Year in Review - German Law in 2016

Corporate and Commercial

Amendment to the Stock Corporation Act: The Amendment to the Stock Corporation Act 2016 (Aktien-rechtsnovelle 2016) introduced, among other things, the option to issue preference shares without subsequent payment, an extended conversion right for convertible bonds, a limitation of the issue of bearer shares for non-listed companies and new provisions on the due dates of dividend payments.

Gender Quota in Business Companies: Since January 2016 the supervisory boards of large companies are required to gradually respect a mandatory quota of 30% when appointing new members to the supervisory board. Furthermore, certain companies are obliged to publish targets for the increase of the quota of women in management and supervisory boards. Read more...

IT security: On 3 May 2016, the first part of the regulation under the Act on the Federal Office for Information Security (BSI Act) entered into force. For several sectors it defines the thresholds based on which companies may determine whether they are deemed “operators of critical infrastructures”.

EU Data Protection Reform: The European General Data Protection Regulation has been adopted. It will be directly applicable as of 28 May 2018 in all EU member states. The Regulation establishes a uniform Europe-an legal framework for data protection law and – in certain circumstances – also covers providers domiciled in countries outside the EU.

Privacy Shield: The EU and the USA have reached an agreement on a successor agreement to “Safe Har-bor”. The “Privacy Shield” will now allow for data transfers to the USA.

Audit Reform: The German Act Reforming the Audit of Annual Financial Statements (Abschlussprüfungs-reformgesetz) came into force in June 2016. It has strengthened the audit-related duties of supervisory boards of publicly traded companies.

Guidance on Remedies in Merger Control and on Resale Price Maintenance: The German Federal Cartel Office has published new draft guidelines on the assessment of remedies in merger control proceedings. These should help companies when submitting remedy proposals in cases which would have been prohibited without any concessions (conditions or obligations) of the participating parties. Further guidelines on resale price maintenance will be published in due course.

Electricity Market: In 2016, the model of free pricing uninfluenced by State interference (energy-only market) was enshrined in the German Energy Industry Act (EnWG). Renewable energies are better integrated into the market thanks to the introduction of tenders in the 2017 German Renewable Energy Resources Act (EEG). The Act on the Digitalisation of the Energy Turnaround (GDEW), with a roadmap for rolling out smart meters, is laying the foundation for a smart grid as well as flexible behaviour of consumers and producers of electricity. The implementation of the recommendations of the panel appointed to review the financing of a phase-out of nuclear power brings the issue of disposal of nuclear installations one step closer to being resolved.

Procurement Law: The implementation of the EU procurement reform package of 2014 amended the rules on European public tenders extensively. Apart from substantive amendments, such as to electronic procure-ment, the package also codified legislation on in-house procurement and subsequent adjustment of contracts. For the first time, procurement for services concessions is covered by the procurement rules. In addition, the rules on concessions for using public ground for power and gas grids were amended.

Banking and Financial Markets

Single Resolution Mechanism (SRM): Since January 2016 the SRM is fully operational. The newly estab-lished Single Resolution Board (SRB) is now responsible for the resolution and restructuring of German signif-icant institutions which are directly supervised by the ECB.

Insurance Supervision: With the coming into force of the revised Insurance Supervision Act (VAG) in Janu-ary 2016 the requirements of the Solvency II Directive (as amended by the Omnibus II Directive) were imple-mented and the new rules became applicable.

SFTR: The EU Regulation on Transparency of Securities Financing Transactions and of Re-Use (SFTR) also came into force in January 2016. With the intention to improve transparency of financial transactions in the so called shadow banking sector, the SFTR among other things establishes reporting requirements for the con-clusion, modification and termination of securities financial transactions.

Lending activities by debt funds: After BaFin changed its administrative practice in May 2015, the rules for the granting of loans by alternative investment funds (AIFs) were revised as of 18 March 2016 by the UCITS V Implementing Act (OGAW V Umsetzungsgesetz). Lending by debt funds without a banking licence is now in principle possible in Germany. Read more....

EMIR: In relation to the European Market Infrastructure Regulation EMIR various RTS in the form of delegated regulations have been issued; among other things, certain credit derivatives contracts as well as further interest derivatives contracts were made subject to clearing requirements.

Close-out Netting: On 9 June 2016, in a much-noticed decision, the Federal Court of Justice (BGH) held that certain settlement provisions on close-out netting used in financial market contracts and standard master agreements are invalid under the German Insolvency Act. On the same day, the German Financial Superviso-ry Authority BaFin issued a general decree ordering that netting agreements have to be settled as contractual-ly agreed. The subsequently initiated Act for a clarifying amendment of the Insolvency Act was adopted in December 2016. Read more here and here.

Market Abuse (1. FiMaNoG): The Market Abuse Regulation (MAR) which came into force in 2014 has essen-tially been applicable since July 2016. Necessary changes to German capital markets legislation were made by the First Act Reforming Financial Market Rules (1. FiMaNoG). Overall, German market abuse legislation has been largely revised, particularly in the areas of insider dealing, prohibition of market manipulation, ad hoc notifications, directors’ dealings as well as the sanctions regime. Read more...

Benchmark Regulation: In response to the LIBOR and EURIBOR scandal, the EU Benchmark Regulation was adopted. Part of the provisions have applied since 30 June 2016, and the majority will apply from 1 January 2018. The Regulation establishes a uniform EU control framework for determining benchmarks which aims at preventing conflicts of interest and ensuring greater transparency.


Modernisation of Taxation Procedures Act: The Act was officially announced in July 2016 and shall im-prove the economic feasibility and efficiency of taxation procedures by certain specific measures.

Investment Tax Law Reform: The taxation of (special) investment funds and its investors is set under a new regime by the Investment Tax Law Reform Act as of July 2016 with effect from the beginning of 2018.

BEPS Implementation Act: The Act shall implement certain guidance in the BEPS Action Plan into law, in particular with regard to transfer pricing documentation and Country-by-Country Reporting as well as the im-plementation of the new rules set forth in the Mutual Assistance Directive of the EU as to the automatic ex-change of information regarding so-called tax rulings. Read more…

Loss Utilisation for Companies (new Sec. 8d Corporate Income Tax Act): Pursuant to the Bill, companies shall be able to set-off their losses and loss carry forwards after a harmful acquisition of shares (schädlicher Beteiligungserwerb) if certain requirements with regard to the continuance of the business activity are fulfilled. Read more…

Inheritance Tax Reform: The Reform Act was officially announced in November 2016 and provides that the current tax relief regime with regard to the inheritance of business assets in principle remains if certain value thresholds are not exceeded. However, modifications have been made regarding e.g. the determination of tax-privileged assets and by way of introducing a special tax relief for certain family companies as well as a tax deferral regime.

Year to Come - German Law in 2017

Corporate and Commercial

Increase in Minimum Wage: As of January 2017, the minimum wage in Germany will be EUR 8.84 (gross) per hour.

German Corporate Governance Code: In November 2016, the Government Commission of the Corporate Governance Code proposed amendments to the code. The Commission will have a final debate on the amendments in February 2017.

EU Shareholder Rights Directive: The European Parliament and the Council reached a political agreement on amendments to the Shareholder Rights Directive in December 2016. The institutions still have to formally adopt the agreement. The directive is expected to enter into force in the first half of 2017.

Implementation of the CSR Directive: The Act Strengthening Non-Financial Reporting of Companies in their Management and Group Management Reports is expected to come into force in the first quarter of 2017.

Second part of BSI-Kritis Regulation: The second part of the BSI Critical Infrastructure Regulation (BSI-KritisV) is expected in early 2017. It will define the thresholds for companies referred to as “operators of criti-cal infrastructures” in further sectors such as the financial and healthcare industries.

Reform of German Competition Law: At the end of September 2016, the German government submitted the draft of the ninth Amendment of the German Act against Restraints of Competition (9. GWB-Novelle), which provides for major changes for companies in the area of cartel liability and cartel damage claims. It also takes into account the development of digital markets in the context of merger control and abuse of domi-nance proceedings. The amendment is expected to come into force in early 2017.

Temporary Agency Workers Act: On 1 April 2017, the reform of the Temporary Agency Workers Act (AÜG) will come into force. Loaning an employee on a temporary basis will then be generally permissible only for a period of 18 months, while loaned employees are entitled to equal pay after the ninth month. Even if the agent is licensed an employment relationship between the employee and the client will be established in all cases of impermissible loaning.

Remuneration Transparency Act: In mid 2017 a Remuneration Transparency Act, whose precise details are not yet clear, is supposed to come into force. Essentially, what is contemplated is a claim to information on the average remuneration of a group of employees of the opposite gender performing the same or comparable work. In addition, various reporting duties relating to equality are being considered.

EU Insolvency Regulation: Although the revised regulation entered into force at the end of June 2015, the main provisions will only apply to insolvency proceedings which are opened after 26 June 2017. Read more ...

Insolvency Proceedings: Due to recent court decisions, the German government tabled a draft bill for a re-form of claw-back challenges by the insolvency administrator which is expected to become law in 2017.

Pre-Insolvency Restructuring: In November 2016, the EU Commission published its expected proposal for a directive on pre-insolvency restructuring proceedings. The directive aims at creating an EU framework which maximises the chances of a company with a viable business being able to restructure its debts before it is forced into liquidation. Read more ...

Amendments to German Data Protection Law: The EU Data Protection Regulation applying from May 2018 contains numerous opening clauses for national data protection laws. Germany is expected to adapt its exist-ing Federal Data Protection Act (BDSG) so as to avail itself of the opening clauses.

ePrivacy Directive: After the EU Commission has completed its public consultation on the revision of the ePrivacy Directive, an adapted ePrivacy Directive is likely to be adopted in the near future.

Energy Law: One of the salient issues during the 2017 election year will be implementing and concluding the reforms from 2016, including a reform on network charges. The “Winter Package” submitted by the EU Commission at the end of November 2016 with extensive proposals on Europeanising power supply and imple-menting the Paris Agreement on Climate Change provides ample scope for discussions and debate. Read more …

Environmental Law: The Environmental Appeals Act (UmwRG), which was last adapted at the end of 2015, is currently being reformed to bring it fully in line with the requirements of EU legislation and case law, for example with regard to the preclusion rules on legal remedies for nature conservation associations.

Brexit: After the “Vote to leave” in the United Kingdom, many sectors and practices are asking questions about the potential legal consequences of a Brexit. Read more …

EU Unitary Patent: The United Kingdom announced its intention to ratify the Unified Patent Court Agreement despite the vote on Brexit. The Unitary Patent could thus still potentially come into force in 2017.

Banking and Financial Markets

Remuneration Ordinance for Institutions: Effective from 1 March 2017, the new Remuneration Ordinance for Institutions (InstitutsVergV) reflects the EBA’s guidelines on sound remuneration policy. The revision re-sults in a fundamental change in the determination of fixed and variable remuneration and sets out detailed requirements on the permissibility of severance pay packages.

Reform of Banking Regulation: The wide-ranging proposals by the EU Commission on a reform of banking regulation from November 2016 concern in particular the CRR, CRD, BRRD and SRMR and are likely to be negotiated in trilogue procedures between EU Parliament, Council and Commission in 2017. Read more ...

MaRisk Amendment 2016: Since publication of the final version of the MaRisk planned for summer 2016 is still being awaited, it will probably not be possible for institutions to finalise the review and adaptation pro-cesses in their risk management entailed by the amendment before 2017.

PRIIPs-Regulation: The PRIIPs-Regulation creates the obligation for retail investors to publish a two-to-three-page key information document for numerous financial and insurance products. The Regulation will presumably be applicable from 1 January 2018. Read more ...

Implementation of MiFID II: A draft for a Second Act Reforming Financial Market Rules (2. FiMaNoG) has been tabled in autumn 2016. Once in force, the Act will implement the requirements arising from MiFID II and make far-reaching amendments to existing legislation. Implementation has to be completed by 3 July 2017, but the majority of the new rules will only come into force in January 2018.

Capital Markets Union: In autumn 2015, the EU Commission presented its Action Plan on Building a Capital Markets Union until 2019. One priority is the implementation of a legislative package for simple, transparent and standardised securitisations (STS-Securitisation). The Commission’s proposal of a prospectus regulation - which is expected to materially amend German securities law – is, since October 2016, being discussed in trilogue procedures between EU Parliament, Counsel and Commission.


Tax Act to Fight Tax Evasion: The Draft Bill in particular aims at facilitating the examination of facts by the tax authorities in certain cases involving countries not being members of the EU/EFTA by establishing stricter reporting and cooperation duties as well as higher criminal penalties and broader verification measures.

Further Implementation of the BEPS Action Plan: 2017 will be presumably as well characterised by the implementation of the BEPS Action Plan into national (tax) law. A further implementation act is expected, comprising, inter alia, probably rules against so-called hybrid mismatches.

Real Estate Tax Reform: The Federal Council initiated a real estate tax (Grundsteuer) reform in November 2016. Having the procedures with regard to the so-called uniform valuation (Einheitsbewertung) currently pending before the Federal Constitutional Court in mind, it is planned to maintain the current valuation proce-dure, however, to establish by way of re-valuation of the real estate an up-to-dated tax base and, thus, a fairer tax procedure.

Real Estate Transfer Tax (RETT) Reform: Based on an initiative of the State Hesse, the ministers of finance of the Federal States discuss (again) a RETT reform with regard to the transfer of companies and partner-ships holding real estate (so-called share deals). If this initiative will result into a respective act in 2017 re-mains, however, to be seen.