Our law firm focuses on mergers in the field of corporate law. The legal possibilities of mergers under the German Transformation Act (Umwandlungsgesetz, UmwG) are manifold, because corporations, associations of persons or asset masses within the meaning of Section 1 (1) of the German Corporation Tax Act (KStG) may be involved in merger processes as transferring or receiving legal entities (Section 3 (1), (2) UmwG).


A merger involves the merging of two or more legal entities into one receiving legal entity, whereby the corporate assets of the transferring legal entity are transferred by way of statutory universal succession and the transferring legal entity ceases to exist without liquidation; a possibly lengthy liquidation procedure in compliance with the blocking year can thus be avoided.


The motives for conversion are also varied. For example, the number of related companies can be reduced by merging, or a subsidiary is merged with the "parent" (so-called upstream mergers) or, in another order, the "parent" is merged with the subsidiary (so-called downstream mergers).


In addition to the reduction in the number of shareholders, a further advantage is the concept of consideration in the form of the granting of shares. This type of consideration requires far less liquidity than the acquisition of shares in the company to be integrated through a paid acquisition. Thus, the merger is also an attractive model of corporate concentration from a financing point of view. The shareholders of the transferred legal entity do not have to give up their position as shareholders and the risk of a possible misinvestment is ultimately shared by all parties to the contract.


Insofar as the transferring entity is the owner of real estate or there is a change in the shareholder structure as a result of the merger, real estate transfer tax (GrESt) is generally payable; there are exceptions to this rule in the Group segment in accordance with the German Real Estate Transfer Tax Act (§ 6 a GrEStG).


Recently, cross-border mergers (Sections 122a - 122m UmwG) have been playing an increasingly important role, after the law of the Federal Republic of Germany and the European Parliament and the European Council Directive (EU) 2017 / 1132 of 14 June 2017 on certain aspects of company law (OJ L 169 of 30 June 2017, p. 46) have been given legal effect in accordance with Article 119 No. 1 of the Directive (EU) 2017 / 1132 of the European Parliament and the European Council of 14 June 2017 on certain aspects of company law (OJ L 169 of 30 June 2017, p. 46). With the exception of cooperatives and so-called public companies, limited liability companies within the meaning of Article 119 of the above-mentioned EU Directive are approved for conversion as transferring, acquiring or new companies if they maintain their registered office, central administration or principal place of business in a member state of the European Union.

 

Conversions in accordance to the

                       German Conversion Act (UmwG)

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