Date of reorganisation

Can a corporate reorganisation be backdated or deemed to have already taken place, for example from the start of the financial year?

As regards the effectiveness of a corporate reorganisation from a corporate law perspective, it is generally possible for the involved group companies to agree in the relevant documentation that the relevant measure shall have economic effect from an earlier date than the actual execution date. This, of course, only applies to the internal relationship between the involved group companies. Any relationships with third parties, consent requirements, etc, will not be affected thereby. Should a corporate reorganisation be given retroactive effect, it is necessary to consult with the relevant auditor to discuss any restrictions and limitations prior to the consummation of the corporate reorganisation.

The aforementioned should not be confused with the actual backdating of documents (ie, signing documents with an earlier date than the date on which the documents were executed). Under German law, the backdating of agreements may lead to invalidity of such agreements, liability of the involved group companies and individuals, and can even constitute criminal offences.


What documentation is required in a corporate reorganisation?

The content of the required transaction documentation mainly depends on the scope and structure of the individual corporate reorganisation. For example, purely internal measures between already existing group companies usually require less documentation compared to measures with the purpose to, for example, integrate formerly external (ie, newly acquired) companies into an existing corporate group. Having comprehensive transaction documentation available may, of course, always be helpful to avoid legal disputes regarding the exact content and objective of the relevant corporate reorganisation. Also, by diligently executing comprehensive transaction documentation, the relevant group companies, as well as the respective individuals acting on their behalf, will be able to show that the concerned measure was implemented (eg, in compliance with the arm’s-length principle).

Typically, the transaction documentation in relation to a corporate reorganisation should comprise:

  • an asset or share purchase agreement, or in the case of, for example, transformations pursuant to the Transformation Act (UmwG), the relevant inter-company agreement (eg, merger agreement);
  • any relevant transfer documentation, of which its scope mainly depends on the assets transferred (eg, shares, real property, intellectual property);
  • authorising documents, such as minutes of shareholders’ resolutions, notices by national authorities, if applicable; and
  • further documentation in relation to transitional services, intellectual property licences or employees, etc.
Representations, warranties and indemnities

Should representations, warranties or indemnities be given by the parties in a corporate reorganisation?

Transaction documentation on corporate reorganisations typically does not provide for comprehensive contractual protection in this respect. In many instances, title warranties may be, more or less, the sole warranties provided. This may, under specific circumstances, be different in scenarios where the relevant corporate reorganisation measure is implemented as part of a pre-sale structuring process. The acquiring group company may be provided with more comprehensive contractual protection in relation to the transferring group company. This could be helpful if the acquiring group company has to seek recourse internally at a later stage after a consummated sale of the relevant assets to a third party that asserts certain claims in relation thereto. However, the aforementioned does not, in our experience, have any practical significance.

Assets versus going concern

Does it make any difference whether assets or a business as a going concern are transferred?

The transfer of assets or a business as a going concern is, under certain conditions, outside the scope of VAT. Any other transfer of assets or a business not qualifying as a going concern would, in turn, be either subject to VAT or VAT-exempt. While the qualification of a transfer as a going concern provides for a simplification in the first place as the group of assets does not have to be individually classified as VAT-exempt or subject to VAT (including the assessment of tax base, tax rate, tax liability, etc), it should be noted that the qualification of a transfer of assets as a going concern generally triggers a secondary liability of the transferee for business taxes of the transferor. While certain limitations with respect to the kind of taxes, periods for which the secondary liability applies and time limitations for the assessment of taxes by competent tax authorities are to be considered, the underlying transaction documentation should generally address such secondary liability and how the parties intend to secure it.

Types of entity

Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.

Corporate reorganisations involving public (ie, publicly listed) companies are typically subject to a more restrictive legal framework. One example in this respect is the prohibition of provision of financial assistance (see question 10). Further, in particular, the acquisition of shares in public companies is subject to the compliance with certain restrictive statutory requirements under the Securities Acquisition and Takeover Act and the Securities Trading Act. Another example in this regard is the mandatory compliance with the European Market Abuse Regulation, which, for example, stipulates ad hoc disclosure requirements for public companies in relation to inside information. Overall, a corporate reorganisation involving public companies is, in general, more complex, cost-intensive and challenging for the parties involved. The same will, in principle, apply to governmental and public companies as well, mainly due to specific regulations and restrictions applicable to such entities that, if applicable, have to be complied with in the course of a corporate reorganisation.

Post-reorganisation steps

Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation takes place?

The answer to this question depends, again, on the nature of the individual corporate reorganisation measure. For example, in the case of public companies, certain announcements to the Federal Financial Supervisory Authority may become necessary. Also, certain changes need to be registered with the competent commercial register in order to become effective (eg, a merger between group companies). In the case of a transfer of real property, respective filings will have to be made with the competent land register. Should a transfer of intellectual property have occurred, respective filings with the competent patent or trademark office may have to be made. Also relevant in this context may be the notification of affected business partners, such as customers, suppliers or other relevant third parties. Finally, all relevant company books and records may have to be updated accordingly to reflect the consummation of the corporate reorganisation.