Personnel integration is the second necessary criterion for the existence of a division of operations. This means that in both companies, i.e. both the owner and the operating company, the same person or group of people can enforce their will. Jurisdiction and literature speak here of the unified will to act.[60] According to the literature, the decisive criterion for the enforcement of the willingness to act is to determine the possibility of the amount of the rent for the transferred assets. [61] For the assessment of personnel interdependence, in addition to the statutory provisions, deviating provisions in the articles of association but also written additional agreements of the parties involved must be included in order to prove or refute a uniform will to act. [] 62]

In the video we show you various strategies to avoid a division of operations in advance, as well as in retrospect or to consciously maintain it.

1. uniform will to act

The basic case of a uniform will to act is a one-man division of operations, i.e. both the owner and the operating company are 100% controlled by one person. In doing so, an equal interest on the part of the controlling partner for his own holding company and operating company must always be assumed.

The second non-contestable case of personnel interconnection is a so-called unit operating split. The holding company's shares are held in the assets of the holding company, which enables a majority shareholder[63] to enforce his unanimous desire to operate both in the holding company and in the assets of the holding company. [] 64

2nd majority in terms of personal integration

In constellations in which several persons are involved in ownership and operating companies, the voting relationship is considered as a decisive characteristic for the fulfilment of the human connection. [65] Furthermore, both the regulation of the majority form in the case of shareholder resolutions and the question of the extent to which a managing director is allowed to direct the business without the intervention of the shareholders must be observed. [] 66

If a simple majority is required, a control of 51% on the part of both the owner and the operating company is sufficient in principle to meet the requirements of human integration. How many minority shareholders there are in both companies is irrelevant insofar as the controlling shareholder can overrule any decisions of the minority shareholders through his 51% voting rights. [] 67

A group of persons who are each involved in the ownership and operating company and whose voting rights together amount to more than 51% is given the personal interdependence based on the group of persons theory. It states that an association of persons involved in both companies represents common interests. The relationships of the individual group members in both companies can either be identical (identity of participation)[68], or can be structured as a group with different participation rates in the ownership and operating company, as long as control as a group is still fulfilled. [] 69

3.1. Fulfillment of the personal connection according to BFH

According to the BFH judgment of 15.05.1975, the personal connection is also fulfilled if only two persons are involved in both companies and this participation in one or both companies amounts to 50% each. In BFH's opinion, there is also a personal connection if, in the case of a group of two participants, one controlling partner is the owner and the other of the operating company. [71] The above-mentioned examples are to be applied to the personnel interdependence both through their shareholding and through their distribution of voting rights according to these quotas.[72] If a group of persons does not fulfil the required control in one of the two companies, this control can be achieved by means of a power of voting upon acceptance of the received voting rights and a division of operations can be justified.

If, however, the prerequisites already exist and it is planned to prevent the division of operations by the absence of the personal connection due to a power of attorney to vote to a third party, this is in the opinion of the BFH not permitted, since the shareholder is still in possession of the voting rights, this cannot exercise only for the duration of the power of attorney to vote. [] 73

3.2. Re-establishment of the same interest

However, the assumption that there is an equal interest on the part of several persons in connection with the same company holdings may be demonstrably refuted,[74] so that the group of persons theory does not apply. For example, a legal dispute between the persons involved can be considered as proof of a conflicting interest. [75] However, an exact individual case should also be considered here, since the submitted proof of a conflicting interest is often rejected in practice by the courts and thus continues to be assumed to be a personal link. [] 76

3.3.

A large difference in the participation relationships also cancels out the theory of groups of people. According to the BFH, in this case the difference between the shareholdings of the individual shareholders in relation to the ownership and operating companies is too large to speak of an equal interest.[77] With a participation ratio of 80% to 20%, the BFH came to the conclusion in 2001, however, that a personnel link still existed.[78] Due to the unclearly defined limits, in which there is a uniform willingness to act, the literature advises to choose other ways in a avoidance strategy against a company split, since this way does not seem to be 100% secured before a decision by a court. [] 79

4. Special features of majority requirements

4.1. postponement of qualified majority

The required 51% of the voting rights apply only to a simple majority vote. In the social contract, however, a different regulation, such as a qualified majority or unanimity, is permitted, which excludes control with 51%. In doing so, the agreement governed by the articles of association is to be set higher than the participation rate. If there is a majority shareholder who holds a 60% stake in the company, but the company contract requires a qualified majority of 66.33% for a company resolution, he cannot enforce his will in this company and the criterion of personal interdependence would not be fulfilled in this case. [80] Another case was last decided by the BFH in 2000. In this case, a majority shareholder was involved in an ownership GbR with more than 51%, but a shareholder resolution had to be made with a majority of 75%. On this basis, a dominant will of the majority shareholder is excluded. [] 81]

The principles of qualified majority are applicable to unanimity requirements. The only difference with the qualified majority is that a shareholder decision must be unanimous. However, it should be noted that an identical interest, for example, of a minority shareholder with another company compared to a controlling group, does not directly enter into a personal connection and thus a division of operations. [82] Because this minority shareholder acted only in his own interest and since he is not a shareholder in the second company, in the opinion of the BFH from 1991, the group of persons, despite the same will, cannot achieve their control on the basis of the unanimity requirements. [] 83

In the case of a provision in the articles of association that unanimity only has to be present for transactions that go beyond the business of daily life, the BFH[84] considers that there is also a personal connection if there is only a simple or qualified majority. The decisive factor for the existence of the personal connection is that the day-to-day transactions can be carried out by a controlling partner/group of persons. This includes, among other things, control by a shareholder-managing director of a Besitz-GbR, who may conclude everyday legal transactions without unanimity of the remaining shareholders. [] 85

5 Indirect control

Indirect control exists if, in the case of a majority interest in the ownership or operating company, another company is interposed. According to BFH’s case law, an indirect holding in a holding company and in an operating company must be strictly separated. According to the literature, an indirect shareholding with the help of a limited company should be treated equally both in the case of the owner and the operating company. The decision that in the case of the operating company in question an indirect participation was sufficient to establish a personal connection was decided by BFH in several judgments to the contrary for a holding company. [86] In the case of an intermediate partnership, the differentiation need not take place. [] 87)

A BFH judgment from 1992 came to the conclusion that indirect control of a shareholder via a limited liability company in a GbR is not sufficient for the personal connection, since the limited liability company cannot enforce its will due to the unanimity requirement. [88] This judgment is also recognized by the literature, but it offers a need for discussion, as it does not fit other jurisdictions. [] 89

6. factual mastery

In individual cases, only one out of two majority holdings in the ownership or operating company is sufficient for human integration. It may be the case that, although there is a minority interest in one of the two companies, the majority shareholder cannot exercise his own will, since the minority shareholder has the opportunity to acquire a majority interest at any time or to lease an essential operating basis, despite the minority rights in the company, a higher position in the company. If these prerequisites are met, there is a personal connection due to de facto control. [91] In the opinion of the BFH, the formation of a group of people between actual and actual controlling shareholders is excluded. [] 92]

7th Family Shares

The husband’s participation in the ownership company and the wife’s participation in the operating company brought about a change in jurisdiction. While the shares of spouses were aggregated until 1985, the Federal Constitutional Court made it clear in its decision that this action was unconstitutional, since spouses and single people were not treated equally under Article 3 of the Constitutional Law. [93] However, the marriage entered into should not be completely neglected if there are further indications that the couple pursue a common economic purpose beyond the marriage.[94] However, the principle should be assumed that each person acts in his own interest, even if one spouse is involved in the entire company construct. [95] This is without prejudice to the principle that spouses are not liable for the other spouse without agreement. [] 96

The abovementioned case law also applies to children of age in combination with one or both parents. Whereas in the case of minor children, the shares should be allocated to the parents, as they are also responsible for the child's assets as custodian and can thus increase the benefit of the children's shares together with their own. [] 97