This document summarizes various legal methods for reorganizing companies in Germany, including mergers, spin-offs, conversions, and corporate group contracts. It outlines the key steps and legal features of transformations according to the Transformation Act, including transferring assets and liabilities between companies and changing shareholder rights. It also discusses relevant tax aspects, such as continuing book values or forfeiting loss carryforwards depending on the type of reorganization.

1. Reorganisation of companies
Measure Legal features Steps Tax aspects
Transfor‐ Merger ‐ All assets and liabilities of transforming company (TC) are transferred by act of law to ‐ Merger Agreement (or final ‐ If applicable: continuance of book
mation acquiring company (AC) without requiring further transfer acts or approval by third parties draft) must be submitted to values.
according ‐ Shareholders of TC become shareholders of AC; TC ceases to exist works council (eg. 20.07.) ‐ If applicable: no income taxation for
to Transfor‐ ‐ May be carried out with retroactive effect shareholders
mation Act ‐ Merger report, merger audit ‐ Forfeiture of losses and loss carry‐
(waiver possible) forwards of TC
Split‐off ‐ (Only) such assets and liabilities as listed in the Transformation Agreement are transferred ‐ Dto., but continuance of book values
by act of law from TC to AC ‐ Appointment with notary (eg. and freedom of taxes only if
‐ Shareholders of TC become shareholders of AC 30.08.): notarial recording of transferred assets qualify as a business
‐ May be carried out with retroactive effect  merger agreement branch + retention periods are kept
Drop‐down ‐ (Only) such assets and liabilities as listed in the Transformation Agreement are transferred  merger resolution = Contribution
by act of law from TC to AC ‐ application and registration with ‐ Transfer of business branch: see split‐
‐ TC becomes shareholder of AC commercial register (CR) off
‐ May be carried out with retroactive effect ‐ Retention periods to be kept for sales
and other measures
Conversion ‐ No transfer of assets takes place ‐ Merger Agreement (or final ‐ Partnership into corporation: see drop‐
‐ Legal identety remains unchanged draft) must be submitted to down
‐ May be carried out with retroactive effect works council (eg. 20.07.) ‐ Corporation into partnership: generally
‐ Merger report, merger audit see merger
(waiver possible)
‐ Notary, CR
Accretion Simple ‐ Shareholder A of a 2‐person partnership (“A & B partnership“) exits ‐ Shareholder agreement ‐ Dependent on constellation: disclosure
Accretion ‐ Legal consequence: partnership ceases to exist; assets are transferred by act of law to B ‐ Where applicable: CR of hidden reserves
(declarative)
Expanded ‐ Shareholder A of a 2‐person partnership (“A&B partnership“) contributes his interest into B ‐ Contribution agreement ‐ Dependent on constellation: if
Accretion ‐ Legal consequence: partnership ceases to exist; assets are transferred by act of law to B ‐ Capital increase in B (if applicable see drop‐down
applicable, notarial)
‐ If applicable CR
Corporate Profit‐and‐Loss ‐ Contractual group of enterprises ‐ Conclusion of PLTA ‐ Precondition to the formation of a tax
Group Transfer ‐ Agreement under which one company agrees to transfer its entire profit to another ‐ Consent of shareholder meeting unit (Organschaft)
contracts Agreement company (notarial) ‐ At least 5 years’ term
(PLTA) ‐ Controlling company owes compensation of losses, protection of creditors, compensation ‐ Application and registration with ‐ Other Conditions to be met
to other shareholders commercial register (CR) ‐ Formalities to be strictly kept!
Domination‐ ‐ Contractual group of enterprises ditto. Isolated Domination Agreement of
Agreement ‐ Agreement under which one company agrees to submit its management to another importance only for VAT‐purposes
company (eg. facilitating Cash Pooling)
‐ Controlling company owes compensation of losses, compensation to other shareholders
This survey is intended to provide a brief overview on reorganization issues under German law. It is not designed to serve as a basis of business decisions. No responbility is taken for the correctness of this information.
Status: 04/2012
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Contact: Rechtsanwalt | Steuerberater Dr. Volker Heeg VH@WLH‐Legal.de