 %) financed by the public sector, or
it is subject to management supervision by public authorities, or
more than half of the members of its administrative, management, or supervisory body are appointed by the public sector

Practical Significance

The correct identification of legal persons under private law as contracting authorities is of considerable importance in procurement practice. Where such a body procures services without complying with procurement rules, bidders who have been passed over can launch review procedures and bring claims for damages.

In practice the classification is often difficult. Whether a body still acts in the general interest or already qualifies as a market participant depends on an overall assessment of all the circumstances. The CJEU has developed criteria for this assessment in numerous decisions.

Distinction from Legal Persons under Public Law

Legal persons under public law (e.g. municipalities, federal states, professional chambers) are always contracting authorities by virtue of their legal form. Legal persons under private law, by contrast, must satisfy the functional criteria mentioned above to qualify as contracting authorities.

Related Terms

FAQ

Is a municipal limited liability company automatically a contracting authority? Not automatically. What matters is the three conditions: general interest, non-commercial nature, and state influence. A municipal limited liability company that operates wholly on the market and receives no state subsidies can be a purely private undertaking.

Does the tender obligation also apply to subsidiaries of a municipal limited liability company? Yes, provided the subsidiary also satisfies the criteria. Otherwise the in-house award exceptions may apply where the parent company, as a contracting authority, exercises sufficient control over the subsidiary.

Does a legal person under private law lose its contracting authority status when it is privatised? Yes. If the public sector gives up its majority holding and the other criteria (financing, supervision) are also no longer met, contracting authority status falls away. In procurement law this is known as "avoidance through privatisation".

Last updated: January 2026 All information provided without guarantee. For legally binding advice, please consult a law firm specialising in public procurement law.