Legal Persons under Private Law in Public Procurement Law

Legal persons under private law such as limited liability or public limited companies can be contracting authorities where they act in the general interest and are state-financed or state-controlled.

Definition: Legal persons under private law are legal entities formed by private autonomous act (in particular limited liability companies, public limited companies, and associations) which, under the functional concept of the contracting authority in public procurement law, qualify as contracting authorities where they perform tasks of general interest of a non-commercial character and are predominantly state-financed or state-controlled, in accordance with Art. 2(1)(4)(b) Directive 2014/24/EU.

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

What are Legal Persons under Private Law in Procurement Law?

Legal persons under private law – in particular limited liability companies, public limited companies, associations, and cooperatives – can be contracting authorities within the meaning of public procurement law even though they are organised under private law. Procurement law does not turn on the legal form but on the actual function and funding structure (the so-called functional concept of the contracting authority).

In a long line of case law the CJEU has clarified that the concept of contracting authority must be interpreted broadly and functionally in order to prevent circumvention through the choice of a private-law organisational form (CJEU, C-360/96, BFI Holding; C-237/99, Commission/France; C-470/99, Universale-Bau).

Significance and Function

The functional concept of the contracting authority is the central instrument that prevents public tasks from being removed from procurement law by spinning them off into private-law companies.

The Three Criteria of the Functional Concept

Under Art. 2(1)(4)(b) Directive 2014/24/EU, § 99(2) GWB, and § 3(1)(2) BVergG 2018, a legal person under private law is a contracting authority where it cumulatively satisfies the following conditions:

1. Tasks of general interest of a non-commercial character: The body must have been established for the specific purpose of performing tasks in the general interest. Tasks are of a "non-commercial character" where they are not performed in competition with private suppliers, the state acts as a residual financier, and there is no typical entrepreneurial loss risk.

2. Legal personality: The body must have its own legal personality, which is always the case with limited liability companies, public limited companies, and registered associations.

3. State financing or control (alternative conditions): It is sufficient that one of the following alternatives is met:

predominantly state-financed (more than 50 % of funding comes from public sources)
state supervision of management
a management, supervisory, or administrative body whose majority is state-appointed

Typical Examples

Municipal limited liability and public limited companies in the water, sewage, public transport, and housing sectors as well as publicly owned hospital, trade-fair, and airport operating companies are regularly to be classified as contracting authorities.

Distinction from Legal Persons under Public Law

While legal persons under public law are established by sovereign state act and their contracting authority status is generally indicated by their organisational form, for legal persons under private law the functional conditions must always be examined in concrete terms. The practical legal consequences are nonetheless identical: where the conditions are met, the full procurement regime applies.

Legal Basis

Art. 2(1)(4)(b) Directive 2014/24/EU – functional concept of the contracting authority
§ 99(2) GWB – contracting authorities (DE)
§ 3(1)(2) BVergG 2018 – contracting authorities (AT)
CJEU, C-360/96 (BFI Holding) – leading judgment, criteria of non-commercial activity
CJEU, C-470/99 (Universale-Bau) – majority state-financed limited liability company

Related Terms

FAQ

When is a municipal limited liability company not a contracting authority? Where the municipal company operates entirely in competition with private undertakings, no state loss compensation exists, and the company bears genuine entrepreneurial risk, the criteria of the functional concept may fall away. This is rare in practice and must always be examined on a case-by-case basis.

Does procurement law also apply to charitable associations that receive grants? Not on the basis of funding alone. An association that receives state grants is a contracting authority only where it was established for the specific purpose of performing tasks of general interest of a non-commercial character and is predominantly state-financed or state-controlled. Mere project funding does not, as a rule, establish contracting authority status.

What applies where a limited liability company performs partly public and partly commercial tasks? Under the case law of the CJEU and the Federal Court of Justice, what matters is the principal purpose of the body. Where the body is predominantly active in non-commercial general-interest matters, it is to be classified as a contracting authority as a whole; the body is not split by area of activity.

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