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02. September | Cross-border change of legal form: Procedural steps and practical advice (this article)

A cross-border change of legal form occurs when a legal entity transfers its registered office to another state and converts the legal form into one of the incoming state. In German law, however, there are currently no legal regulations. We explain what you have to consider when changing your legal form across borders.

1st Cross-border Change of Form: Basics

In the event of a cross-border change of legal form, a legal entity transfers its seat to another state and in this process transforms itself into a legal form of the incoming state. However, a cross-border change of form is not yet regulated in German law. That is why the rules on change of form and cross-border mergers are still applied in an analogous manner. However, there is a new draft law that introduces the cross-border change of form into the conversion law and is to enter into force on 31 January 2023. However, the provisions contained therein are based on the cross-border merger procedure. Therefore, the new regulations largely correspond to the provisions of §§ 122a et seq. UmwG that have already been applied.

2nd Cross-border Change of Form: The individual procedural steps

Cross-border change of form: start with conversion plan

The submission of a draft conversion plan for publication in the electronic information system of the Commercial Register marks the beginning of the change of legal form procedure. Therefore, the draft already has some legal consequences. On the one hand, it triggers the waiting period, which determines the earliest date from which the conversion decision can be taken. On the other hand, the creditor protection period applies, according to which creditors of the company can file their claims in writing to the company for two months from this date for the purpose of providing security. Therefore, the draft must be interpreted from the date of publication to the creditors at the company’s registered office for inspection and for making any copies.

The subsequent conversion plan must be established by notarization. The conversion plan is intended to serve the information needs of creditors, minority shareholders and employees. Therefore, he must inform about the essential conditions of the change of form. This includes, for example, the future legal form in the target State and the characteristics of the shareholders’ participation under the new legal form rules. Subsidies or subsidies received by the company in the last five years must also be presented.

In addition, the conversion plan must include a timetable for the change of form procedure. It shall specify the date of submission of the plan for publication in the commercial register. In addition, it must contain the probable date of resolution after the expiry of the statutory period for the assertion of creditor rights and, lastly, the date of registration of the change of legal form.

In the future, the conversion plan will be regulated in § 335 UmwG.

2.2. Conversion report

A cross-border change of form also requires a conversion report. This explains and justifies the legal and economic aspects of the change of legal form, as well as the effects for shareholders, creditors and employees. However, it is possible for the shareholders to waive this report. In the future, § 337 UmwG will regulate the conversion report.

2.3 Conversion decision

Subsequently, at the earliest one month after the publication of the conversion plan, a conversion decision shall be taken and notarized. The regulations for this will be found in § 339 UmwG in the future.

2.4.

A cross-border change of form ends on the part of German law with the registration to the commercial register, by the representative body. The application shall include a certified copy of the certified conversion decision. Where the conversion report is waived, this shall be indicated in the notification.

The representative body must provide certain assurances. On the one hand, it is necessary to confirm that all creditors who have made themselves known to the company after the announcement of the conversion plan and are entitled to receive security have been provided with adequate security. Secondly, it must be ensured that employee rights have been respected and that the draft conversion plan has been sent to the shareholders.

If all conditions are met, an entry in the commercial register is made with the note that the change of form has been carried out and takes effect upon entry in the register of the target state.

2.5. Registration and cross-border change of form in the receiving state

The registration of the change of form in the receiving state is ultimately governed solely by the regulations there. For example, under Luxembourg law, the registration of the company in the local register of companies (the so-called Registre du Commence et des Sociétés) is not constitutive but declaratory. Therefore, the company of the target legal form is already effective after the notarized shareholder resolution without further registration.

Since the legal systems of the departure state and the destination state of the form-changing company are regularly not identical, the question arises as to which legal form the company has in the intermediate stage. Such an intermediate stage occurs if the legal system of the targeted State does not consider the registration in a register, but the shareholder resolution under that law, as constitutive for the effect of the change of legal form. In contrast, however, German law assumes effective effect from the date of registration. This problem can be solved by submitting a notary certificate from the state of the target-legal form to the register court early after the application, certifying that the conditions for establishing the target-legal form without being entered in a register there are fulfilled. A register entry then has only a declaratory effect.

Successful cross-border change of form: deletion in the commercial register in Germany

After the company has assumed its target legal form in the receiving state either by resolution of the shareholders or by registration in the commercial register and thus established its registered office there, it must be deleted in the commercial register. A cross-border change of form is then successfully carried out.

Subsequent changes in the conversion plan

The information in the draft conversion plan may become incorrect. At least where there are material changes affecting creditor rights, the amended version must be re-issued. Then a new deadline for the creditor protection period for the conversion decision would also apply.