Acquisition of an enterprise by conversion to another form

The acquisition of the enterprise is effected by universal succession (with exception of d) contribution in kind). The company taking over enters into the existing legal relations of the transferring company.

1. Merger

   Unification of (two or more) corporations into one company. The assets of the transferring company (companies) is transferred in its entirety to the company taking over, the liquidation of the transferring company being excluded. The merger causes the company taking over to enter into all the legal relations of the transferring company (universal succession).

   Mergers are permissible between

   • (two or more) private limited companies
   • (two or more) public limited companies
   • one private company limited as the transferring company and one public company limited as the company taking over.

   The merger of a public limited company as the transferring company with a private limited company as the company taking over is not permissible.

   The merger can be effected as:
   Amalgamation: one company (the one taking over) continues to exist, the transferring company is absorbed in this company.
   Reorganisation merger: two (or more) companies as the transferring companies are absorbed in a company to be newly founded.

   The transfer of assets is effected against the granting of shares in the company taking over to the shareholders of the transferring company (companies). The company taking over shall carry out an increase in share capital for this purpose. In special cases, no shares need be granted (e.g. in group mergers). The merger is effected by concluding a merger agreement (that must notarized). Beforehand, a formal procedure must be observed (inter al. filing of the merger agreement with the book of firms, audit by an external merger auditor, examination by the supervisory board); some elements need not be observed. The general meeting of the companies affected must resolve the merger with a ¾ majority.

2. (Transferring) change of corporate form

   Transfer of the assets of a corporation, liquidation being excluded, to a principal shareholder by universal succession (merging change in corporate form), a partnership to be newly formed (establishing change in corporate form), paying of the minority shareholders.

   Merging change in corporate form: the transfer of the assets to the principal shareholder who holds at least 90 % of the shares of the company whose corporate form is to be changed.

   Establishing change in corporate form: transfer of the assets to a partnership that is established by the shareholders of the company whose corporate form is to be changed who hold at least 90 % of the shares of the company.

   In order to carry out a (merging and establishing) change in corporate form, a resolution of the general meeting with the approval of 90 % of the nominal capital of the company whose corporate form is to be changed is required.

3. Demerger

   Transfer of assets (wholly or in part) of a corporation by universal succession to one or more corporations already existing or to be newly formed by the demerger. The transfer of assets is carried out against the granting of shares in the company taking over to the shareholders of the transferring company.

   Variants:
   Splitting: transfer of the entire assets of the company, liquidation being excluded to (two or more) corporations:

   • Splitting for takeover: transfer of the entire assets to corporations already existing;
   • Splitting for new establishment: transfer of the entire assets to a corporation or corporations to be newly established.

   Segregation: transfer of a part of the assets to one or more other corporations; the transferring company continues to exist:

   • Segregation for takeover: transfer of a part of the assets to corporations already existing;
   • Segregation for new establishment: transfer of the entire assets to a corporation or corporations to be newly established.

   Similarly to the merger (a) a formal procedure is followed to carry out the demerger (preparation of a demerger plan by the board of directors/management, demerger audit by an external demerger auditor, examination by the supervisory board).

   The demerger must be resolved by the general meeting with a ¾ majority. In the event of a demerger that does not maintain the existing ratios (= change in the participation ratios because of the mergers), the consent of 9/10 of the nominal capital is required.

4. Increase in share capital with contributions in kind

   An enterprise can be a contribution in kind (by way of succession under civil law) to a corporation against the granting of (new) shares in the company. The shares to be newly issued are “created” by means of an increase in share capital; the subscription rights of the “old shareholders” to the new shares can be cancelled (by a resolution of the general meeting). A (written) agreement on a contribution in kind must be concluded, then an audit by auditor for contributions in kind to be appointed by a court must be carried out. The general meeting shall resolve the contribution with a ¾ majority.

   This synopsis is only intended to offer a brief survey in excerpts of the possible variants in the acquisition of an enterprise. A detailed description – e.g. tax-law aspects of the subject, questions of liability – must be left to a discussion of individual cases in accordance with the respective facts.

Should you wish to learn more about this subject, our law firm will be happy to assist you.

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